Generative artificial intelligence search startup Perplexity AI Inc. reportedly is finalizing the details of a mammoth new funding round that would increase its valuation to a cool $9 billion.

The startup, which has built an AI-powered search engine platform and competes with both Google Search and OpenAI’s ChatGPT, is set to receive $500 million in the round. The San Francisco-based venture capital firm Institutional Venture Partners is leading the round, according to reports by the Wall Street Journal and CNBC, which both cited anonymous sources.

The round would make Perplexity one of the most valuable generative AI startups in the world. At the beginning of the year, it was valued at just $520 million, but successive funding rounds increased that number to $3 billion at the end of June. All told, it has announced four funding rounds this year alone.

Perplexity is attracting more investor cash even as its rivals step up their efforts to better compete against it. Last week, OpenAI unveiled a new search feature with ChatGPT, its viral chatbot, while Google Search and Microsoft Corp.’s Bing search engine have also added AI capabilities. In the case of ChatGPT’s search feature, it provides up-to-the-minute sports scores, stock prices, news headlines, weather and more, powered by its real-time internet search capabilities and partnerships that its parent company has forged with various publishers and data providers.

Despite the competition, Perplexity has done fairly well itself, with its search app downloaded more than 2 million times to date. In August, it said it handles about 230 million search queries each month. Last month, the Journal said its annualized revenue stands at about $50 million.

Like Google, Perplexity’s AI engine searches the web for the most up-to-date information, but rather than produce a list of links, it will respond to users’ queries in a manner that’s more akin to ChatGPT.

The startup’s tools are free to use, but it makes money from selling premium subscriptions that come with more advanced features. Besides targeting consumers, it has also launched an enterprise-grade version of its search engine for businesses. That version can also search a company’s internal files to answer business-related questions.

The company also has plans to integrate advertising with its platform, but it has not yet done so.

Perplexity has also attracted a fair share of controversy amid its rise, with a number of media outlets complaining that its search engine basically plagiarizes their content when it produces its answers. In September, the New York Times reportedly sent Perplexity a cease and desist letter, asking it to stop crawling its web pages and using its content to generate answers. The Times accuses Perplexity of simply scraping its web articles, but the startup denies this.

Other websites, such as Forbes and Wired.com, have also accused Perplexity of plagiarism, and the Journal’s parent company Dow Jones has gone further, suing the company over its practices.

Responding to this controversy, Perplexity has held out an olive branch in the shape of a revenue-sharing model for publishers. It’s inviting media companies to sign up to the program, and anytime it generates ad revenue from a response that cites one of their articles, it will share a percentage of that money with them.

The initiative appears to have satisfied quite a few publishers, with the likes of Fortune, Time, Entrepreneur, The Texas Tribune, Der Spiegel and WordPress all signing up to the program.

For publishers, it could be pretty lucrative. In a July interview with CNBC, Perplexity Chief Business Officer Dmitry Shevelenko said that if one of its answers cites three different articles from the same publisher, that partner would earn “triple the revenue share” than if just one link was used.

Image: Perplexity AI