(Sept 6): Palantir Technologies Inc is in talks to raise significant funding from private investors, a move that could indefinitely delay one of Silicon Valley’s most hotly anticipated initial public offerings, according to people familiar with the company.
The secretive data mining company approached Singapore’s Temasek Holdings, SoftBank Group Corp. and other investors outside the US according to people with knowledge of the situation, all of whom asked not to be identified discussing private information. Talks are ongoing and no deal has been reached.
Palantir spokeswoman Lisa Gordon declined to comment on the fundraising.
Co-founded by billionaire investor Peter Thiel in 2004, Palantir got its start helping the US Department of Defense and other federal agencies aggregate and analyze mountains of data. Palantir’s technology has helped the government with the capture of terrorists like Osama bin Laden, and more controversially, has assisted immigration authorities separating families at the southern border.
But despite continued success scoring multi-year contracts with the Department of Homeland Security and private companies like Merck KGaA and Airbus SE, Palantir has struggled financially.
Talking to employees earlier this month, Thiel said Palantir will not go public anytime during the next two to three years, people with knowledge of the meeting told Bloomberg. Previously, the company was thought to be targeting an IPO in 2020. Palantir’s effort to raise more funding from private investors would ease some of the IPO pressure, and would provide a formal re-set of the company’s volatile value for the first time in four years.
Since Thiel and other investors crowned Palantir one of the world’s most valuable tech startups by awarding it a US$20 billion ($27.7 billion) valuation in 2015, the company’s share prices have tumbled on the secondary markets. That’s even as some investment banks have estimated its value in the ballpark of US$40 billion, making its true worth difficult to parse.
The company has never turned an annual profit, and Palantir’s lofty reputation has suffered as concerns around the ethical use of its technology have increased.
One of the biggest worries about the company’s business has been its heavy reliance on engineers to customize software for each client -- a labour-intensive operation that caused some to compare the startup to a consulting company instead of a software company. Earlier this year, Morgan Stanley and other investors slashed Palantir’s value by more than half, sending employee options underwater and prompting the company to heavily cut the price of those options in an effort to boost morale, Bloomberg has reported.
Palantir aims to reduce labor costs with Foundry, its new product for non-government customers that automates work previously done by engineers. The company is also building a sales team -- its first ever -- to sell the product. The result, according to one investor who asked not to be identified because the details are private, is that Palantir’s balance sheet is the strongest he’s ever seen it. But he also said that the company would do better to remain private.
Because Palantir’s sales tend to be large and “lumpy,” forecasting revenue year to year, let alone quarter to quarter, is difficult, the investor said. Providing the public markets with a longer timeline to evaluate its progress will be critical, he added.
