Yesterday evening Palantir, the quasi-secretive data mining and analysis firm, publicly announced that it has privately filed to go public.
The disclosure came in the wake of Palantir raising new capital, taking on hundreds of millions of dollars before its planned public offering. According to Crunchbase data, Palantir has raised billions while private, making its debut a marquee affair in the worlds of technology, startups and venture capital.
As TechCrunch reported yesterday, Palantir has a controversial product history, including helping locate immigrants for the Immigration and Customs Enforcement agency, connecting databases for intelligence agencies and recently winning no-bid contracts to gather data about the COVID-19 pandemic for the White House Pandemic Task Force.
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The company’s filing comes after a long incubation period; it’s been 17 years since Palantir’s founding in 2003. Since then, its reported financial performance and fundraising history have become sufficiently convoluted that I couldn’t tell you this morning how big the company really is or how much it raised before its most recent investment.
Palantir’s reported history
To prep us for its eventual public IPO filing, let’s go back in time and collect data points from Palantir’s reported history. This way when we do get the company’s S-1 filing, we’ll better understand what we’re looking at.
Even with companies that aren’t privacy conscious, it can be hard to craft a comprehensive history of their business activities from when they were private. With Palantir, it’s even trickier.
Still, leaning on more than a decade of TechCrunch reporting, Crunchbase data, other publications and Craft.co, what follows is a reasonable look at what has been reported about Palantir through time.
In unbolded text you’ll see funding rounds. In bolded text you’ll see end-of-year valuation notes and some revenue figures. Please note that we’ll deal with the obvious revenue issues directly after our timeline:
- July 2006: Palantir raises a $7.5 million Series A led by Oakhouse Partners. (Source: Crunchbase)
- November 2006: Palantir raises a $10.5 million Series B led by REV. (Source: Crunchbase)
- February 2008: Palantir raises $36.8 million in a Series C. Company valued at $400 million, per Craft.co data.
- June 2010: Palantir raises $90 million Series D, led by Founders Fund. Company valued at $730 million, per Craft.co data.
- May 2011: Palantir raises $50 million Series E. Company valued at $1.7 billion, per Craft.co data.
- October 2011: Palantir raises $68 million Series F.
- As 2011 comes to a close, Palantir is worth $2.5 billion.
- October 2012: Palantir raises $56 million Series G.
- According to Forbes, Palantir’s 2012 revenues were under $300 million.
- September 2013: Palantir raises $196.5 million Series H, valuing the company at around $6 billion.
- Forbes estimates that Palantir’s 2013 revenue “will reach nearly $450 million.”
- As 2013 comes to a close, Palantir is reported to be worth around $9 billion.
- Palantir said that it expected $1 billion in contracts in 2014, per TechCrunch reporting.
- February 2014: Palantir raises $111.3 million. (Source: Crunchbase)
- September 2014: Palantir raises $444.2 Series I. (Source: Crunchbase, SEC)
- December 2014: Palantir raises $50 million Series J. The company’s valuation rises to $15 billion.
- Palantir tells Fortune that it saw revenue of more than $1 billion in 2014.
- December 2015: Palantir raises $879.8 million, led by Kortschak Investments. (Source: Crunchbase)
- Palantir reaches $1.7 billion in revenue in 2015, per Bloomberg, via BI.
- As 2015 comes to a close, Palantir is reported to be worth $20 billion.
- Palantir is reported to have seen around $600 million in 2017 revenue.
- Palantir is reported to have expected around $750 million in 2018 revenue.
- Palantir is reported to have generated $739 million in revenue in 2019.
- Palantir tells CNBC that his company expects more than $1 billion in revenue in 2020.
- June 2020: Palantir raises $550 million, led by Sompo Holdings. The round, according to an SEC filing, is about half of what the firm expects to raise ahead of its IPO.
- July 2020: Palantir files privately to go public.
A good question: How did Palantir see more than $1 billion in revenue in 2014 and yet is on track today to reach $1 billion in revenue in 2020? I have a guess. I suspect that bookings — the total value of sold contracts — were conflated at times as revenue — accrued bookings, essentially — obfuscating the company’s real growth rate and size.
This may have made the company appear bigger, and thus more attractive than it was in reality.
Generally speaking, the later-stage a company is, the more accurate the reporting that surrounds it becomes. So I am far more inclined to believe the more recent reporting than our earlier notes. The fact that an IPO is near makes it all the harder for the firm to obfuscate its numbers today. So, I’d bet you lunch that Palantir wasn’t anywhere near GAAP revenues of $1 billion back in 2014 and 2015, but that it is now.
(To be clear, startups misleading the media and other external parties through metrics magic or other means is nigh-standard. Here’s one of my favorite examples.)
Looking at our collected information, Palantir seems like the Platonic ideal of a unicorn. It’s older than you’d think, has a history of being hyped, its valuation has stretched far beyond the point where companies used to go public, and it appears to be only recently growing into its valuation.
Questions abound. Did the company not grow much, if at all from 2018 to 2019? Or are reported numbers missing a trick and thus giving a distorted picture of the company? Either way, from around $600 million in 2016 revenue to $1 billion or so in 2020 is not that impressive of a growth pace; yes, Palantir has reached material scale, but that doesn’t mean that it’s making money or growing very quickly.
And, finally, lost in the above are questions about revenue mix. What portion of the company’s revenues are services, versus software? Services — the use of humans to deploy, manage or run product for customers — are lower-margin than software incomes, making them less attractive. The more services a company has in its revenue mix, the lower the quality of its aggregate revenue becomes.
Palantir makes use of “Forward Deployed Software Engineers,” which makes me wonder about its revenue mix, and therefore revenue quality.
This is just one reason why Palantir’s numbers are so exciting. What is this company that we’ve heard so much about, and how good of a business is it? As we’ve seen above, lots of folks have bet over the last decade and a half that it’s a stellar company. We’ll see soon enough.