Why E1 Ventures Invested in Perplexity
We’re thrilled to have been part of Perplexity’s Series C. With heavyweights like ChatGPT Search and Google targeting a similar arena, our conviction in Perplexity’s potential only strengthens.
AI is underhyped. Comparing search results for ChatGPT, Claude, and Perplexity highlights how far we are from realizing the full spectrum of tools that could streamline professional and personal tasks.
Each search engine has its strengths:
OpenAI: AI-powered internet search with a fine-tuned model
Perplexity: AI-powered internet search combining multiple models
Google: Generative AI in Search, AI tool designed specially for students and teachers
Microsoft: AI search built around Bing years ago
Perplexity AI positions itself uniquely among its competitors by leveraging a multi-model approach and focusing on delivering a comprehensive user experience tailored to the needs of the modern internet user.
Perplexity's ability to combine multiple models suggests an approach where different AI models with various strengths are utilized to provide answers. This could mean better accuracy across different types of queries, from factual information to complex reasoning. Each model can be optimized for specific tasks, potentially leading to superior performance in varied contexts compared to a single fine-tuned model like OpenAI's. This strategy results in more nuanced and contextually appropriate responses, offering users a richer search experience.
Perplexity has been noted for its interface that blends AI capabilities with traditional search engine functionality. This user-centric design might make it more intuitive for users accustomed to both conversational AI and conventional search, providing a seamless integration of both worlds. As a result, users find Perplexity's search experience more engaging and less overwhelming, as it doesn't force the AI features into an existing framework but designs around them.
Perplexity's approach involves real-time access to a broad spectrum of sources, including direct citations within responses, which is something users have appreciated. This ensures that the information provided is up-to-date and traceable back to its source, increasing trust and reliability in the search results. OpenAI is doing the same, but still lags behind. Could they catch up? Certainly. However, search is Perplexity’s core business, and in the long run, OpenAI may find it challenging to deliver updates and features at the same pace - here’s a hint as to why this is a real possibility. As for Google, while they have the capacity to outcompete, it remains to be seen how much they’re willing to adapt their legacy search functionality and ad-driven model. Perplexity's focus on introducing new features like "Reasoning Mode" indicates an ongoing commitment to innovate and adapt to user feedback, potentially offering more advanced functionalities over time compared to competitors who might be slower in updating their AI capabilities due to legacy systems or different business models. This could mean that Perplexity stays ahead in terms of feature offerings, providing users with tools that enhance their search and learning experience.
Another proof? Perplexity is venturing deeper into e-commerce with its new feature, Pro Shop, which allows users to research and purchase products from multiple merchants with just one click directly on Perplexity. Users will see a “Buy with Pro” option for eligible items, simplifying checkout by enabling in-app transactions. This move places Perplexity in competition with major players like Google Shopping and Amazon. Perplexity is exploring partnerships with brands like Nike, and is also planning to introduce ads by the end of this year or Q1 2025.Users already perceive Perplexity as more user-oriented and possibly less influenced by large-scale advertising or data monetization strategies, which could be priorities for bigger tech giants like Google, OpenAI, or Microsoft.
Perplexity's tailored experiences like election-related information suggests a capability for customization in searches, which might not be as highlighted or available in the same way with competitors. This level of personalization could make Perplexity more appealing for users looking for specific, context-aware information. Moreover, Perplexity has also integrated specialized searches for sports and finance. Perplexity has the potential to disrupt tools like Bloomberg Terminal, Pitchbook, and similar platforms by continuing to aggregate both public and private data and adding reasoning capabilities on top. With the introduction of Perplexity Spaces, users can now combine information from the web and their own files into organized “spaces.” This feature enables users to create dedicated knowledge hubs for projects, making it easier to search, ask questions, and organize data from personal files. Perplexity Spaces supports Excel, PowerPoint, Word, PDF, and CSV files, allows collaboration through shared spaces, provides comprehensive answers based on both personal data and internet sources, and even lets users select different AI models to refine searches.
Perplexity has launched the Perplexity Publishers Program to support and partner with media organizations, aiming to bolster high-quality, trustworthy content. This initiative involves partnerships with key publishers like TIME, Der Spiegel, and Fortune, and includes revenue-sharing from ad interactions, access to Perplexity’s APIs, and complimentary Enterprise Pro accounts for publisher employees. The program will allow publishers to create custom answer engines, and offer new ways to engage readers. Perplexity is open to future collaborations, like bundled subscriptions, and is actively refining its platform based on partner feedback.
The company was founded by engineers with extensive backgrounds in AI, machine learning, and back-end systems, with experience at leading tech companies like OpenAI, Meta, and Quora. Perplexity’s ability to rapidly iterate and develop cutting-edge features demonstrates the team’s technical expertise. In this episode of Lex Fridman’s podcast, CEO Aravind Srinivas shares his vision for Perplexity’s purpose and his perspective on its competition with Google. Here are two direct quotes:
“I think of Perplexity as a knowledge discovery engine, neither a search engine. Of course, we call it an answer engine, but everything matters here. The journey doesn’t end once you get an answer. In my opinion, the journey begins after you get an answer. You see related questions at the bottom, suggested questions to ask. Why? Because maybe the answer was not good enough, or the answer was good enough, but you probably want to dig deeper and ask more.
That’s why in the search bar, we say where knowledge begins, because there’s no end to knowledge. You can only expand and grow. That’s the whole concept of The Beginning of Infinity book by David Deutsch. You always seek new knowledge. I see this as sort of a discovery process. Let’s say you literally, whatever you ask me right now, you could have asked Perplexity too. “Hey, Perplexity, is it a search engine, or is it an answer engine, or what is it?” Then you see some questions at the bottom, right?”
On ads integration:
“It’s possible, and many experiments need to be tried. The trick is to really figure out how to do it in a way that doesn’t make users lose trust in your product, and yet build something that can connect people with the right source of information. I kind of like how Instagram does its ads, for example. It’s really targeted at relevance and it almost doesn’t look like you’re seeing an ad.I think Elon’s also said this publicly, how ads can be useful when done really right. It shouldn’t feel like you even see an ad when you see an ad. That’s truly the only right sort of ads. If we figure out something like that, in a way that’s actually disruptive to the link click, then I think it can work.”
Returning to our earlier point, AI remains underhyped, and Perplexity is still relatively unknown to the general public despite its 15 million active users. But the company is experiencing rapid growth, as is its ARR. While some might focus on competition with OpenAI, Google, and others, we believe Perplexity has the potential to become a supplemental and essential tool for hundreds of millions of people on their computers and phones, transforming the journey of knowledge discovery in various ways.