Obviously, I don't know what's going on at Palantir besides what I've read, but I know a few things about Finance.
A tax loss isn't necessarily all bad news. If you have a tax loss in one year, you might be able to use that loss to offset profits in future years, to minimize taxes for your business in those years. This technique is called a tax loss carry forward because it takes a tax loss in one year and carries it into a future year.
So, what they might be doing is using this as an opportunity to "throw the baby out with the bathwater," as the saying goes. Show a bunch of losses prior to IPO (setting expectations low), then show gradually improving operating results. Investors love this kind of "story" because the potential for stock to go down is less then if they were to show a booming business right off the bat.
Finally, just to make a point about investors not necessarily being worried about a company showing losses, all you have to do is look at Amazon, who for years showed loses.
If you grease up both candidates, your long-term success is not contingent on the current administration.
Since it's incredibly unlikely that an anti-surveillance, anti-warhawk, anti-police state candidate will ever become president, and it's incredibly unlikely that congress will be dominated by those sorts of folks, I think Palantir's business model is safe as houses.
> That is essentially a lobby-dependent business model with long-term success contingent on the currently elected administration.
Unfortunately these type of setups tend not to care who is in power. As the types in power are never against this type of company. Look at Democrat support for NSLs (Obama notably expanded use of them despite being against them while campaigning).
I may have missed this in the article but I don't think the S&M expense of $450M per year was broken out by Government vs. Commercial segments. That would be more relevant to the discussion to estimate the expense allocation between direct sales forces for gov & enterprise, pure media/advertising spend, and lobbying.
The magnitude of Amazon's losses are incomparable. Palantir losing half a billion in one year is significant. Amazon's loses were <$10 million in the mid 90's. [0]
The article's title gets straight to the point. "Why Amazon’s History Of IPO-Era Losses Means Little For Today’s Unprofitable Unicorns".
Palantir's revenue was $742 million in 2019, so it's relative. How is Palantir going to scale to 10x, 100x current revenue? Is federal spending going to balloon to accommodate that growth?
Amazon took a bite out of big-box retailers. They could grow by stealing their competitor's revenue streams. Palantir doesn't have that option, unless there are other equally giant contractors they can knock out.
What shocked me more than the loss was the honestly kinda ass revenue for their valuation. This isn't Uber with billions in revenue while losing in money.
>In the screenshots of the company’s financials, Palantir lists a net loss of roughly $580 million for 2019, which is almost identical to its loss in 2018. The company listed a net loss percentage of 97% for 2018, improving to a loss of 78% for last year.
Again, I don't know, but I'm comfortable speculating that it is (partially). The other obvious reason that I could think of is that Colorado is a very appealing location to live (for some people) and when you are trying to attract talent, it could be used as an incentive to get them to join the company. Another reason, could be customers located in the area.
I think here you need to look at their main weakness, which is strong reliance on government contracts. If Trump loses the next election then there will be a major change that will likely adversely affect them. Peter Thiel is one of the founders of Palantir.
And? Let's assume Trump loses, Biden wins. Do you have a specific basis to say that'll significantly change things for Palantir? Noting Thiel/Trump's relationship seems insignificant.
There'll always be entrenched national defense & security + intel bureaucrats who hold power, regardless if a Democrat or Republican is in office. Seems Palantir has at least spent a pretty penny building relationships with some of those folks.
IMO I remember interviewing there and my bullshit detector was at 10000%. First the interviewer went off on a tangent claiming that they’re not evil (unsolicited) and second it seems like they’re capitalizing on the whole “big data” trend. They’ll find “insights” across multiple data streams without ever providing examples beyond license plate readers. I am surprised they haven’t gotten enterprise businesses to sign on - although maybe enterprise business only trust certain brands, but am not surprised they’ve gotten the government to sign on.
I have also got an unsolicited pitch from their recruiter and I have to concur - before I even knew what is the company about and who is behind it my BS detector was off the scale almost immediately.
All talk about "extremely high hiring standards", perks like "washing your laundry", "free massages", "wear pink on Friday" and similar nonsense, but not a single word about what is the company doing or what would I, should they hire me, be doing apart from gems like "Deploy Palantir at moment's notice".
Then I have found the zingers:
"Palantir employees are far from anti-social. We have parties pretty often."
And the bit on how people there turned down or left Google and Facebook.
I mean WTF? Why would you include things like this in a recruiting pitch? The creepiness vibe was off the charts.
Then I did a bit of research and it was obvious why. I have told the headhunter in no uncertain terms to take a hike. But I have heard they are paying well - if you can stomach what they are doing.
