Palantir’s recent public entrance could be like Facebook’s in 2012 and reflects the current wave of machine learning, AI, and analytics being gobbled up by investors. History can help better understand how the company’s future may play out despite the controversy surrounding it.Â
One of the tech industry’s big IPOs this fall was Palantir. With its passionate support among government contractors and corners of its history hidden in the shadows, the rise of this cryptic company has given me deja vu. In so many ways, this feels like Facebook #2.
Like we saw with Palantir, the weeks before Facebook went public were filled with furious speculation. What was this company? Was it a social media site? A communications platform? Some other animal entirely? Was its valuation too high? Too low? Who was its elusive, baby-faced CEO, and why in the world was he meeting investors wearing a sweatshirt of all things, and by video rather than face to face?
Palantir is a tricky company to understand. Smart investors make their moves based on a combination of careful calculations and a sharply-honed instinct, and Palantir, with its Trump allies and anti-press founders, its legacy of utilization by government contractors and its dark links to ICE, drone warfare and some of the most unimaginable aspects of global government and policing, make it difficult, to sum up. Even its raison d’etre remains shrouded in secrecy. Is Palantir a software company? Is it a consulting firm? It resists definition.
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And as Facebook knows quite well, going public changes the game. Stakes get higher. Controversies get stickier. And perhaps most crucially, the opinions on where your company is going and what your stock price means for your future only get louder and more fervent.
Critics and investors watching Palantir’s coming of age should take note of the lessons that Facebook has taught us. Facebook famously held its IPO in 2012 as one of the largest in the history of the internet, despite a flurry of headlines in the hours before announcing that investors, including Goldman Sachs, were planning to offload as many as 50 percent of their shares.
Palantir has also faced intense scrutiny over its valuation, which reached $16 billion on the day it went public. In the short term, we should expect its value to dip the same way Facebook’s did, and in just the same way, we should resist any calls to declare the company damaged by the incident. Facebook continues to surprise investors. Palantir is on track to follow a similar model.
Palantir is a decacorn. It’s murky and mysterious. Co-founders, Alex Karp and Peter Thiel, are known to tango with ICE and the Department of Defense, and the company seems to be locked in a bear hug with tyrants and unsavory agents during a time of pandemics, protests, and intense political upheaval.Â
We all wonder whether the company has anchored itself to a sinking ship or if, even more critically, the company itself could be the sinking ship. The American guard has now changed. The calls for societal change are deafening. And Palantir, silent and sneaky, seems overinflated, ready to pop, and impossible to fully comprehend.
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So, as I often do, I am looking to history to guide me on how this might play out. And history tells me the following:
Investors generally invest not for ethics or excitement but for one thing and one thing only: profit. The questions swirling around Palantir are the same ones that swirled around Facebook, and even Google, when they had their grand debuts: What will be the role of regulation in this technology, and will going public offer us a better understanding and more clarity as to how our data is used?
Big data is getting bigger. The global datasphere is growing exponentially by the minute, and the migration to the cloud, especially as COVID-19 upends traditional workplace scenarios and reminds us of the critical need for remote, instantaneous access to our information, is at an all-time high.
In the wake of this rush, machine learning, AI, and analytics are gobbling up funding, and for a good reason: they are no longer shifting the landscape but defining it. Take Snowflake, the cloud data warehouse, the largest software IPO ever with the company now valued at $70 billion, proving that interest in cloud computing is pushing its short-term outlook to an all-time high. That value is probably spot on. Snowflake is highly scalable and has a technological edge over its data warehouse competitors. The company is looking beyond data management and will likely use the IPO to increase its capabilities in areas such as AI and data engineering.
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For Palantir, the appeal lies in its ability to straddle verticals and bridge some of the most highly anticipated technologies of this moment together. Palantir’s expertise is highly verticalized in the intelligence community, and in that huge and valuable market, they dominate.
The truth of the matter is that Palantir’s dark reputation likely won’t matter. If you are looking for a reliable forecast on what Palantir’s IPO means, move beyond the headlines and dive deep into its position in the big data ecosystem. Take stock of history and companies like Facebook and trust that its valuation, be it over or under, is likely irrelevant, as was the behavior of its CEO and the style of its roadshow.
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