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Perplexity’s value triples to $9bn in latest funding round for AI search engine

Silicon Valley start-up capitalises on surging investor interest to raise $500mn in fourth round of the year

Perplexity, an artificial intelligence-driven search engine, has closed its fourth funding round this year, tripling its valuation to $9bn as it seeks to compete with offerings from Google and OpenAI.

The $500mn round was led by Institutional Venture Partners, with involvement from Nvidia, New Enterprise Associates, B Capital and T Rowe Price, according to multiple people with knowledge of the deal. Previous investors have included SoftBank’s Vision Fund 2, Nvidia and Amazon founder Jeff Bezos, as well as several prominent names from the AI industry such as OpenAI co-founder Andrej Karpathy and Meta’s chief AI scientist Yann LeCun.

The San Francisco-based group has grown rapidly this year, with its product receiving hundreds of millions of queries a month. It has 15mn monthly active users with most of that traffic coming from the US.

The new funding will help Perplexity compete with west coast rivals in an increasingly fierce fight for engineers. “The talent war for AI is like no other time before,” according to Ali Ghodsi, co-founder and chief executive of Databricks, the AI and data analytics company that announced a $10bn fundraising round on Tuesday.

Perplexity is seeking to capitalise and improve on the search advertising system pioneered by Google, in which marketers bid to have a sponsored link placed against search queries. It is in talks with major brands to pilot advertising on its platform.  

In a sign of growing competition in the space, AI companies have recently targeted the search market by linking up chatbots to the internet. This week, OpenAI rolled out web searching for its popular ChatGPT product, while Anthropic’s Claude can perform searches through a feature called “computer use”.

Google and Microsoft, which are leaders in the $300bn digital advertising world, have also recently incorporated large language models, which power AI chatbots and make results more conversational, into their search offerings.

The latest round has pushed Perplexity’s valuation higher by nine-fold since the start of the year, in another sign of how hot start-ups developing new AI tools can draw in hundreds of millions or even billions of dollars in investment. 

After OpenAI’s $6.6bn fundraising in October — one of the largest in Silicon Valley — one person close to the company said Perplexity was inundated with unsolicited interest from new investors.

Run by former Google intern Aravind Srinivas, Perplexity raised $250mn this summer, on top of previous funding rounds in January and April.

Perplexity makes money through subscriptions. It says its annualised revenues — a projection of full-year revenues based on extrapolating the most recent month’s sales — have grown from $5mn in January to $35mn in August.

The spate of deals for lossmaking AI start-ups has stoked concern among some investors that rising valuations in the sector show all the hallmarks of a bubble, however. But even those who argue most AI valuations are increasingly detached from reality are willing to stake bets on companies they believe could be winners.

Perplexity and T Rowe Price declined to comment. IVP, B Capital, NEA and Nvidia did not immediately respond to a request for comment. The closing of the round was first reported by Bloomberg.

Boss David Epstein hopes to replicate his success at Seagen after $43bn sale last year

Ottimo Pharma, which is developing a new cancer drug, has completed one of the largest early-stage biotech fundraisings of 2024 as its boss seeks to replicate his success in leading oncology group Seagen to a $43bn sale.

The London and Boston-based group has raised $140mn in a series A round and is led by David Epstein, who was chief executive of Seagen until it was sold to Pfizer last year. 

Ottimo is developing an antibody treatment that Epstein hopes could replace the market leaders in cancer care by being more effective and producing fewer side effects for patients. The new class of cancer drugs could be worth up to $100bn a year at its peak, he said.

Epstein said he believed the market for the new type of drug could “easily” be double the size of the market for so-called anti-PD-1 medicines such as Merck’s Keytruda, which stop cancers hiding from the body’s immune system. 

The start-up is developing Jankistomig, a drug that combines an anti-PD-1 with an anti-VEGF, a molecule that tackles another protein on tumours to slow their growth. Epstein thinks it will become the “new backbone immunotherapy to be used across cancer types”, eventually replacing existing treatments. 

“It’s pretty clear that if you can get substantial increases in survival, the older drugs will be used less and less over time,” he told the Financial Times.

