after 17 years on the private market
data analytics company palantir is ready
to make its public market debut
co-founded by peter thiel back in 2003
its mission providing software that
customers use to integrate
volumes of data from images to
spreadsheets into a central platform
where it can then be securely analyzed
and interpreted
news of palantir's plans to go public as
well as its recent announcement that it
will be relocating its headquarters from
palo alto to denver
has put the secretive software company
in the spotlight
best known for its work with us
government agencies like the cia the
department of defense
and most controversially immigration and
customs enforcement
the company was founded following 911
with the goal of defending american
interests
the core mission of our company always
was to make the west especially america
the strongest in the world for the sake
of global peace and prosperity
but in recent years palantir has also
courted customers like airbus
chrysler and bp commercial customers now
make up about 50 percent of the
company's revenue
a number that's trended upwards over the
past decade and even though palantir has
never turned a profit
revenue has been growing as losses have
narrowed perfectly normal for a software
company to show
that sort of trajectory going into their
ipo the question is
does the economic model over time look
like one that
will eventually produce profits and you
can certainly
get there but while longtime investors
are eager for the company to go public
for others confusion remains about what
it is exactly that palantir does
and why their work with law enforcement
agencies has raised eyebrows
the name pound here comes from the lord
of the rings in the fantasy series
palantiri are spherical stones that help
powerful users see what is going on in
other parts of middle earth
and communicate with each other founded
in 2003 by billionaire peter thiel
alongside current ceo alex carp joe
lonsdale
stephen cohen and nathan gettings
palantirs tech helps detect
unusual or suspicious patterns in large
data sets
using techniques that the founders
learned working together at paypal
the cia was one of the company's
earliest investors
and its only customer for a number of
years eventually other intelligence
agencies like the fbi and the nsa jumped
aboard
using the company's customized data
analytics capabilities to track and
capture terrorists
insurgents and drug smugglers they cite
afghanistan and iraq
as two examples of places where soldiers
were mapping networks of insurgents and
makers of roadside bombs by hand
so they actually were bringing in
technology to do things that
intelligence agents on the ground were
having to do manually in very dangerous
places
the company's software has been credited
with helping to find and kill
osama bin laden and though this has
never been confirmed
palantir certainly has not disputed it
the text also helped to uncover bernie
madoff's ponzi scheme
and rooted out chinese spyware installed
on the dalai lama's computer
we work hand in hand with most of the
special operators
in the western world we work hand in
hand with most of the clandestine
services
we're in over 40 countries
today the company increasingly works
with high profile commercial customers
too
its first was jpmorgan chase which
adopted the software in 2009 to monitor
employees who might go rogue
however the partnership ended in scandal
when jp morgan's special operations lead
used it to spy on top executives
others have continued to express
interest though fiat chrysler now uses
palantir to identify potential faults in
car parts
airbus uses it to respond more quickly
to manufacturing problems
accelerating the production of its a350
aircraft
and bp uses it to analyze drilling data
reportedly leading to a 10
increase in oil production in the north
sea this is a
hefty piece of software that runs across
an enterprise
and is used for understanding everything
that a company faces
whether it's their customers their
supply chains downtime
geographies where there's growth where
their competitors are gaining share
as revenue from the commercial sector
has increased over the years
ceo alex carp has had to rethink his
historical dismissal of salespeople
we don't look like a classic enterprise
software company we have no sales people
almost everyone is an engineer not
anymore carp's been building out a sales
team
and in 2019 the company spent 61 percent
of its revenue on sales and marketing
however long-standing government
contracts remain integral to the
company's revenue as well as its
reputation
and during the coronavirus crisis
palantir has formed a number of new
partnerships too
with the va the national institutes of
health and britain's national health
service
helping these agencies as well as the
cdc to track the spread of the virus and
allocate resources
in order to make decisions right now in
order to know where the ppes need to go
in order to know when and where you're
going to reopen you want all the
analytical models
all the pieces of information all in one
place pouncer is really designed to
thrive in a crisis
but especially under the trump
administration the company's work with
ice and police departments has raised
considerable concern in the liberal
leaning silicon valley
leading palantir to double down on its
commitment to law enforcement and
national defense
so i do think this idea of like
nationalism and libertarianism
is is kind of intersecting in a very
interesting way and palantir seems to
represent all of that
protests against palantir first gained
traction in 2018
primarily in response to the company's
contracts with immigration and customs
enforcement
which are worth up to 92 million dollars
the agency has crackdown on illegal
immigration through workplace raids
and separating families at the border my
house has been protested for many months
almost every day
