Contrary Research Rundown #108
Hyper-growth and heated publishers: Perplexity’s challenge to navigate media lawsuits as it continues to grow, plus new memos on Perplexity, EquityBee, and Ripple.
Research Rundown
Search engine Perplexity has been one of the hottest startups in the AI sector this year, raising new funding at higher valuations three times so far in 2024:
In January 2024, the company raised $74.6 million at a $520 million valuation
In April, it raised $63 million at a $1 billion valuation
In June, it raised $250 million at a $3 billion valuation
Earlier this week, The Wall Street Journal reported that Perplexity was now looking to raise $500 million at an $8 billion valuation. A potential 15.4x valuation increase in ten months is a meteoric rise, but venture investors in 2024 have shown that they’ll pay a premium to invest in AI startups, and Perplexity’s growth this year has been impressive.
49% of all venture capital dollars in Q2 2024 went to AI and machine learning startups, and the median pre-money valuation for late-stage AI startups is now more than 65% higher than their median fintech and SaaS peers. Meanwhile, Perplexity’s annualized revenue, calculated by extrapolating last month’s revenue over the next 12 months, has increased from a little over $10 million in March 2024 to $50 million now, just seven months later.
Perplexity, which is seeking to disrupt Google’s search market dominance, is processing around 15 million queries per day, and it generates revenue from premium subscriptions to its search services. However, earlier this month, Perplexity said that it plans to start including advertisements, allowing brands to sponsor follow-up questions to user queries.
While investors have been impressed by Perplexity’s growth, one group of companies has taken issue with the search engine’s business practices: media companies.
On October 21, News Corp, the parent company of The Wall Street Journal and the New York Post, sued Perplexity for infringing copyrighted content. To quote the lawsuit:
“[Perplexity’s] AI ‘answer engine’ copies on a massive scale, among other things, copyrighted news content, analysis, and opinion as inputs into its internal database. It then uses that copyrighted content to generate responses to users’ queries that are intended to and do act as a substitute for news and other information websites. Perplexity loudly touts that its answers to user queries are so reliable that its users can ‘Skip the Links’ to the original publishers and instead rely wholly on Perplexity for their news and analysis needs. What Perplexity does not tout is that its core business model involves engaging in massive freeriding on Plaintiffs’ protected content to compete against Plaintiffs for the engagement of the same news-consuming audience, and in turn to deprive Plaintiffs of critical revenue sources.”
This lawsuit comes after The New York Times sent Perplexity a cease and desist, Forbes accused the company of stealing its reporting, and Wired accused it of illicitly scraping its site.
The legal implications of AI tools summarizing articles are murky. Perplexity’s head of business, Dmitry Shevelenko, compared Perplexity’s summaries to journalists incorporating information from other sources to support their own reporting, and summaries, by themselves, aren’t necessarily illegal. According to US copyright law, “it is permissible to use limited portions of a work including quotes, for purposes such as commentary, criticism, news reporting, and scholarly reports.” However, AI tools like Perplexity can generate these summaries much faster than reporters incorporating outside information into their stories.
While OpenAI has signed licensing deals with at least seven prominent media companies, helping it navigate the complicated relationship between generative AI and publishers, Perplexity has not yet announced similar deals.
This is a situation where technology has outpaced current regulatory frameworks, and the outcome of News Corp’s lawsuit will likely play a large role in shaping the future relationship between media and generative AI companies. Read our full memo below:
On Tuesday, we’re thrilled to be hosting Tech Talk in NYC featuring eng leads and founders from Ramp, Warp, Railway, Together AI & Moment. It’s an evening built by engineers for engineers — each company will live demo their latest product innovations for leading builders in NYC. Register here for a chance to join.
Equitybee is a platform that helps private company’s employees access the funding they need to exercise their stock options by connecting them with investors. To learn more, read our full memo here and check out some open roles below:
There are no open roles at the moment. For updates, check out their career page here.
