Hi, this is Wayne again with a topic “Perplexity AI continues to shake up search | Equity Podcast”.
This episode is presented by invest Puerto Rico, if you believe your business can go anywhere. Puerto Rico is the place hello and welcome back to equity, The Tech runch podcast, where we unpack the numbers and the Nuance behind the headlines. This is Alex, and today is April. 24Th 20 24 – and this is our Wednesday – show where we dig into the critical startup and Venture Capital stories from the week thus far, and this week’s show is actually pretty darn awesome. I’M excited about every single one of these stories, so on the show.
Today we have news about the Tik Tok band and what is going on with the pony. aipo, then perplexity, Ai, and why its upcoming round actually makes reasonable sense. Then repairable laptops are big business, who would have thought two European AI stories that I’m tying together and then good news for Boston startups from the world of venture capital. All right, let’s go first up big news from the realm of banning Tik Tok.
The Senate has passed a bill included as part of a larger foreign aid package that will ban Tik Tok if its owner bite dance doesn’t sell it. Within a year. The senators in the Senate passed the bill 79 to8, and that was after the house passed it with an overwhelming majority over over the weekend. Of course, the president has to sign it to actually make a law, but the White House says that he will do that today.
Now Tik Tock does plan to challenge this move in courts, which is absolutely unsurprising, so get ready for that legal drama. But let’s talk about the context here: Tik Tock is headquartered in Singapore, which is a good move by the company to try to create space between it and its Chinese parent company and the problem there is that it’s not that much distance and also bite dance, which Of course, owns t to is part of the Chinese economy, which means that the Chinese government can kind of do with it. What it wants to so there’s concern that Tik Tok could be used by B Dan and therefore the Chinese government to collect information from and push information to the US market. Now, when it comes to the actual ban or really forced divestment or ban a lot of folks are pretty mad, I’m sure you’ve seen this on Twitter and other social media sites or in and around the water cooler at work, which is good.
It should be a polarizing issue. This is a big deal and a big choice and a big kind of moment for the economic balance, if you will between China and the US – and I do think that it’s useful to discuss this in the context of Free Speech. But the argument that First Amendment rights extend to foreign companies has never made sense to me. My POV here is that there’s no surrender requirement in a free market system when it comes to powers that are foreign and do not offer economic reciprocity. If you will so, in other words, there’s no kind of moral need to allow Tik Tok into our Market, if it is a concern, and our government has decided that it is so I I kind of see this, but while the US is doing all of that, China is making moves that are just as notable and kind of in the other direction, and this involves pony.ai a Chinese self-driving technology company that, according to Bloomberg and a Chinese State media report intends to list on the US Stock markets. So yikai reports that pony.ai May issue as many as 92 million shares in the deal, which sounds like quite a lot, and you may recall that pony.ai recently raised 100 million from Saudi sources and according to Tech, reporting was valued at 8.5 billion back in 2022. After closing the first bit of its series D, why do we care about one late stage, startup from China listing in the US? Well, access to US capital markets is a big freaking deal for fundraising and Chinese companies know it. In contrast, going back to Tik Tok, the US is less reliant on any short form vertical video platform for Capital formation, of course, and so from a business perspective. Not quite the same thing.
It’S just interesting to see the US move to limit access of Chinese companies to the US population. Well, the Chinese companies are going hey. We love to list under Capital markets, business, it’s complicated.
Let’S talk about lexity AI! Back in January, the AI search company raised around $ 74 million at a valuation of 540 million, which was a lot because the company was only worth 121 million back in April of 2023 and then beginning in March. The company closed funding on a valuation of just over $ 1 billion, with the CEO clarifying on Twitter today that the amount it raised in that round was about 63 $ million, but wait. There’S more techwrench has learned that the company is currently raising at least $ 250 million at a valuation of between 25 and $ 3 billion, so clearly, Venture capitalists are falling over themselves. You put more money into this company. Why? Well? The only thing we know about its business is that it’s at about 20 million worth of annual recurring revenue or ARR now at a $ 1 billion price tag, that’s about a 50x AR multiple, which is spicy, but not insane at a $ 3 billion price tag That ARR multiple skyrockets 2 150x, which is absolutely Bonkers for the company in its current form today.
So, while that’s crazy, though I do actually kind of get the logic, so here’s the way I think about this perplexity is probably growing very, very quickly, which means that there is General optimism that it can scale to $ 100 million worth of air r r become An IPO candidate at a pretty good pace, so the risk here of money going into perplexity going to zero, probably feels pretty low to its backers. On the other side, the upside is absolutely enormous. Here is an AI company that is taking on search, which is just about the biggest deal out there in Revenue terms. So perplexity is not just another AI company, it’s a search competitor that is seeing Rising traction. If you want to put your Venture hat on, ask yourself this question: how much would you have paid for Google stock back when it was Private? The answer is an infinite amount of money, because no matter what price you paid, you were going to make an insane return on your investment, and we are seeing some signs that perplexity is seeing very rapid growth in its query. Count which implies that its search product does actually have legs Bloomberg reports that the company has handled about 75 million queries so far this year about what a day in all of 2023 that works out to if no more growth happens in terms of pace.