It worked though. Both you and the GP ended up not working there, increasing the ratio of gullible fools that did end up working there. It's the same as the spammers with their Greetings in the name of God. If that turns you off you are not their mark, best to move on. Think of it as an optimization strategy from their part.
I wouldn't have been eligible to work for them anyway, given who their customers are and that I would not be able to get a security clearance as a foreign national (yay for headhunters not bothering to do their homework).
The rest of your argument is just nonsense, sorry. If that was the case, then why to pay a recruiter to actively reach out to me? It is not like they don't have enough job seeking applicants at their doors, even today.
And they certainly did even 10 years ago when the above has happened and all the bad press about the shady stuff Palantir is/was involved in had yet to come out - before Facebook scandals, before Cambridge Analytica (where Palantir was involved), before Trump election (Palantir's founder Thiel is big Trump's donor), etc.
> If that was the case, then why to pay a recruiter to actively reach out to me?
Recruiters are not paid up front, nor for the number of candidates they bring.
Recruiters are paid when a candidate accepts the job, so it’s in their interest to throw as many candidates as possible at the client in order to increase their chances of closing one.
Why? Because recruiters are not paid a fixed amount per se, but 15-25% of your first year’s salary.
> First the interviewer went off on a tangent claiming that they’re not evil (unsolicited)
They're a big data company that works mostly with governments and militaries, and they're named after evil (and unreliable!) magical spying technology from The Lord of the Rings. It's clear why they feel the need to try to convince you that they're not evil.
If you are evil and proud it makes sense to name yourself after evil. It is a waste of everyone's time to try to recruit non-evil people. Given that this headline is the only example of evil failing that I have seen in recent times, they should probably assume the problem is salary, intelligent evil people are clearly the most occupied and must be very expensive. Taking short cuts with either stupid or ethical people is never going to work for them.
The palintiri weren't evil. They were created by the Noldor (elves) not Melkor or Sauron -- perhaps even by Feanor, who also created the beautiful gems known as the Silmarils. This was in Aman before the elves fell. They were given to the Numenoreans (men from which Aragorn came), and brought by Elendil into Middle Earth. Also called "seeing stones", the palintiri were used to observe and communicate over long distances. They were not used for evil purposes until Sauron captured one, and also when used by those he corrupted. Gandalf even said that it was beyond the power of Sauron to create a palintir, nor could he make them lie or show false images (though he could show select ones, and so deceive). So a stone that can tell only the truth can't be evil, although some beings that used them were.
Thanks for the explanation! I've been rereading the LOTR series over COVID shelter in place and it's been so enjoyable taking me back remembering what a great story it is and experiencing it again! I ended up ordering the LOTR ATLAS with maps drawn by Tolkein's son which looks exciting to explore. Dunno if I have the mental fortitude to tackle the Silmarilion though!
>If you are evil and proud it makes sense to name yourself after evil. It is a waste of everyone's time to try to recruit non-evil people.
Exactly. Interviewed there, got the same bullshit vibe.
Like, I'm here to find out just how tasty the cookies are on the dark side, you don't need to convince me you are, quote, "saving the world".
>Taking short cuts with either stupid or ethical people is never going to work for them.
I think they are going for smart, non-ethical, but obedient enough people. Drinking the doublespeak kool-aid probably is a good enough indicator for that.
Palintir's weren't evil spying tech. They were originally Zoom for coordinating the far flung domains of the Numenoreans. Only when the Minas Morgul palintir fell into the hands of Sauron did they become instruments of his corruption.
Keep in mind that the Numenorians were a cautionary tale of human pride, hubris and abuse of magical trinkets [1], that eventually led them to declare war on the gods, and try to invade Valinor.
They then got Atlantis'd.
There's a few recurring themes in Tolkien's work - one of them is that marvelous inventions, created by clever people for good purposes, can either be turned to do evil - or the struggle to possess them will turn good people to do evil.
[1] In contrast to the rest of the Silmarillion, which was a cautionary tale of elven pride, hubris, and abuse/attachment to magical trinkets.
That is a very astute observation! I seem to remember Tolkien himself explaining that The Silmarillion was from an elvish view, the middle tale of The Hobbit was a virtually human view, and The Lord of the Rings blends them. I think he meant in tone and style, but the subject material aligns with your view as well. To my mind, the Numenorean legends in Unfinished Tales seem closer to The Silmarillion than either of his other two main published works.
