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Billion Dollar Unicorns: Is Palantir Losing Valuation?

Posted on Friday, Jul 13th 2018

According to an IDC report, the worldwide revenues for big data and business analytics will grow at a 12% annual growth rate over the next few years. The market was pegged at $130.1 billion in 2016 and is projected to grow to $203 billion by 2020. The secretive Billion Dollar Unicorn Palantir was expected to go public last year. But recent reports suggest that the company may be delaying its plans.

Palantir’s Financials

Palo Alto-based Palantir was founded in 2004 by Alexander Karp, Garry Tan, Joe Lonsdale, Nathan Gettings, Peter Thiel, and Stephen Cohen who wanted to build software that could integrate, visualize, and analyze data while delivering security. Initially, Palantir was a government supported initiative that focused on coming up with ways to improve global security. While working on the project, the founders realized that advanced analytics could be used to defend enterprise assets as well. Soon, Palantir expanded into other industries including defense, law enforcement, and financial sector. Its platform is useful for fraud detection, terror attack prediction, identifying financial crimes, and fighting widespread crimes and disease outbreaks.

Palantir is a very secretive company. It does not divulge many details about its operations and discloses even fewer details about its financials. According to analysts, Palantir recorded bookings of $3.5 billion in 2017, of which nearly half would have come from government contracts. The company is estimated to have generated revenues of $600 million in 2017, and was not profitable as of the start of the year. Recently, in an interview, Palantir’s CEO Alex Karp said that if Palantir was to disclose its financials, people would be “positively surprised”.

Palantir’s Struggling Valuation

Palantir is still venture funded and has raised more than $2 billion from investors including GSV Capital Corp., Transamerica Investment Services, Morgan Stanley, RTIS Ventures, Benjamin Lang, Founders Fund, Glynn Capital Management, In-Q-Tel, IT Ventures, Jeremy Stoppleman, Keith Rabois, Kortschak Investments, L.P., Mithril Capital Management, Reed Elsevier Ventures, and Ulu Ventures. Its last round of funding was held in March 2017. But the company did not disclose either the amounts raised or the valuation at which they were raised. A funding round held in December 2015 had valued the company at $20 billion.

Market studies suggest that the company may be struggling to maintain that valuation. The data analytics industry is facing stiff competition from giants like Microsoft, IBM and Oracle. With deeper pockets and advanced technologies including engines like Watson, the tech giants are making their presence felt in the market. Additionally, Palantir has also witnessed the exit of some of its key clients like the Nasdaq and Hershey who have discovered that they could build their own security systems for less. According to a Bloomberg report, investors in the company including GSV Capital Corp and Morgan Stanley have reduced the valuation of their holdings by 11% and 47% respectively. Last March, SharesPost also valued its holdings 34% lower than the valuation two years ago.

Palantir was expected to go public last year, but declining valuations appear to have deferred that plan. Analysts still hope that Palantir will be able to make a turnaround by attracting more corporate customers and managing their costs better. But, if its valuation continues to fall, it could become an attractive acquisition target for the giants it competes with. Reports suggest that last year, Oracle was interested in acquiring the company.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.

This segment is a part in the series : Billion Dollar Unicorns


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