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Peter Thiel’s stealth start-up Palantir has unlocked a new opportunity to sell to the US military as revenue tops $1 billion

From CNBC May 2019:

Palantir — the Silicon Valley data analytics company co-founded by PayPal founder and Trump advisor Peter Thiel — has made the CNBC Disruptor 50 list for six years running. But this year was perhaps the most disruptive of all for the company, which has attracted $2.8 billion in funding, raising its valuation to $20.5 billion, according to PitchBook.

In 2019, Palantir was able to leverage a favorable landmark 2017 court decision to break through government contracting barriers that formerly kept the firm out of the running for some of the Pentagon’s most lucrative contracts.

Palantir, ranking No. 34 on the 2019 CNBC Disruptor 50 list, is expected to build and upgrade an Army intelligence system known as DCGS-A for $800 million. Palantir beat out Raytheon, a defense industrial mainstay, for the contract, raising its profile in D.C. to a new level. Announced in March, the contract makes Palantir a “defense program of record,” a critical designation for government contracting.

Behind the scenes, Palantir had fought for years in the U.S. Court of Federal Claims to gain access to this designation. The Army had specifically requested Palantir as far back as 2011, but because of contracting rules, couldn’t get it. Palantir said in its court filing that one Army unit had tried repeatedly and failed to get Palantir to use in high-risk operations in Kandahar, Afghanistan.

Now that the company has proved it can fight hard for and win contracts in the deeply entrenched government space, it opens other important doors as Palantir approaches a possible 2019 IPO.

Straddling the line between DC and Silicon Valley

Palantir has both suffered and benefited from a reputation as “highly secretive,” a throwback to its roots as a company initially funded by the CIA’s In-Q-Tel venture capital organization.

The company is a Silicon Valley paradox: Seen as innovative and forward-thinking like its California counterparts, but clandestine and hawkish like its D.C. competitors. While employees for Google, Apple and Amazon have loudly protested to their companies’ involvement in government work with private data, Palantir’s CEO has embraced the role of big tech companies in Washington.

CNBC Reusable: Palantir office known as the Jewel Box
Palantir office known as the “Jewel Box” in Palo Alto, California.
Mark Neuling | CNBC

“I don’t know how you stand up and talk to a Marine or a special operator and explain to them how you have a piece of software that will allow them to come home — or more likely allow them to come home — and you’re not going to allow them to use it,” CEO Alex Carp told Andrew Ross Sorkin in September. “I think it’s a nearly impossible argument to make outside the Valley without people being legitimately pretty upset.”

The company offers two primary platforms, one for government-backed investigations and geospatial missions called Palantir Gotham, and another focused on enterprise called Palantir Foundry.

Gotham is used by government bodies in the U.S. and elsewhere, including intelligence, law enforcement and defense agencies. It allows customers to search and analyze data from a wide range of sources, and importantly, transfer that data securely when it is classified.

Case studies for Gotham include allowing soldiers to plan missions, evaluating where to land and how to evacuate if things go wrong. Afterwards, it can allow them to analyze whether missions are meeting up with their strategy. In law enforcement, detectives have used the platform to set up alerts on open cases, which they receive when new data about a suspect is entered into a wider range of systems.

Subs: Alexander Karp, Palantir Technologies 150707 I
Alexander Karp, CEO of Palantir Technologies Inc.
Getty Images

Foundry has several high-profile clients and provides many of the same data-integration services, but with more practical tools for business. Foundry can use a company’s data to prioritize vendor deliveries or pinpoint areas that could be turned into sales opportunities. Customers include Airbus, Chrysler, Ferrari, Merck, BP, Credit Suisse, RBC, Sanofi and others.

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One key component for Foundry is a suite of tools meant to give more employees the ability to use the software so companies don’t need data scientists or engineers to get some use out of the platform. Foundry can also be integrated into other software tools that businesses already have, so they won’t have to justify buying an entirely new platform.

In health care, scientists have used Foundry to provide a full-scope view of cancer patients in order to personalize care. In the shipping and logistics field, companies use the platform to monitor work orders and timing for shipping containers. In the automotive world, car plant leads use the platform to detect defects on vehicles in the assembly line, according to case studies from the company.

In the case of Airbus, Palantir created the joint partnership Skywise in 2017, which in part aims to ease aerospace supply-chain problems through an open data platform. In mid-2018 the company added suppliers to the Skywise platform, including Premium Aerotec, a key supplier for Airbus that produces 30 million parts per year.

“Skywise helps us manage all the production steps. It gives Airbus much better visibility into where the product is in the supply chain, and it lets us immediately see our weak points so we can react on the spot,” said Thomas Ehm, CEO of Premium Aerotec.

Earlier this year, a Palantir executive revealed on French TV that the company had revenue of $1 billion in 2018. About half came from government agencies and the rest from corporate customers, a segment that is growing rapidly, thanks to Foundry. As Palantir gets closer to an IPO, expect it to try to shed its clandestine image and focus on these practical uses of the software and platform by established Fortune 500 companies.

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