Yep. As others point out, the evil came later. But I spent enough time in Middle Earth to know not to trust anything named Palantir as soon as I heard about them. If they knew enough to lift the name, but not enough to understand what it signified, I didn't trust their research skills from the start.
I thought it was a great name. As a kid, reading the books, I thought palantiri would be cool to have to be able to scry anything and anywhere. All that cool info to observe and learn.
It seems like lots of people incorrectly assume it’s negative. It seems to show off a lacking in understanding of lord of the rings, more than anything.
Kind of like CCTV - can be great to help prevent crime, an invasion of privacy if abused or in the wrong hands. Not necessarily evil, depends on the user.
I would have thought "call yourself something less obviously evil" would be a good start. Though maybe it's a case of one set of marketing for employees and another for customers; I'm sure some governments quite like the evil aesthetics.
“We’re not evil” is a bit like “don’t worry”; if it’s said too often or without prompting, it tends to make the listening party assume that they’re in fact not worrying enough
As you add more modifiers it gets worse; the Republic of the Congo is hanging out with Russia and Vietman on the EUI Democracy Index, but the Democratic Republic of the Congo is all the way down, one point above the Democratic Peoples' Republic of Korea (three modifiers; extra-evil!).
DRC was my first thought when I saw the parent comment! An aside, if you want one of the most amazing and thoughtfully written travel stories of recent conditions in DRC, check out this overlanding thread by a couple who went from
Lubumbashi to Kinshasa. https://expeditionportal.com/forum/threads/democratic-republ...
> Every faction in Africa calls themselves by these noble names - Liberation this, Patriotic that, Democratic Republic of something-or-other... I guess they can't own up to what they usually are: the Federation of Worse Oppressors Than the Last Bunch of Oppressors. Often, the most barbaric atrocities occur when both combatants proclaim themselves Freedom Fighters.
The act which made "Ireland" independent was called "The Republic of Ireland Act", and reads as follows:
"... the description of the State shall be the Republic of Ireland..."
The constitution [0] reads "The name of the State is Éire, or, in the English language, Ireland", and that act can't override it. I suppose it's splitting hairs to distinguish between the "name of the State" and the "description of the State" and either can reasonably be seen as what the country calls itself.
> Notably, the Act did not change the official name of the state. It merely provided the description for the State. The Constitution of Ireland provides that Éire (or Ireland in English) is the official name of the State and, if the Act had purported to change the name, it would have been unconstitutional as it was not a constitutional amendment. The distinction between a description and a name has sometimes caused confusion. The Taoiseach, John A. Costello, who introduced the Republic of Ireland Bill in the Oireachtas, explained the difference in the following way:
> If I say that my name is Costello and that my description is that of senior counsel, I think that will be clear to anybody who wants to know. If the Senator [Helena Concannon] will look at Article 4 of the Constitution she will find that the name of the State is Éire. Section 2 of this Bill declares that "this State shall be described as the Republic of Ireland." Its name in Irish is Éire and in the English language, Ireland. Its description in the English language is "the Republic of Ireland."
The constitution specifies that the name of the country is Éire in Irish or Ireland in English, and that name is used in all official functions and diplomatic relations. The act is neither here nor there. The UK referred to Ireland as the Republic of Ireland until 2000, but it was unusual in doing so.
Nowadays, "Republic of Ireland" is usually only used where disambiguation from Northern Ireland is necessary.
the one thing that set me off was their whole rebranding of software developers as "forward deployed engineers", like some kind of William Gibson-esque cringy stealth company. I honestly couldn't go anywhere and introduce myself like that, it makes you sound like some kind of spec ops person and all you do is write Java
Palantir's "forward deployed engineers" are generally not developers. They're more like post-sales support and data engineers, embedding with clients to deploy and configure products. They might write plugins and extensions, but a relatively small fraction of their time is spent coding.
The software engineer role at Palantir is called "software engineer."[1]
I bet Palantir could provide something like a social credit score to supplement existing data like from Experian/etc. I wonder if lenders want to work with them but can't due to regulations, ethics, complexity, profitability of the relationship, or simply bad optics.
What? Palantir has tons of commercial contracts, although I guess they don't pay as well as government contracts do. Scroll down in this long Buzzfeed article to find a subset of Palantir's commercial clients and their internal code names for them: https://www.buzzfeednews.com/article/williamalden/inside-pal...
I am very interested in investing in Palantir stock. There is political risk with Biden reducing contractor and military spend, but ultimately they provide critical software / infrastructure for the government and that won't be going anywhere.
