AI costs are too high, including Perplexity, multiple star startups are seeking to sell

Facing the "sky-high" AI software development bills, many star startups such as "Alphabet-C killer" Perplexity and AI writing platform Writer are considering "selling themselves".

Perplexity, an AI search engine company that is seen as a strong competitor to Alphabet-C, has been in operation for less than two years and has fewer than 40 employees.

According to an insider who spoke to The Information, several companies expressed interest in acquiring Perplexity last year.

The insider revealed that the management of Perplexity had discussions about mergers with at least four companies, as they were concerned about the cost of training AI models and the fierce competition from search giant Alphabet-C.

However, no deals were reached in all the discussions, and at the end of last year, Perplexity shelved the merger negotiations.

Instead, Perplexity raised $73.6 million in Series B financing at a valuation of $520 million, announcing this good news earlier this month.

Since its inception, Perplexity has raised a total of $100 million in funding.

According to insiders, Perplexity's annual recurring revenue has recently increased to about $8 million, far exceeding the $3 million in October last year.

However, considering the "sky-high" cost of AI model development, the new financing and revenue may still not be enough to ensure the long-term operation of Perplexity.

Sam Altman, CEO of OpenAI, stated that the development cost of GPT has exceeded $100 million.

According to The Information, OpenAI's "arch-rival" Anthropic used more than half of its revenue last month to pay cloud providers such as Amazon and Alphabet-C.

Developers of large language models (LLMs) need to pay millions of dollars in licensing fees to cloud providers to use their content for training AI models.

These costs may continue to rise in the future.

In addition to Perplexity, some smaller startups are looking for a foothold in large AI companies.

An insider revealed to The Information that enterprise-focused AI startup Writer has been in talks with at least three companies regarding acquisition in recent months.

In September, Writer announced the completion of a $100 million Series B financing round led by Iconiq Growth.

In May last year, database software provider Snowflake acquired AI search engine company Neeva for $150 million, equivalent to half of Neeva's previous valuation during its financing. At the same time, there are also some giants preparing to snatch valuable AI talent through acquisitions.

Clem Delangue, CEO of AI model repository Hugging Face, stated earlier this month on X platform that "Hugging Face may be an ideal destination for early-stage startups that are striving to find funding."

Harpaul Sambhi, Founder and CEO of AI company Magical, recently stated that he has weekly conversations with two to three startups that are looking for buyers in order to recruit top talent in the AI industry.