
Leaked S-1 screenshots show Palantir losing $579M in 2019 - rvz
https://techcrunch.com/2020/08/21/leaked-s-1-screenshots-show-palantir-losing-579m-in-2019/
======
ryansmccoy
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.

~~~
matchagaucho
Had they spent the money on ops or DoD compliant hosting infra, I would agree
the long-term gains offset the near-term losses.

But as an Investor, it concerns me they spent $900M on Sales and Marketing in
the Gov sector over 2 years.

That is essentially a lobby-dependent business model with long-term success
contingent on the currently elected administration.

~~~
vkou
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.

~~~
dmix
Plus the party power brokers seem to stick around for a long time. It's really
only the executive branch that changes often.

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mlazos
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.

~~~
baddox
> 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.

~~~
hnmullany
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.

~~~
vkou
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.

~~~
hcrisp
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.

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chromaton
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.)

~~~
person_of_color
Go on...

------
KKKKkkkk1
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!

~~~
1-more
Well I thought it was funny at least.

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mrich
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?

~~~
taywrobel
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.

~~~
brundolf
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.

~~~
quacked
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.

~~~
randycupertino
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!

~~~
brundolf
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.

~~~
quacked
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.

------
Pandabob
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.

How off base is that impression?

~~~
thesausageking
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.

~~~
chrisseaton
It's also a name that sounds familiar to military people - might have made it
easier for them to sell contracts into that space.

~~~
randycupertino
That's pretty brilliant. Rebranding!

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AJRF
What does Palintir even do?

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?

~~~
bengale
Only thing I’ve ever seen from them is a super handy react component library.

~~~
flanbiscuit
this one right? [https://blueprintjs.com/](https://blueprintjs.com/)

I had never heard of it before until very recently I saw it mentioned on
reddit. It looks interesting

~~~
bengale
Yeah that’s the one. We make pretty extensive usage of it, it’s been great.

------
gen220
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.

~~~
teachrdan
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?

~~~
gen220
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.

------
paxys
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.

~~~
justapassenger
With enough of hype and right people behind your company, it's very easy to
get money in silicon valley.

~~~
xenospn
Not just in silicon valley.

------
bobwernstein
quoting top comment under the article:

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.

------
iammru
Palantir throws people at big data problems. It seems that they have some tech
but a lot of critical work is done by their highly paid consultants.

~~~
paxys
All their out-of-the-box products have been failures. They are a 100%
consulting company.

~~~
gabaix
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.

~~~
randycupertino
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?

------
mbesto
It's losing money but it's slowing that loss relative to revenues. I don't
understand what the story is here?

~~~
siliconvalley1
That yet another "Unicorn" is actually just smoke and mirrors, isn't
profitable and has no realistic path to ever being so?

~~~
kirillzubovsky
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.

~~~
siliconvalley1
> there is always going to be someone else further down the road willing to
> buy into the story.

This doesn't point to a successful value adding business but rather mass
market delusion...

~~~
WrtCdEvrydy
I mean... if you buy it and flip it in a year for an extra $300 million or a
cool billion, who cares if it's a bigger fool theory in effect.

~~~
ta17711771
You, when you're the bigger fool.

------
jshaqaw
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.

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pc86
No screenshots in the article.

~~~
jessaustin
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?

------
code4tee
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.

------
microtherion
What do you want? Keeping the chairman's Blood Bar stocked up isn't cheap.

------
worldmerge
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?

------
motohagiography
"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.

------
qaq
Palantir has pretty clever shtick positioning pretty much run of the mill
consulting operation as a very advanced software company.

------
facethrowaway
Best investments of the 21st century:

1\. Peter Thiel, Facebook, $500k

2\. Peter Thiel, Donald Trump, $1m

No matter who wins the next election, Thiel and his buddies are guaranteed
more contracts. Welcome to the new American plutocracy!

------
ThA0x2
Palantir, the virtue signalers' rally point.

------
tempsy
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.

------
api
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.

~~~
H8crilA
It is uncommon to the successful ones. Microsoft, Google, Facebook, Apple -
all profitable at IPO time. Look up old S-1s.

~~~
itsoktocry
> _It is uncommon to the successful ones._

Exactly. People love to point at Amazon as long unprofitable, but don't
realize the company was generating massive cash flows for reinvestment, too.

There's no inherent reason startups or tech companies should lose money
endlessly.

~~~
ttymck
Softbank is responsible for spreading that assumption, no? Fairly recently?
(Uber, et al.)

~~~
govg
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.

------
gnu8
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.

------
SpicyLemonZest
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?

~~~
msoad
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

~~~
SpicyLemonZest
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.

~~~
Panini_Jones
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.

------
iso1631
They own the UK now, however the process that led to this tanked the UK
economy so it's not worth as much as expected.

~~~
StavrosK
Can you elaborate?

~~~
eshyong
I wonder if they're referring to this? [https://www.cnbc.com/2020/07/16/peter-
thiel-palantir-nhs-dea...](https://www.cnbc.com/2020/07/16/peter-thiel-
palantir-nhs-deal.html)

------
siliconvalley1
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!

~~~
baby
How do you monetize?

~~~
jbay808
The plan is to start charging $2 once everyone is already on the platform.

~~~
siliconvalley1
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!