Everyone who looked into a palantir in Lord of the Rings got accurate data, but bad information. (That is, the images were real, but the context was misleading.)
All these unicorns are staying private so long that the average Joe is not getting any opportunity to get in on the wealth creation due to draconian SEC regulations. WeWork, Theranos, now Palantir. Luckily Uber went public!
How does such a secretive company, mostly dealing with government, spend so much money on sales & marketing? (61% of revenue, "roughly $450 million for both years")
I mean, just bribing people to get the contracts should be an order of magnitude cheaper, right?
I left Palantir in 2014, so this may be a bit out of date, but back then, a lot of the sales of the product were done by engineers, which was effective but expensive.
The general approach would be “give us 2-4 weeks to integrate your data and give you a demo”, and would give organizations a demo of the software using their own data.
There were some well known stories internally, of things like police agencies forgetting to ask about the product at all, and instead taking notes on suspects and investigations being shown to them in the demo for further follow up, because it was making connections and breakthroughs on stalled or cold cases. Those were the ones that they knew were hooked.
The flip side of this is the cost of deploying anywhere from 2-20 engineers into the field to handle the system setup and integration on the fly.
I used to work for an "AI" company, who claimed (and largely believed) that their main value-proposition was their proprietary secret-sauce (they didn't do anything especially evil like Palantir, but it sounds like the business was structurally similar).
However, most of the time the way they won over their (usually enormous) clients was just as you describe: they took a few weeks to pick through the client's existing data hoards, mapped out what were often dozens or hundreds of disconnected databases, found common identifiers for entities, hooked them all up into a unifying system and then just... queried it. Data unification on its own yielded really impressive results for the clients. To be fair, the company had built up some compelling experience/tech around doing said data unification, but that stopped short of any of the "AI" and was never really how they marketed themselves. Some at the company always saw that part of the process as just a prerequisite for "the real product", but in practice it seemed to be the most useful part.
It's amazing how inefficient data-usage is throughout so many large organizations.
I work for a big organization, and the amount of "wow, you're a data wizard!" comments I get for generating combined keys inside disparate databases and then merging them in Excel is insane.
It's making me think that anyone who is not well-versed in at least the basics of database theory is crippled in the information economy. A lot of "tool-based" problems that people complain about are in fact user problems, when certain teams aren't maintaining their data with clear identifiers or internal standards.
Umm, I work for a big org and I get called a data wizard for cleaning up and merging two Excel trackers! I just copied your comment into my One Note so I can figure out what you're talking about re: combined keys and level up my wizardry. Any tips to get me started? I work frequently in disparate databases (EPIC, Veeva, Rave, Excel, Suvoda.....).
Any big org that is silo'd is gonna have a big problem re: clear identifiers and internal standards. Heck, once we passed 500 headcount even just file naming convention was tough to roll out!
People at my old company would do a lot of "data archaeology". They would find a table in a T-SQL database named "facilities", and a table in an SAP system called "units", and then would notice that the numeric "facility_id" column's values had a lot of overlap with the string IDs in "unit_id", if you remove the underscore prefix at the front, and then they'd email the client's data people to confirm that these were in fact the same entities, and then they'd associate them in their cross-database-querying tech, and ta-da. A huge amount of new data cross-pollination is available.
I'm starting to wonder if I should quit my job, buff up on SQL, and go into data consulting. Everyone on HackerNews talks a big game about FAANG and their copycats trying to leverage machine learning techniques to increase profit margins, but the bulk of legacy businesses seem to not even have the facility to make sure that client_ID is stored properly across their massive realms of siloed databases.
The comments below me elaborate a little more clearly, but it's pretty simple. If you have two databases:
DATABASE A
Field List: {Temperature, Price, PART NUMBER, Delivery Time, SERIAL NUMBER}
DATABASE B:
Field List: {Mass, Length, Width, Height, PART NUMBER, Volume, SERIAL NUMBER}
You just have to create a new concatenation of PART NUMBER and SERIAL NUMBER, and now you have a unique identifier that will match between the two databases, and you can easily check which unique instances are present in both databases, and which in A are missing from B and vice versa.
Not sure what your level of coding proficiency is, but a flowchart of how you might get started increasing data wizardry would be something like this:
EXCEL
Master the following functions: INDEX/MATCH, Nested IF statements (especially using AND, OR, XOR, and NOT), IF/ISERROR, ISBLANK, CONCATENATE, and figure out how to combine all of these creatively
Master the creation and formatting of Pivot Tables
POWER QUERY
Master Power Query (you'll want to use online tutorials for this)
Once you're really, really proficient in Power Query, you may as well just start learning SQL and writing your own queries. Udacity and Udemy have multiple excellent free courses in SQL and Python.
