Algolia Inc., a startup that enables companies to add an artificial intelligence-powered search bar to their websites, has closed a $150 million funding round at a valuation of $2.25 billion, four times what it was worth after its previous capital raise.

Announced this morning, the round follows a year in which Algolia saw net new annual recurring revenue jump 180% thanks to strong demand. The startup says that its technology is now used by over 10,000 companies including big names such as NBCUniversal Media LLC and Stripe Inc. Algolia estimates that it reaches about one in eight internet users worldwide.

San Francisco-based Algolia develops a search service that enterprises can embed into their websites and mobile apps to make them easier to navigate. Each company can customize Algolia’s search algorithm for their requirements.

Retailers, with which the startup’s service is particularly popular, use it as a tool for generating more sales. They create Algolia-powered search bars to help shoppers navigate their online product catalogs. The products that customers are most likely to buy can be placed at the top of search results to encourage more purchases.

If an electronics retailer observes that customers who order a wireless mouse often also buy a keyboard, it can configure Algolia’s service to include keyboards in search results more often. It’s also possible to display multiple products from the same category or manufacturer. This latter feature has the potential to improve sales in scenarios where the specific item a user sought is out of stock, but a similar product may prove suitable as well.

Algolia makes it possible to personalize search results in an even more fine-grained way when necessary. A company can, among others, customize what products appear in results based on factors such as whether or not a shopper has added an item to their shopping cart.

Earlier this year, Algolia embarked on an effort to expand its addressable market by moving into other areas besides search. The startup’s first major move in that direction was the May launch of Algolia Recommend, a product recommendation engine. Retailers can use it to show online shoppers a list of items they may be interested in adding to their order.

Like Algolia’s search engine, Algolia Recommend offers an array of customization features. A company looking to boost profitability, for example, can configure the engine to prioritize high-margin items in product suggestions. It’s also possible to fine-tune suggestions based on other factors.

Algolia said that it will use the $150 million funding round announced this morning to continue its expansion into additional markets. The round was by Lone Pine Capital. More than half a dozen other investors participated as well, among them the venture capital arm of Salesforce.com Inc., Accel and Fidelity Management & Research.

Search startups have raised a considerable amount of venture capital lately. Earlier this month, Sourcegraph Inc. raised $125 million for a search engine that enables developers to quickly find specific lines of code in their applications’ code base. About two weeks prior, Neeva Inc. launched from stealth mode with $77 million in funding and a subscription-based search engine for consumers that aims to compete with market leader Google LLC.

Algolia’s main competitor, however, is not a fellow startup but rather publicly traded Elastic NV. Elastic provides a popular open-source search engine called Elasticsearch that is used for many different applications, including powering website search bars. Algolia says that its competitive edge is ease of use: It promises to let companies make their websites searchable with less custom coding than is required when using Elasticsearch.

Algolia’s hefty $2.25 billion valuation and the 180% jump in net new revenue it disclosed today suggests that enterprise demand for embeddable search engine software is increasing. The growing demand led to this segment becoming a bigger priority for the three major cloud providers, which all offer enterprise-grade search services through their respective platforms. Amazon Web Services Inc. has Amazon CloudSearch, Google LLC provides a cloud version of its flagship search engine and Microsoft maintains a presence in the market as well.

Algolia’s recently launched effort to expand beyond search into other areas could not only open new revenue opportunities for the startup but also help it set itself apart from rival search providers. By offering a broader set of features that includes capabilities such as automatic product suggestions, the startup can potentially provide a more compelling value proposition to enterprises than if were to offer search features alone.

Algolia rival Elastic has also built an ecosystem of complementary capabilities around its core product. Building on the success of Elasticsearch, the company over the years introduced additional tools for performing tasks such as analyzing data and creating visualizations.

Image: Algolia