Although the Palantir “unicorn” is valued at $20 billion and has taken over a huge swath of Palo Alto near Stanford University, the company is hemorrhaging top-name clients, bleeding key staff and becoming increasingly unprofitable.
The 12-year-old, wildly secretive company received start-up capital from the Central Intelligence Agency. For the first several years of its existence, Palantir only sold its data analysis algorithms and products to agencies of the United States government.
The company still produces state-of-the-arts algorithms to drive government “Black Ops,” such as hacking foreign governments for the National Security Agency and tracking criminal cartels. But its bigger business is now selling big data analysis tools for major corporations to “mine” the deepest secrets of their customers.
As a example of how powerful Palantir has become to business, CEO Alex Karp once told Fortune that the company once turned down a partnership with a tobacco company over “fear the company would harness the data to pinpoint vulnerable communities to sell cigarettes.”
But this week’s release of a treasure trove of internal documents and insider interviews by BuzzFeed revealed that the company “has also lost blue-chip clients, is struggling to stem staff departures, and has recorded revenue that is just a fraction of its customer bookings.”
Examples of customer losses over the last 13 months include Coca-Cola, American Express, and NASDAQ, according to internal documents. Although Palantir promised these companies to mine data to improve profitability, clients are balking at the effectiveness of Palantir software to produce valuable enough insights over time to justify paying $1 million per month or more in billings.
Palantir insiders are increasingly concerned that their corporate clients’ “low-vision” of focusing intensely on revenue and margin expansion conflicts with Palantir’s twenty-something engineering force, who have “low-vision” regarding consumer business activity. The communications friction is tending to drive clients away over lack of performance.
BuzzFeed reports that over 100 Palantir employees, including several prominent managers, have left the company this year through April 15, according to a leaked confidential log. At that pace, the company is on track to turn over about 20 percent of staff in 2016. That is about double the average turnover rate in the prior three previous years.
Palantir CEO Alex Karp has said in the past that the company prides itself on paying salaries below market, because the work is so interesting and challenging for the employees.
But in a sign that Palantir is hemorrhaging in a growing staff retention crisis, Karp on April 22 announced a 20% across-the-board pay raise for all employees with 18 months’ tenure, and said that he was canceling annual performance reviews, because they weren’t working.
Palantir publicly disclosed that the value of its “2015 bookings” was $1.7 billion. But internal slides and an audio recording from February revealed that the company spent $500 million in 2015 on revenue collections of $420 million, up 50 percent from the prior year.
That disconnect between bookings and profitability appears due to the likelihood that Palantir contract bookings often include lower-paying trial periods or complex performance bonuses. Add in the 20 percent higher wages, and Palantir looks like a company that has a serious financial problem and is likely to remain unprofitable.
Gavin Hood, Palantir’s chief of staff, said in an interview with BuzzFeed News, “We’re looking to do transformational work with our customers,” but he did not mention transformational profitability.