I am by no means a real master, and my degree is in engineering, not programming, but independent research into basic database management has propelled me far past many coworkers in terms of efficacy. It really is astonishing how little the average person knows about proper database operation, despite the fact that most modern companies live and die by the strength of their data.
Former Palantir employee here (left 2016), your description is exactly what it was like when I left. No machine learning or AI phds, just gluing databases together and building a shiny UI.
Are they marketing directly to local law enforcement agencies? I can imagine if they organize a lot of conferences or sales retreats for police and FBI officers then this is going to be very expensive. A lot of this is also going to be lobbying which is not too far removed from bribing.
If Palantir is like other firms on "the black budget", there would also be a fair amount of self-dealing. "Why did we spend $20k printing brochures? Oh we had Chad's in-laws' company doing that... It's a good thing we're never getting audited!"
People are downvoting you but I fail to see any other ways for Palantir to spend that much money on marketing products that such a small number of potential clients would both want and afford.
For reference Nike only spent 7-8 times that on marketing in the same year.
Enterprise sales can get expensive. They're likely booking R&D/ consulting hours as sales and marketing.
It's not necessarily wrong if they hold the customer for decades, but that depends on the stickiness of the contract.
I'd imagine for a company like palantir to win in the long run would require the western world to value surveillance at the same level as tanks, ships, and fighter platforms. At which point they look like a digital Raytheon or BAE.
How much is Palantir in the consulting business vs. a SaaS? Whenever I read something about it I get IBM vibes, of a company which is partly doing some software platform stuff with a mix of good ol consulting.
One of their clever moves was calling their consultants "Forward Deployed Engineers". This let them hire better engineers than you normally could to be consultants (You're not a consultant, you're a "Forward Deployed Engineer").
This term also allowed them to book much more of their revenues as software licenses than services, which makes them look much more attractive to investors. With it, they were able to get a $20B valuation in the last round, where if they were viewed as a government IT services vendor they would've been lucky to be valued at $0.5B.
>>This term also allowed them to book much more of their revenues as software licenses than services, which makes them look much more attractive to investors.
Changing the job title of a professional services staff member, whether it's "FDE", "Consultant" or "Customer Success", doesn't change the final gross or operating margins. The financials and economics remain the same whether this is at the deal or firm level.
>>With it, they were able to get a $20B valuation in the last round, where if they were viewed as a government IT services vendor they would've been lucky to be valued at $0.5B.
If Palantir didn't sell a product then you're right that they would be viewed as a services company which drops their valuation multiple. But since they sell a product, and presumably charge license fees for the right to use, their classification as a product company seems to justified from a valuation perspective.
I have seen some of their SaaS demos. It might fool some high level decision makers, but anyone with technical background can see right through their fake-n-bake garbage.
IBM is one of their main competitors. When I interviewed a few years ago, it was primarily consulting. Things could have changed, but I doubt they have.
Hopefully when investors get to see the uncloaked financial statements and disclosures there will be a breakdown of the revenue streams between consulting (aka services), license and support across the two segments (government & commercial).
Of the license revenue, I hope (but find it unlikely) management discusses a breakdown subscription (if any), term license revenue and one-time (e.g. perpetual/buyout).
It seems that they have consultants (that they called forward deployed engineers for some reason) who go into military, police & enterprise and set up some sort of bespoke data lake for all the docs and data flowing through the company.
Then they give users a tool to do investigation of the data using a tool that lets them build causal links between documents or maybe entities is a better name?
That seems useful - but the secrecy is weird. I saw some product videos from ages ago and it looked like software only an Enterprise could love. Looked incredibly slow, janky and overly complicated (I assume it's a convoluted interface so they can charge training fees!)
Can anyone yay or nay me here - is this what they do?
I only know about as much as you do, but I interviewed with them ~7 years ago and played with the software a bit and from what I can tell you're spot on. My understanding is that they're basically a counterpart to the big data companies serving enterprise, except targeting the government/military space. They are obviously bound to secrecy as part of those projects, but it seems they lean in to the secrecy as a recruiting strategy because it's better to be mysterious than admit to candidates that they're a boring government contractor.
My recollection may not be entirely up to date, but Palantir fielded two distinct product areas: what were previously called (1) "Metropolis" and (2) "Gotham"; the distinctive difference between the two were applications and context to (1) Financial Markets / Quantitative data and (2) "Intelligence" and other unstructured data. These have likely evolved.