I don’t know 2 3x growth this year and if the company keeps accelerating it could reach a quadrupling, that’s crazy for a search product already in the eight figures of queries, so I dig all of that. It’S a cool company one to keep an eye on, and it’s definitely not just a CH GPT rapper. What’S next in Tech, that’s not the right question! It’S where Puerto Rico! More than just a tropical par Paradise, it’s an Innovations, Paradise where startups and Global players coexist in a vast and vibrant ecosystem, where Talent runs deep, highly skilled and bilingual plus the island offers the most competitive tax incentives in the US.
If you believe your business can go anywhere, Puerto Rico is the place find out more at invest. Pr.Org crunch, put aside all that AI business and come with me back to the physical world, because we have to talk about frame work computer now they sell repairable laptops in 13 countries across North America and Europe, and also given where so many oems are located. Taiwan. The company itself has been pretty deliberate, you might even say cautious when it comes to fundraising. Its last major round was an $ 18 million series, a that it closed back in 2022 and in fact the company says that its fundraising strategy is to – and I quote, raise as little as possible and focus funds on efficiently expanding the reach of our mission. Translating that for you, it means don’t raise much focus on hardware and don’t get too upside down in your Venture calculations. But framework is doing well enough that it has announced a follow-up, a $ 17 million series A1 that it’s going to use to hire 10 more people stay lean and keep shipping Hardware. I love it.
I have actually had the pleasure of using framework computers a time or two, and I really kind of liked it. It’S weird to see, though, because if you are like myself accustomed to MacBook Pros and iMacs and that sort of all-in-one device, the framework laptop, is like a bunch of Legos that you can kind of turn into a computer if you want or take them apart and Reorder them, I’m just very excited to see a company that is challenging. The current model of an enormous industry is seeing the success that it is and repairability. I love that very cool.
Next up, we are going to Europe to talk a little bit more about AI, because there are two stories that I want to touch on. I am keeping an eye on AI startups over in Europe. There does seem to be quite a lot of activity over there. So when two stories on Tech rench landed on the same day, I thought hey, we’ll put them together. So first up, conversational AI paroa has snapped $ 66 million in a series B round. This comes after it raised 21 million from a smoth of European investors to focus on International growth.
First thoughts here $ 66 million for a series B is a lot of money, implies that either they’re working on something so hard, they need lots of money or they’re. Doing so well that everyone wanted to give it to them, or both now. Conversational AI, of course, is a big Market with lots of different players. So it’s hard to say exactly who parloa is going to compete with, but we do know that the German company is focusing on the US market in particular and opened an office in New York last year, one to keep an eye on.
Then there is flex AI, which has been operating in stealth for some time, but the Paris based company is formerly coming out of its shell this week with about $ 30 million in funding and a tease of its first product. What tance described as an on-demand cloud service for AI training, very interesting? What I like about Flex AI is that they’re not just working on some software. An on demand cloud service for AI training sounds like a competitor to what Amazon and Azure and gcp and others offer right. So do we have a company Tak on the major Tech Cloud, compute platform companies? I sincerely hope so cuz that would make Flex II about 10 times cooler than nearly any other company out there. It does seem that there is a lot of activity in AI in Europe, or at least that’s what I keep reading about, and it’s a lot more than just what MW is up to, despite what some Outlets would want. You to think to close out this morning. The Boston Globe reports that Boston based volition, capital is expanding, it is Staffing up, and this is good news for the Northeast and all the startups thereof, because it is a counter Trend move in Venture Capital. One story that we haven’t talked about enough is what’s happening with Junior talented Venture Capital firms, hearing anecdotally that some folks are moving on and looking for other things to do, because the boom inventure Capital has ended.
I guess you might say anyways if you don’t know, volition capital. I went ahead and pulled some of their portfolio companies for you. They have backed companies that have exited like chewy in the pet e-commerce space Ping, Identity which sold the private equity and they also back startups like Kora and gra. So some names we know some names, we don’t, but it all adds up to. I presume an internal rate of return that makes volition Capital the apple of its LP’s eyes, and that’s why it’s expanding when everyone else is shedding Talent anyways. This is all good fun and well timed, because I am heading to Boston literally later today for our early stage event, I’m pretty excited about that it’s on Thursday. So if you are going – and you see me – please say hello – I will be the uh – probably awkward. Looking bald guy in shorts also, I will be recording my bit for the Friday episode of equity at the event itself.
So if you see me tucked into a corner, recording, don’t say hi, then because I’m recording but the moment I’m done, I would love to just meet as many of you fine folks as I can. That is our show for this ever so lovely Wednesday morning. Of course, our Friday news Roundup is coming up next. If you need more from the equity team, we’re Equity pod over on X and threads and Tech runch pods over on Tik Tok, my name is Alex. I think you are the beeses I’ll talk to you soon. Bye Equity is hosted by myself, Alex Wilhelm and Tech rench senior reporter Mary, an azto. We are produced by Teresa loans, solo with editing by Kell Bryce. Durban is our illustrator and a big.
Thank you to the audience development team and Henry pette who manages Tech, wrench audio products. Thank you so much for listening and we’ll talk to you next time. .