If you haven't heard of the Silicon Valley tech company Palantir Technologies, you'd probably be in the majority.
Despite Palantir's nearly $9 billion valuation and close to a $1 billion in venture capital investment over the past decade, it holds its cards close to its chest, and rarely speaks to the media. Its business is also hard to understand–creating software that can crunch big, unstructured sets of data to find meaningful patterns. Nevertheless, Palantir has been linked to helping federal entities like the Central Intelligence Agency and U.S. military–according to rumor–help capture Osama bin Laden, and to assisting big banks recover billions of dollars stolen and hidden by Bernie Madoff.
Few people also know that Palantir has been a hotbed of entrepreneurial innovation for years. At least half-a-dozen of its executives have gone on to launch other important Silicon Valley startups since the company was founded in 2004. According to the former Palantir executives interviewed for this story, it's an example of why having a big idea, a sense of mission, and hiring the right people is important. But it's also a testament to the advantages of forming strong connections with the right people.
“We wanted people with a lot of raw intellectual talent, but also people who had strong opinions and who were passsionate about their mission and the world,” says Joe Lonsdale, who along with billionaire investor Peter Thiel, Alex Karp, and a number of others, launched Palantir.
The Allure of a Big Idea
In many ways, Palantir is like Paypal in the 1990s, a startup whose founders–Elon Musk, Max Levchin, and Peter Thiel–all went on to start other, highly successful companies. In fact, Paypal's magic hand can be felt throughout Palantir's own structure–whether it's through Thiel's outsized influence in providing $40 million of seed money and guidance, or Lonsdale's own internship at the payments company while he was still a student at Stanford.
Whereas Paypal used top engineering talent to create a consumer product, Palantir uses its engineering wizardry for other businesses, Lonsdale says.
“Palantir is the new wave of companies solving big problems for big industries,” he says.
That premise is particularly attractive for Palantir's bright, entrepreneurial engineers, Lonsdale says. Specifically each company that comes to it as a client has a particular problem that needs solving. Armed with Palantir's technology, the engineers have to figure out how to apply it, whether that's in the pharmaceutical industry looking to solve data challenges in research and development, or in large money center banks, such as JP Morgan Chase, which uses Palantir's platform to spot cyber-fraud in its vast international network. And that involves innovating at every turn.
“Fundamentally you need a great tech team when you approach these problems,” Lonsdale says. “And it takes a lot of iteration and timing of how to take what Palantir has, and use it to solve the problem.”
The Palantir Mafia
If Palantir is shaping up to be another Paypal, specifically for its ability to beget a host of other hot Silicon Valley startups, Lonsdale is akin to its Peter Thiel-like figurehead.
Like Thiel, Lonsdale has a somewhat Protean ability to found, fund, and connect. Although he left Palantir in 2009, he still has an advisory role there. In 2012, he co-founded Formation 8, a venture capital firm with $450 million of assets under management. Along the way, he also started the government data transparency company Opengov.com, which received $15 million in funding from Andreessen Horowitz in May.
Among the companies Lonsdale has funded is Relate IQ, started by ex-Palantir alumni Steve Loughlin and Adam Evans. The company applies big data analysis to customer relationship management, and in 2013, Formation 8 led a $20 million series B investment in the company. In July, Salesforce.com bought Relate IQ for $400 million.
Lonsdale also founded and funded Addepar in 2009, enlisting the technical and strategic skills of yet another former Palantir executive, Eric Poirier, who is chief executive of the startup. Addepar's core product analyzes the interrelationships of complex investment positions in large portfolios for risk and other insights.
Poirier, who is another Thiel protege–the two met when Poirier was studying computer sciences at Columbia University–started out at Lehman Brothers on the fixed income analytics and research side. But he soon grew disenchanted working in the established “white shoe” environment, particularly with its poor use of technology.
“That was my lens into how old and fragmented and antiquated the use of technlogy was on Wall Street,” Poirier says.
In 2006, Thiel asked Poirier to consider working at Palantir. At the time, Palantir had just 15 employees. Poirier jumped at the chance. “It was very clear that Palantir had a remarkable mission and focus and was really bold in its approach toward innovation, and toward a lot of things that are fundamentally broken,” he says.
Poirier started out as a software engineer focusing on capital markets, and soon moved into a strategic and development position. “My role was to take the software I had built, addressing problems such as Lehman's had on the capital market side, and showing it to large banks and hedge funds and trading desks, and explaining to them how this technology could lead to more well-informed decisions,” Poirier says.
The Entrepreneurial Itch
At a certain point, however, the people doing the hard, challenging, innovative work at startups are likely to want to do that work at their own companies.
Such a phenomenon is typical, particularly for brilliant engineers at the leading technology companies, says Avivah Litan, a systems security expert and analyst for research firm Gartner. Litan has met with many of Palantir's executives, and has followed the company from its early days.
“A lot of entrepreneurial people want more entrepreneurial opportunities than life at a company with a value of $9 billion can offer,” Litan says.
As Palantir grew to more than 1,000 employees, Poirier says he began itching for a startup environment once more. And he jumped to Addepar last year.
“At the core of companies like Paypal and Palantir and Addepar are a number of common threads–one is having the proper culture of innovation,” Poirier says. “The other is having the mission to solve very big problems.”
At its best, this is how Silicon Valley works, Poirier says. And it's likely that many of the engineers and other employees Addepar has hired in the past few years will go on to found their own innovative startups.