Google Slayer Powerset Gets $12.5M Initial VC Funding

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Includes: AMZN, GOOG
by: SA Eli Hoffmann

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Powerset Gets $12.5m at Whopper Valuation, To Go After Search Holy Grail [VentureBeat]

Summary: Powerset, the natural-language would-be "Google-killer," announced it raised $12.5M in a first-round of venture capital. Powerset says it can improve on Google's search engine by understanding context between words. An example: "Who did Dick Cheney shoot?" -- Both will give you references to Harry Whittington, who Cheney accidentally shot. But type in, "Who shot Dick Cheney?" and Powerset will give you no results. Google gives similar results for both. If you search, "Who acquired IBM?" Google will give results about companies that IBM acquired, even though that's not what you asked -- because Google can't understand the difference between an object and subject. Powerset will give results of the various companies that acquired IBM units, including Lenovo, and AT&T. Significantly, Powerset raised its $12.5M at a "sky-high" valuation, giving itself a pre-investment value of more than $30M -- and it's $2.5M more than the $10M they were originally seeking. The money came from Foundation Capital ($7M), The Founders Fund ($3M), and several angel investors ($2.5M combined). To satisfy its considerable data storage needs, Powerset has struck a partnership with Amazon’s new Elastic Computer Cloud program that gives Powerset access to an Amazon network of computers and storage at a cost of $0.10 a CPU hour — letting Powerset focus on its core search. Google has said it will take many years before computers can understand exactly what people are searching for. Co-founder Barney Pell: “It is not a long way away. This is not a change of some technology out on the periphery -- we’re changing the core of the engine.”
Related links: More on Powerset, the secretive search engine [VentureBeat] • Danny Sullivan's scathing critique of Powerset ambitions • Co-founder Lorenzo Thione's Blog • Angel investors press release
Potentially impacted stocks and ETFs: Google Inc. (NASDAQ:GOOG), Amazon.com Inc. (NASDAQ:AMZN)

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