The "Intelligence" and other unstructured data area is the main place where Palantir is most known.
It's useful to think of the Palantir company as a Systems Integrator in the classical sense known to the US Federal Government's DoD and Intelligence Communities, and other governmental entities at other levels (e.g. municipal/state). You can also think of them as technology consultants that integrate with customer missions to understand and provide mission-effective technology solutions.
As a systems integrator, they aim to solve customer problems and provide technical solutions; the product can be considered to be parts of their software platform(s), new tools/additions/augmentations, professional services, and relationship/engagement management.
Forward deployed engineers often act as consultants/systems/sales engineers to characterize customer needs and integrate Palantir platforms with customer systems, which often includes the need to write new code/adapters/interfaces; today, you might call them data engineers.
Palantir also has"Software Engineers" that primarily work on the platform(s), rather than directly with customers.
Regarding "evil/not-evil" and secrecy, etc. We're living in a very divided age where many people feel their cause is righteous and more just than others across the political spectrum. We're also seeing that people are too commonly painted as "evil" if they don't share viewpoints.
The thematic mission of much of Palantir's work relates to matters including National security, etc, which their employees are proud to take part in and contribute. This is tied to the meaning of "Save the Shire," where Palantir employees believe in and do their part in the mission to preserve and do good, from their perspective. Lord of the Rings references are plentiful in this world, and Palantir employees have self-referred to themselves as the "Hobbits" working to "Save the Shire."
One of Palantir's early investors was In-Q-Tel, and Peter Thiel. You'll see this theme present in other places involving In-Q-Tel (it's their purpose for existing), and Peter Thiel's other investments (e.g. Anduril Industries, which has many former-Palantir employees).
Other interesting facts: Palantir was/is based out of Palo Alto, CA and occupies a large chunk of Palo Alto's commercial office real estate. It's main office once, or still does, occupy Facebook's former headquarters building, 100 Hamilton Ave, from its early days.
> Other interesting facts: Palantir was/is based out of
> Palo Alto, CA and occupies a large chunk of Palo Alto's
> commercial office real estate. It's main office once, or
> still does, occupy Facebook's former headquarters
> building, 100 Hamilton Ave, from its early days.
Facebook was headquartered out of 156 University Avenue until 2012, when they moved their headquarters to the campus in Menlo Park.
When I was recruited by and received an offer from Theranos (turned them down because they seemed super shady even during prime hype time before Carryou's first article), they were incredibly proud of themselves for having an HQ in facebook's old building in Palo Alto.
Also, they totally played up the security angle with a mega NDA and security guards who escorted me to and from my car, and another level of security guards to walk me around during the tour and someone even waited outside the restroom while I peed.
One of the biggest things that turned me off about them was the founders crazy Lamborghini looking sports cars in designated spots at the front of the building CLOSER THAN THE HANDICAPPED PARKING SPACES. Like... you call yourselves a medical lab testing company yet your little ego trip is shafting real medical patients? Get over yourselves.
Best call of my career, and now I have an "I turned down Theranos before we knew they were a fraud" happy hour tale.
Do we have any idea where the big expenses stem from?
It's hard to form useful judgements on a single data point.
> In relative numbers, operating expenses changed from 157% of revenues in the first half of 2019 to 107% of revenues in first half of 2020 [while revenue grew 49% yoy].
Seems to suggest that a lot of the expenses were elective, or non-elective but have a sub-linear correlation to revenue growth. Honestly, these numbers are not as bad as the opinions interspersing the numbers makes it out to be.
Sounds to me like a private company that's tightening the belt while leaning into being a public company and continuing to grow.
Serious question: If they were "tightening the belt," wouldn't their expenses go down? Why would they lose over a billion dollars over two years before going public if they weren't showing hockey stick growth?
Not necessarily. Expense is an important figure, but the ratio (operating expense : revenue) is more important, IMO.
They need to demonstrate they can grow revenues without a proportional growth to operating expenses, and that they can sustain this trajectory until revenues > operating expenses.
An operating expense:revenue ratio of 107% (i.e. you spend 1.07 for every 1.00, which is their H1 2020 numbers) is bad in isolation.
But when it was 157% at the same time last year? The fact that they could move from 157% to 107% while significantly growing revenue is a very positive signal.
The bizarre part to me is that Palantir was founded in 2004. How have they survived 16 years with constant large losses? There is no way they've had that much funding.
