Palantir: Peter Thiel’s Next Home Run

“Tolstoy opens Anna Karenina by observing: “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.” — Peter Thiel

Are you ready for this résumé? Peter Thiel is a German-American entrepreneur, billionaire venture capitalist, founder of Thiel Capital Management in 1996, co-founder of Paypal with Elon Musk in 1999 and served as the CEO until they sold to eBay in 2002 for $1.5 billion. After he severed ties with Paypal, Peter started Clarium Capital, a global macro hedge fund based in San Fransisco, became the first outside investor in Facebook when he acquired a board seat and 10.2% of the company for $500,000, and then went ahead and started Palantir Technologies [$PLTR] that same year in 2004, which is why we’re here.

Palantir is a big data analytics company based in Denver, Colorado, named after the Tolkien artifact; a Lord of the Rings reference, where the magical palantir were “seeing stones” of deception. Thiel is the chairman, alongside Stephen Cohen (New York Mets owner) and has publicly stated the idea for the company was based on the realization that “the approaches Paypal had used to fight fraud could be extended into other contexts, like fighting terrorism.” He envisages Palantir as providing data mining services to government intelligence agencies that were undetectable. The first backer Palantir landed was the CIA’s venture capital division known as “In-Q-Tel”, and the company grew to a $20 billion dollar valuation.

In 2005, Thiel created the Founders Club, a VC fund based in San Francisco with Sean Parker (Timberlake’s character in The Social Network). In addition to Facebook, his early stage investments include Airbnb, LinkedIn, Yelp, Spotify, Friendster, SpaceX, Quora, Stripe, and MetaMed. To diversify, the Founders Fund bought about $15-20 million worth of bitcoin, and as a result, they pulled in “hundreds of millions of dollars” for their clients.

Palantir Technologies, which recently moved its headquarters from Silicon Valley to Denver, Colo. (shown here), reported earnings for the first time as a public company on November 13, 2020.

The company is divided into three parts: Palantir Gotham, Palantir Metropolis, and Palantir Foundry. Palantir Gotham is used by counter-terrorism analysts at offices in the US Intelligence Agency and the US Department of Defense. Palantir Metropolis is used by financial service firms, hedge funds, and banks. Palantir Foundry is used by corporate clients. (i.e. Fortune 500s such as Merck, Morgan Stanley, Airbus, and Fiat Chrysler)

On October 18, 2018, the Wall Street Journal reported that Palantir was considering an IPO in 2019, following a $41 billion valuation. However, it wasn’t until July 2020 that the us normies caught wind of the company’s filing. In July, with new virus numbers toppling daily records, Health & Human Services announced an inadvertent shift in how data would be reported. Going forward, hospitals would report their data exclusively to HHS Protect, a new platform that Palantir would be run via another private company called TeleTracking. This would effectively replace the Centers for Disease Control and Prevention’s (CDC) National Healthcare Safety Network.

Palantir, the architect of this complete data system, isn’t a household name like its Bay Area buddies, but the 17-year-old company was one of the most valuable private companies in Silicon Valley pre-IPO. By now, it’s no secret Palantir does most of its work for the government, including national security and intelligence operations. However, word the on the street is that Palantir’s data-mining software has been credited with killing Osama bin Laden (has never been confirmed) and blamed for forcibly separating unauthorized immigrant families. Their anonymity is a feature, not a bug.

Revenue climbed 52% to $289.4 million, said the provider of data analytics software to U.S. government agencies. Analysts had projected a 2-cent adjusted profit, excluding stock-based compensation, on a revenue of $279.4 million.

Palantir seeks to separate itself from the Uber, Twitter, Netflix-like startup scene of Silicon Valley, and instead rub shoulders with government-contracted powerhouses, á la Raytheon, Lockheed Martin, and Booz Allen,” Sam Biddle, who has covered Palantir for years, says “Palantir wants to be a defense contractor, not a Silicon Valley unicorn.” Palantir has grown into a company with 2,400 employees, most of them engineers who write the software that collects data, and embedded analysts who work on site with Palantir’s customers to make sense of it.

Since the virus started casting its shadow and shut down American cities, Palantir’s business has been sheltered by a bevy of government and corporate deals, yet the data-analytics company posted a quarterly loss of nearly $900 million. (due in large part to stock-based compensation) The tone of its first earnings call was optimistic, and the company raised its full-year revenue outlook from $1.07 billion to $1.072 billion, an increase of 44% YOY.

The pandy has “created enormous opportunities for us,” said Shyam Sankar, Palantir’s COO, on their earnings call. The company is assisting the government by tracking clinical data and has been called upon to help with vaccine distribution, too. Virus aside, Sankar said he foresees a “large, systemic transformation in health care” that could bolster Palantir’s future performance.

“If all the seven stones were laid out before me now, I should shut my eyes and put my hands in my pockets.” ― J.R.R. Tolkien

2 thoughts on “Palantir: Peter Thiel’s Next Home Run

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s