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Sourcery · 2 min · Oct 12, 2026

AI products compound through recursive usage, not network effects

Aravind Srinivas

Founder & CEO, Perplexity

Held research roles at OpenAI and Google DeepMind before co-founding the AI search engine Perplexity in 2022.

  • Molly O'SheaHost · Founder, Sourcery

    Ex-Upfront Ventures investor; has interviewed Alex Karp and Palmer Luckey.

About this segment

Srinivas says Perplexity's growth came from enterprise self-serve onboarding, including a solopreneur spending $1M a year while making $3M. He argues AI products win on depth of usage, not a billion users.

From “Perplexity CEO: SMBs Could Drive the Next Economic Boom”, Oct 12, 2026. Watch the full episode

“You actually need to have a lot of depth in the users you have. You still need a lot of users.”
Aravind Srinivasat 27:39 · Sourcery27:39

Takeaways

  1. One solopreneur spends about $1M a year on Perplexity and earns $3M
  2. Enterprise grew faster than prosumer this year
  3. Depth of usage matters more than user count, though you still need millions
Watch 1:57 from 26:26

In this episode

Full episode
  1. 29:26Long-context agents make local hardware cost-competitive with data centers3:28

  2. 26:26AI products compound through recursive usage, not network effects1:57

  3. 42:23The real bottleneck is deciding what to build, not writing code2:14Up next

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

  1. 26:31

    what led to our success. And it was so intuitive that people started onboarding themselves through self-server enterprise. And we saw a lot more growth in the enterprise this year compared to even prosumers because the product started unlocking business operations and workflows for real people. There's one solopreneur, like literally one person company, who's spending upwards of like a million dollars a year on our product.

  2. 27:00

    What? Because he's making three million a year. He's making three million a year. by automating newsletters for others. And the people who are using that are getting clients for their business. So it's very recursive. And so that's why I like to think of this product, our product, our company, and in general, Egeny products, as the recursive effect. It's not the network effect. And this is actually the thing that a lot of people get wrong, is they think of AI should follow the same network effect theory of previous era of consumer products.

  3. 27:38

    So they're like, oh, you don't have a billion users. You're in a failure. No, you don't need to have a billion users. You actually need to have a lot of depth in the users you have. You still need a lot of users. You need real distribution. You need scale at millions of users. But you need high depth, highly recursive usage among those users where using your product actually lets them make a lot of money and that lets you make money because they rely on you for that.

  4. 28:06

    That's basically what's happening with a product like Perplexity Computer. Search is actually compounding. Every form of eugenic action requires access to web, access to a cloud browser, access to context across connectors, files and tools, and putting it all together