{"id":7548,"date":"2015-12-09T23:29:47","date_gmt":"2015-12-10T04:29:47","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/palantir-the-hottest-startup-youve-never-heard-of\/"},"modified":"2015-12-12T19:17:45","modified_gmt":"2015-12-13T00:17:45","slug":"palantir-the-hottest-startup-youve-never-heard-of","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/palantir-the-hottest-startup-youve-never-heard-of\/","title":{"rendered":"Palantir: The Hottest Startup You\u2019ve Never Heard Of"},"content":{"rendered":"

Palantir is the hottest \u201cUnicorn\u201d start-up that you\u2019ve never heard of. While companies like Uber, Airbnb and Snapchat get most of the media exposure for hitting astronomical valuations, Palantir has remained quietly in the background despite being valued at over $20 billion.<\/p>\n

It\u2019s not surprising they\u2019re not as well known \u2013 unlike the aforementioned companies that are geared toward consumers, Palantir is a B2B enterprise software company that offers a data analytics platform to a unique set of customers. Government clients include the CIA, NSA, US Army, and the Center For Disease Control. They have also been able to grow their revenue streams away from government contracts and have diversified into industries such as healthcare, finance, and legal research.<\/p>\n

Their platform acts as an overarching hood over all the data sources a company manages, and allows their analysts to better synthesize and connect disparate sets of data to conduct rich analysis at breakneck speeds that would otherwise not be possible.<\/strong>\u00a0Refer to this video as an example of what a Palantir deployment might look like for a healthcare client:<\/p>\n

https:\/\/www.youtube.com\/watch?v=EG1yXNAmdFU<\/a><\/p>\n

Business Model<\/strong><\/p>\n

Palantir prices its product by charging the client a large multi-million or even billion dollar deployment contract which includes onsite implementation teams, training services, maintenance, and a number of server cores. Since every client has a completely unique set of data sources, Palantir deployments are incredibly high touch and require a high level of customization.<\/p>\n

The reason Palantir is able to charge such high prices in their contracts is that their services are an incredibly high value add for their customers. Additionally, Palantir\u2019s prices are actually relatively cheaper than similarly priced tech solutions such as Bloomberg terminals or SAP. In a typical general example, a Palantir deployment over 3 years for comes out to $11,000 per user (3), which is less than the $24,000 price for a Bloomberg Terminal (5). Considering that the yearly salary of a typical analyst ranges from $40,000-$90,000, the per user cost over 3 years is a relatively small cost, especially if Palantir can enable those users to be more effective by an order of magnitude.<\/p>\n

Palantir\u2019s high touch installation also serve to help build long term momentum since it\u2019s hard to remove a deployment once it has become the new standard for the client and years have been spent building it. This stickiness has allowed Palantir to quickly grow to half a billion dollars of revenue in such a short period of time, with no signs of slowing down (2).<\/p>\n

\"\"<\/p>\n

Operating Model<\/strong><\/p>\n

What\u2019s especially confusing about Palantir is that it doesn\u2019t make it entirely clear whether it\u2019s a product or services company. In addition to charging for usage of their actual software product, upon installation they also offer large contract bundles of engineering, deployment, and training services, all of which they charge a premium for.<\/p>\n

I\u2019d like to take the position that the real differentiating feature of Palantir is the service component, and the ability of its operating model to execute engineering talent arbitrage (7).<\/strong><\/p>\n

Most of Palantir\u2019s clients include large bloated government agencies or companies from old traditional industries seen to be behind the times (healthcare, insurance, etc). Compared to companies like Google, Apple, Facebook, Amazon or the latest startups funded by Sequoia Capital or A16Z which are all desperate for engineering talent, the last place a top software engineer wants to work is in an old government building.<\/p>\n

But paradoxically these more traditional companies have huge amounts of value waiting to be unlocked, with large data repositories that have yet to be bought into the 21st<\/sup> century and fully utilized by engineering talent capable of doing so. Palantir\u2019s operating model, specifically with regard to the way it manages its labor capital, brilliantly takes advantage of this arbitrage opportunity. <\/strong><\/p>\n

Palantir takes advantage of\u00a0this arbitrage\u00a0opportunity by creating a top tier employer tech brand in Silicon Valley that attracts the best talent. One of the ways they do this is that they have an incredibly difficult interview process. By ensuring they are perceived to only \u201cselect the best\u201d, Palantir is able to build an elite brand that attracts talented engineers.\u00a0Once they attract top engineering talent, Palantir is able retain them by modeling its perks after Google while also offering some of the best market compensation (6). They also are able to sell to their employees the idea that at Palantir they are making a real difference by working on \u201cproblems that matter\u201d such as cyber security threats, terrorism and credit card theft (1). This instills a sense of mission and purpose that many tech companies lack \u2013 hard to truly feel like your making the world a better place by optimizing ads on the Facebook Newsfeed.<\/p>\n

Once Palantir has built their employee base, they can charge their clients a premium for the engineering talent they are desperate for. This is not to downplay their technology stack \u2013 but given how much customization it requires and that Palantir\u2019s business model sells its product not by software packages but in the form of large deployment contracts per its business model, the way Palantir\u2019s operating model attracts, invests in and manages its labor capital is one of the primary reasons for its current success!<\/p>\n

\"\"<\/p>\n

 <\/p>\n

\"\"<\/p>\n

Sources<\/strong><\/p>\n

1) https:\/\/www.palantir.com\/2007\/12\/what-do-we-do\/<\/a><\/p>\n

2) http:\/\/techcrunch.com\/2015\/01\/11\/leaked-palantir-doc-reveals-uses-specific-functions-and-key-clients\/<\/a><\/p>\n

3) https:\/\/news.ycombinator.com\/item?id=8325441<\/a><\/p>\n

4) http:\/\/graphics.wsj.com\/billion-dollar-club\/<\/a><\/p>\n

5) http:\/\/qz.com\/84961\/this-is-how-much-a-bloomberg-terminal-costs\/<\/a><\/p>\n

6) http:\/\/www.forbes.com\/sites\/susanadams\/2014\/03\/07\/the-highest-paying-internships\/<\/a><\/p>\n

7)\u00a0https:\/\/www.quora.com\/What-specifically-does-Palantir-do<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The real differentiating feature of Palantir is the ability of its operating model to execute engineering talent arbitrage.<\/p>\n","protected":false},"author":1173,"featured_media":7578,"comment_status":"open","ping_status":"closed","template":"","categories":[1196,493,548],"class_list":["post-7548","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-arbitrage","category-consulting","category-software-as-a-service"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nPalantir: The Hottest Startup You\u2019ve Never Heard Of - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/palantir-the-hottest-startup-youve-never-heard-of\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Palantir: The Hottest Startup You\u2019ve Never Heard Of - 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