More on Sky-High Valuations: Palantir

A recent report by Transparency Market Research titled “Big Data Market – Global Scenario, Trends, Industry Analysis, Size, Share and Forecast, 2012- 2018” projects the big data market to grow at an annual rate of 40.5% to $48.3 billion from $6.3 billion last year. North America will remain the leading contributor to the segment, commanding 55% of the market share. The analytic tools surrounding big data segment are being used to help businesses leverage the vast amounts of data gathered by their systems.  But it is not just businesses that are using big data analytics. There are several government agencies that are also using these tools to come up with solutions to the world’s pressing problems.

Palantir’s Products
Palo Alto–based Palantir Technologies was founded in 2004 by Stanford scientists and ex-PayPal employees to provide analytic solutions that help address “the world’s hardest problems.” Palantir was initially formed to create an anti-fraud offering for financial organizations. Soon, though, they aimed at addressing a much broader range of problems.

Today, their products include a suite of software applications that help to integrate, visualize and analyze the world’s information. Their analytics offerings include security solutions that are used by the intelligence, defense, law enforcement and financial communities. Palantir keeps information about their work quiet primarily because their solutions help government intelligence agencies track criminal activities with sophisticated data analysis technology. They essentially take big data and analyze it to come up with connections between people and entities to not only track terrorism, but also to identify fraudulent activities in financial and government institutions.

Products available to the public include products such as the Palantir Gotham, which lets anyone interested in analyzing publicly available data to provide information about the flow of resources that affect how the U.S. government functions. The tool integrates both structured and unstructured data available from sources such as Data.gov and other datasets compiled by leading nonprofits and policy centers. Through their partnership with Thomson Reuters, the public also has access to Palantir Metropolis, QA Studio. Metropolis is a software platform that integrates data, and through information management helps with quantitative analysis.

Palantir’s customers include banks and other financial institutions and government agencies such as the counter-terrorism analyst teams of the FBI and the CIA, fraud investigators at the Recovery Accountability and Transparency Board, and cyber analysts at Information Warfare Monitor and even the U.S. military intelligence.

Like most of their business, Palantir’s financials are also shrouded in secrecy. But some news reports suggest that they earn revenues through  a subscription based model and recorded revenues of $350 million-$400 million last year. To date, they have raised $301 million in venture funding from investors that include Glynn Capital Management, Ulu Ventures, Jeremy Stoppelman, Ben Ling, Keith Rabois, and Peter Thiel’s Founders Fund. Today, the company is estimated to be worth $7 billion-$8 billion, and some expect that Palantir may soon be thinking of going public.

They may be doing strong business, but I would like to see more details about their business model before I endorse a valuation of the kind suggested above.