1. They have in fact had "that much" funding, $2.6B according to Crunchbase
2. Likely their actual cashflow is not as bad - I suspect that, likely other tech cos, they have a lot of expenses in the form of stock comp, which is not an actual cash cost to the company. but must be accounted for per GAAP.
Credit has been pretty free flowing since 2008 and with near 0% interest rate a lot of different classes of investments aren't as attractive. SV and tech has greatly benefited from this as they're one of the sectors of the US economy that has really stood out in terms of growth.
Probably get a lot of dark money that never has to be reported to the public due to security protections. AKA they can't reveal exactly how much they spend or what projects they work on when they do work for CIA/NSA/FBI. Revealing the amount of money would give enemy states too much info. This helps keeps the guessing and likely Palantir's coffers full and the execs fat and happy.
I interviewed there for a product management position. It was clear they were not a product company, but they badly wanted to be one.
Being a product company is so much better in Silicon Valley. Revenues scale. Engineers work on general problems. Skills are reusable.
At the time (2014) they were building Gotham and Metropolis. There was a small team of product evangelists in the team, whose role was to find commonalities between projects.
I could feel they were conflicted. It looked like the platforms were not valued by the customers. Customers valued answers to their operational problems. And problems across companies and industries get solved very differently. Crossing data between license plates wasn't the same as extracting data from credit card statements. Platforms may provide foundations to speed up implementation and save money, but nothing customers could value directly.
I could tell they wanted to be a product company. Palantir is structured like a regular Silicon Valley company. They have a CEO, a COO, and product roles. They give stock options and now are forced to go public. And they never never present themselves as consultants. One of my friends there took offense at describing the company as 'Tech McKinsey'.
Compare it with firms such as McKinsey and BCG. They are private partnerships. They pay junior consultants higher than any other company at equivalent positions, they give no shares until partners. The partners at these firms possess the network. They do the selling, and that's all they are focused on. Answering customers' problems. It might scale less, but it provides a 100% tailored solution to the customer.
The only question is that what customers value. Do they value Palantir platforms with high recurring fees? Or did they like the first data joins, but eventually thought it was too expensive, or they should build it themselves? Which would mean Palantir has to constantly generate new contracts, much like McKinsey and BCG. Only Palantir knows.
Why are they being forced to go public now after 17 years? Is that just the lifecycle of a consultancy firm their size? Or are they running out of funding?
Their contacts are classified. Regular products (Gotham, Metropolis, Foundry) are not. We've had multiple demos of all this and more from their sales teams and other sources over the years.
They do have unique IP about analyzing patterns in "network" of x (people, places, etc). So pretty useful for telecommunications and defense/intelligence agencies
So let's break this down:
A 17-year-old software firm (they are not a startup) has
Has only 125 paying customers
Generates 742MM in revenue
Raised between $2.6 - $3.0 billion dollars in venture capital to generate that $742MM
Has never broken even in 17 years
Lost $580 MM
Concentrates nearly a 1/3 of its revenue in 3 customers (avg rev ~$67MM per those top 3, a staggering amount for a software company of this size)
Grew revenues by 25% YoY, that's good, but 91% of that comes from existing clients, that's bad
Valued at $20 billion by private investors
And the coup de grace, the founders want to keep 49.999% control in perpetuity regardless of their stock ownership.
I expected a lot more given the hype and aura this firm has had for so many years. This company is being valued at 26x its revenue, which is insane even in SaaS land. Good luck to anyone who purchases these shares on the open market. I would highly recommend against it.
Perhaps that’s an incorrect assumption, that a unicorn needs to be profitable. All they need is to be growing, and show a potential for future upside. If they make net zero, or even keep losing money, doesn’t matter as long as the growth continues because there is always going to be someone else further down the road willing to buy into the story. In theory.
2) Their revenues increased and the losses stayed the same. Isn't that a path? They also mention a lot of the costs are S&M. If you stop growing that can be drastically cut.
The fundamental question is are they a software company, where those expenses were about building out a proprietary product which they can then distribute across the planet at minimal cost, or are they an army of consultants that you can hire for data solutions.
16 years of losses for a company that does not appear to have compelling operating leverage does not seem like something which would get an enthusiastic Wall Street reception.
Presumably TC would like to avoid a Reality Winner situation. Can one be certain that an image has been processed enough to avoid all watermarking etc?
I don’t see the market being very favorable toward floating another “geriatric unicorn” with this sort of financial profile.
I also continue to not understand what their product really is and if it’s actually valuable. They seem to just throw armies of people at data problems which might produce some results but is hardly a scalable or valuable business model.