Ripple proposes an alternative to expensive and time-inefficient international money transfers by cutting out intermediary banks and enabling the sending and receiving banks to communicate directly, exchanging fiat using a cryptocurrency token, XRP. To learn more, read our full memo here and check out some open roles below:
Applied Cryptographer - London, UK
Senior Manager, Software Engineering - San Francisco, CA
Check out some standout roles from this week.
Clay | New York, NY - Senior Product Designer, Go-To-Market Engineer, Head of Engineering, Data Scientist, Enterprise Growth Strategist
Retool | San Francisco, CA - Product Marketing Manager, Security Engineer, Software Engineer, Product Designer, Sales Engineer (Enterprise)
Modern Treasury | San Francisco, CA or New York, NY - AI/ML Ops / Software Engineer (Tech Lead), Revenue Operations Lead, Software Engineer (Senior)
Pinecone | New York, NY or Remote (US) - Technical Support Engineer, Engineering Director (Experience), Platform Engineer
Former OpenAI CTO Mira Murati is reportedly raising $100 million for a new startup focused on building AI products based on proprietary models.
Sam Altman’s crypto project, called Worldcoin, announced it changed its name to just “World,” and unveiled “Orbs” which is an eyeball-scanning crypto project designed to prove someone is human in the age of AI.
Ripple named exchange partners including Uphold, MoonPay, and Bitstamp for its stablecoin RLUSD which Ripple’s CEO stated could launch within weeks.
Stripe acquired stablecoin platform Bridge for $1.1 billion in hopes of building “the world’s best stablecoin infrastructure.”
Book publisher Penguin Random House published a statement saying that it will “vigorously defend the intellectual property that belongs to [its] authors and artists” by blocking AI training.
Physicist Baiju Bhatt, who previously co-founded Robinhood, launched a new startup called Aetherflux to retrieve solar power from space through large solar arrays in geostationary orbit that would collect solar energy and beam it back to Earth via microwaves.
Anthropic released a paper titled "Sabotage Evaluations for Frontier Models” discussing how Anthropic’s Claude 3 Opus and Claude 3.5 Sonnet models only have minimal mitigations to address sabotage risks.
Anthropic also introduced a new capability for its Claude 3.2 Sonnet model which allows developers to direct Claude to use computers the way people do — “by looking at a screen, moving a cursor, clicking, and typing text.”
Brex announced a new partnership program for accounting, bookkeeping, and fractional CFO firms to optimize their workflows.
Character.AI is being sued by a Florida mom accusing its chatbots of initiating abusive interactions with her 14-year-old son who took his life after his last conversation with a chatbot.
Rippling released a new scheduling product called Rippling Scheduling that lets managers customize schedules based on demand, employee certification, wages, and “hundreds of other data points” which ensures efficient staffing.
A former OpenAI researcher alleges in a personal blog that OpenAI is breaking copyright law and destroying the internet.
Zepto is in conversations to raise between $100 million to $150 million in funding from high-net-worth individuals in India.
Apple CEO Tim Cook said the $3.5K Vision Pros weren’t a “mass market product” and could stop production by the end of the year as the Chinese manufacturer assembling the Vision Pros stated it’s making about half as many units per day compared to its peak production.
A key AI safety policy researcher at OpenAI resigned and is planning on starting or joining an AI policy nonprofit since he thinks the technology is "unlikely to be as safe and beneficial as possible without a concerted effort to make it so.”
Taiwan Semiconductor Manufacturing Company’s (TSMC) chip production in Arizona achieved early production yields that surpassed production in China, representing “a significant breakthrough for a US expansion project initially dogged by delays and worker strife.”
Google’s Notebook LM feature can transform articles and blogs into a conversational exchange between two podcasters discussing topics based on the source materials.
Finix raised $75 million to take on Stripe as a payment processor; its CEO observes that “payments are still relatively fragmented, and probably about 91% of payments today still goes through systems that were built back in the ’80s and the ’90s.”