our office has been protested many
palantirians protested against
internally
some people were so upset about it that
they left these are very hard decisions
co-founder and board member peter thiel
is probably president trump's most
famous silicon valley backer
donating 1.25 million dollars to his
2016 campaign
carp's politics differ but he says that
palantir remains fully committed to
aiding the u.s government
i've never stopped being critical of
this administration i'm not planning to
vote for this administration so there
are things i do differently the core
issue though is
who decides the small island in silicon
valley that would love to decide what
you eat how you eat
and and monetize all your data should
not decide who lives under your country
and on what your conditions
there are elections there are rules they
should be enforced
carp's ethos also holds true for
palantir's work with police departments
from new york city to los angeles new
orleans and chicago
who have used the tech for surveillance
of criminal suspects and predictive
policing
a tactic that civil liberties groups say
leads to over-policing of minority
neighborhoods
but can palantir really claim to be
above the political fray
i understand the desire to be neutral
and to kind of say hey we're going to
play by the by the rules
that is a logically coherent stance if
companies are also neutral with regard
to who makes the laws
but hold on if you're willing to back
political factions with your own money
you can't say well in this aspect of our
business
we do influence policy and politics but
over here we are politically neutral it
doesn't work that way
other tech companies like google have
backed out of controversial contracts
with the defense department
but palantir sees that as an abdication
of responsibility
peter and i built a very patriotic
company google's clearly not a patriotic
company
carp also hit back against the culture
of the valley and the company's s-1
filing to go public
here's what he had to say the
engineering elite of silicon valley
may know more than most about building
software
but they do not know more about how
society should be organized or what
justice requires our company was founded
in silicon valley but we seem to share
fewer and fewer of the technology
sectors values and commitments
in august the company announced it will
move its headquarters to denver colorado
likely both a financially and morally
motivated decision
the valley has basically sold the soul
to an advertising model where it's okay
to sell your data
but it's not okay to support the country
and they didn't want to be part of that
ecosystem and didn't feel
that that ecosystem was aligned with
their values
so what does all this controversy mean
for investors
for those who believe in palantir's
mission it could be an asset
and for those with qualms while it
ultimately may not mean much
the general belief around the valley is
that public market investors in
particular
talk a big game about governance and
about things that they view as
acceptable and unacceptable
and then they buy the stock anyway
though palantir is yet to turn a profit
this isn't of considerable concern to
investors
who are used to betting big on tech
companies operating at a loss
what will affect the company's value is
whether investors view it more as a high
growth
tech company or a lower margin
consulting firm
that combination makes this a bit of a
rubik's cube
for investors because it's not a
pureplace software model
for most of its history palantir is
spent heavily on software customization
services
for both government agencies and large
corporations
it is a very costly business to run but
if they can automate their own processes
and you know have a more efficient sales
process and get the biggest customers to
continue to buy more
then their their operating metrics do
improve over time as of late that's what
palantir has been trying to do
and now it offers two fixed feed
platforms gotham for government clients
and foundry for the private sector
the company's target market is said to
be the six thousand companies that make
500 million
or more in revenue the average customer
spends over five million dollars a year
on palantir's product the top 20
customers
account for roughly two-thirds of their
revenue they say they only have about
125 customers so
this is fundamentally different than
your zoom and your slack
it is not for everyone in 2015 when
palantir raised its last funding round
the company's valuation was upwards of
20 billion dollars
but lately share prices have been all
over the map indicating a valuation
range of anywhere from less than 10
billion to over 20 billion
they're trying to show investors that
they do have this really big market
opportunity that they have
a bunch of potential customers out there
and that's where the skepticism is
the true value will be clarified at the
end of september when volunteer
completes its direct listing
a process that is similar to an ipo
except that the company won't sell any
new shares
it will just unleash those held by
existing investors
thus the shares will be priced based on
investor demand and if the stock trades
higher than expected that value won't be
handed to brand new shareholders
i think the palantir ipo is going to
signal to
venture investors and others that
serving the department of defense and
military business is going to be
worthwhile carp certainly hopes so
saying that the future of our nation
depends on it the country with the most
important ai
most powerful ai will determine the
rules that country should be either us
or a western country palantir doesn't do
business with china
the us's main competitor when it comes
to ai so if we bring our a-game we will
win
if we bring our d-plus game because most
people in
the valley live on an island where this
seems like a questionable project
they will win
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