I know there is a lot of controversy around Palantir but I don't understand what they do. From their site it seems like they're just another data analysis company. What does Palantir do?
"Leaked screenshots," like this would be really funny to bait some TSLA shorts, but I think that's where trolling crosses over into market manipulation.
Palantir slow walked their IPO because it is, by nature, a very secretive business that sells to law enforcement, military, banks, etc., and the transition to opening up its books and talking about their customers is inherently difficult. They were able to raise privately for a long time so they felt no reason to hurry to go public.
At same time they've raised so much money that being acquired by a PE firm or basically anything else other than going public would likely be detrimental to common shareholders given liquidity preferences.
And now given all the backlash that police department funding is getting and the possibility of a Biden presidency looming it's very possible that the type of "surveillance policing" that Palantir enables will be severely cut, and in fact some cities have already begun to ban these practices.
I must point out that it is not uncommon for any tech company to lose money for a long time, especially if they are being bankrolled on the other side.
I mean, there are two things here a) even Softbank doesn't assume indefinite losses/ unknown profitability, they have an exit horizon in mind that just happens to be larger than that of most other funds, and b) a lot of tech startups that have IPO'ed in the recent past have all been unprofitable when going public, and Softbank isn't responsible for most of them. A notable exception was Zoom ( I'm talking about last year ) who were profitable before the IPO, as far as I remember.
Companies are allowed to take on WAY more operating debt than in previous decades (especially in tech VC!) - whether this is rational or otherwise (I personally think this trend is fucking insane), these comparisons are not apt.
It would be nice if these losers stopped naming crap used to violate civil rights and murder people after Lord of the Rings and other beloved fictional stories. Just call it PusGuzzler 20202 or Venomous Butt Spiders so people can recognize the company and product for what it is, ugly and terrible.
There are lots of people who fit the description of "a Palantir shareholder", and of course faking a screenshot is trivial. What has TechCrunch done to confirm the reliability of their source or otherwise verify the leak?
I'm guessing this is intentionally leaked by Palantir to test the waters for IPO. No one with access to that document will risk the legal ramification of leaking it just for fun
I agree that's plausible speculation, but it's still speculation. It seems like a pretty serious failure of media literacy to assume that these screenshots are authentic without any concrete knowledge of how their authenticity was confirmed.
I'm not sure it's in TechCrunch's interests to tell us how credible their leakers are. Leakers probably have repeat value and they don't want to poison their relationship.
Given how few people presumably have legitimate access to these, Techcrunch probably couldn't say much without risking identifying their source. When people leak to media, they often do so on condition that they won't be identified.
Regardless of one's opinions of Thiel, most opposition to Palantir would be political rather than personal. This firm's actions have made society poorer and less free, in multiple nations.
Anyone who wants to quibble that it's fine to lock up people who lack documentation or who live across the street from a drug dealer, can have that conversation without me. I'm sure if you consult a search engine you can find lots of other stuff like this:
Apparently some of Palantir's line is so secret we don't know about it. The products we have heard of, like "Gotham" (?!!), are ineffective at the task of "assisting police without violating human rights". That task is important to humans, but not to some of those who decide where police departments spend money. It's a principal-agent problem.
If a product aimed at law enforcement, say, doesn't work, but does make law enforcement more arbitrary, then both are satisfied.
Not saying that's the case here, but one could be forgiven for assuming that a lot of 'predictive policing' stuff is snake oil, but dangerous snake oil.
Someone invest in my startup. It's genius. I'll sell $1 Bills for $.50, I'll never make a profit but my user growth will be off the charts! Me, my cofounders and any VC stupid/genius enough to invest in us will make millions when we IPO, cash out and go bankrupt all within 5 years!
Haha no that's so 2012. To buy the $.50 dollar you have to use our app, that also happens to be a high end privacy invasion tool and we'll sell all our user data to the highest bidder!
A tax loss isn't necessarily all bad news. If you have a tax loss in one year, you might be able to use that loss to offset profits in future years, to minimize taxes for your business in those years. This technique is called a tax loss carry forward because it takes a tax loss in one year and carries it into a future year.
So, what they might be doing is using this as an opportunity to "throw the baby out with the bathwater," as the saying goes. Show a bunch of losses prior to IPO (setting expectations low), then show gradually improving operating results. Investors love this kind of "story" because the potential for stock to go down is less then if they were to show a booming business right off the bat.
Finally, just to make a point about investors not necessarily being worried about a company showing losses, all you have to do is look at Amazon, who for years showed loses.