“The market currently is about $50bn for anti-PD-1s. If people are staying on [the drug] for twice as long, and you’re going to do tumour types like [hard-to-treat] triple negative breast cancer . . . I think they [will] call it a $100bn market one day.”

Ottimo’s drug will now be tested in a large early-stage trial to find the right dose and combinations with other medicines. It will then have to go through late stage trials to prove efficacy and the regulatory approval process.

The drug candidate was discovered by Jonny Finlay, a protein engineer and serial biotech entrepreneur based in Scotland, who then co-founded Ottimo with European venture capital firm Medicxi. 

Epstein saw the potential for the new class of drugs when biotechs Summit Therapeutics and Akeso reported trial results in September, showing their drug ivonescimab cut the risk of disease progression or death by 49 per cent compared with lung cancer patients treated with Keytruda. 

Germany’s BioNTech has also shown interest in the new type of treatment, signing a $950mn deal to buy Chinese company Biotheus for its similar medicine. 

Ottimo’s series A round is being led by US healthcare investors Orbimed, Avoro Capital Advisors, Avoro Ventures and Samsara BioCapital. Epstein said the round was heavily oversubscribed.   

Ottimo has fewer than ten staff. The company will work with outsourcers to run its clinical trials and so only plans to expand to up to 25 staff next year. 

But Epstein said the company was already getting inbound interest from large drugmakers. “Many big pharma companies that currently have oncology franchises are trying to figure out how to play in this space,” he said.

US currency hits two-year high on hawkish forecasts from central bank

The dollar rose to its highest level in more than two years and global stocks fell on Thursday after the US Federal Reserve jolted markets by signalling a slower pace of interest rate cuts next year.

Asian currencies including the Chinese renminbi and Japanese yen fell sharply against the dollar, with South Korea’s won sinking to a 15-year low. The region’s benchmark equities indices opened down after a sharp slide in Wall Street stocks the previous day.

Futures contracts suggested Europe was poised to follow Asia and the US lower, with contracts tracking the FTSE 100 down more than 1.1 per cent and those for the Euro Stoxx 50 down 1.6 per cent.

The moves come after the Fed cut interest rates by a quarter of a percentage point on Wednesday but gave projections that pointed to fewer rate cuts than previously forecast for 2025, underscoring concern with lingering inflation.

The indication that US interest rates could remain higher for longer, sucking capital away from other markets, was a blow to Asian and emerging markets, where investors had hoped for a swift path back to lower rates.

“Markets were surprised by the perceived hawkishness of the Fed,” said Mitul Kotecha, head of emerging market macro strategy at Barclays in Singapore. “For Asia, which has struggled in terms of relatively lower yields and the weakness in China adding pressure on the region, [today’s falls] are the culmination of those factors.”

The dollar, which jumped 1 per cent against a basket of currencies including the yen and the pound on Wednesday, rose a further 0.1 per cent on Thursday.

The benchmark 10-year Treasury yield rose another 0.03 percentage points to 4.52 per cent. The rate-sensitive two-year yield was flat at 4.35 per cent after rising 0.11 percentage points on Wednesday.

The Indian rupee hit an all-time low of Rs85.1 against the dollar, while the Chinese renminbi teetered around Rmb7.3.

Asia-Pacific equities fell on Thursday, with Australia’s S&P/ASX 200 down 1.7 per cent, South Korea’s Kospi down 1.9 per cent and India’s Sensex falling 1.2 per cent.

Hong Kong’s Hang Seng index dropped 0.3 per cent, while mainland China-listed equities recovered after opening down.

Japan’s currency-sensitive Nikkei 225 index was down 0.6 per cent after the Bank of Japan opted on Thursday to hold rates steady.

The US Federal Reserve’s “dot plot” median now suggests policymakers only project two quarter-point rate cuts in 2025, down from four forecast in September.

“Given the risk of resurging inflation from potential trade tariffs and a slowdown in immigration that has been cooling pressure in the labour market, market expectations of only two more cuts in 2025 now seem reasonable”, wrote Jean Boivin, head of the BlackRock Investment Institute, in a note.