Software boss takes aim at Silicon Valley in £15bn float

The origins of Silicon Valley – long before Facebook, Google and Apple – are inextricably linked with America’s defence establishment.

It was Pentagon funding that helped to develop the internet, while Fairchild Semiconductor – now seen as the original Valley start-up – began by making chips for Cold War missiles and the rockets that put Neil Armstrong on the moon. 

But while this historic link with government has become unfashionable at some tech firms lately, one company is putting it at the heart of its pitch to investors. 

Inspiration: The company's name, meaning 'one that sees from afar', comes from the seeing stone used by dark wizard Saruman (pictured) in JRR Tolkien's The Lord of the Rings

Inspiration: The company's name, meaning 'one that sees from afar', comes from the seeing stone used by dark wizard Saruman (pictured) in JRR Tolkien's The Lord of the Rings

Inspiration: The company’s name, meaning ‘one that sees from afar’, comes from the seeing stone used by dark wizard Saruman (pictured) in JRR Tolkien’s The Lord of the Rings

THE DATA WIZARD INSPIRED BY TOLKEIN 

Palantir is an American technology company founded in 2003 by the Paypal tycoon Peter Thiel and other entrepreneurs. 

The company’s name, meaning ‘one that sees from afar’, comes from the seeing stone used by dark wizard Saruman (pictured) in JRR Tolkien’s The Lord of the Rings.

It makes software that crunches vast amounts of data to make it easier for people to manage and analyse information. 

The company’s early funding came from InQ-Tel, the CIA’s venture capital arm, and its customers now include both the US and UK governments. 

It has earned its name doing official – and often controversial – work for government agencies. 

But its tools have increasingly been used by the private sector as well. 

For example, BP is said to have turned to Palantir to help it extract oil more efficiently in the North Sea, while drugs companies are using its tools to analyse research data, and US bank JP Morgan has deployed the software to detect fraud.

Palantir, a data analytics business preparing to float on the New York Stock Exchange, claims to be different to the ‘engineering elite of Silicon Valley’. 

Co-founded by investors that include Paypal tycoon Peter Thiel, it has ‘chosen sides’ and will stand by clients, who include the US and UK governments, no matter what. Put simply, it makes software that helps to crunch huge amounts of data and then present it in a way that makes it easier for experts to analyse. 

Its computer algorithms detect fraudulent credit card payments, help police connect the dots between suspects and track down roadside bomb makers who target American troops in Afghanistan. 

It was recently drafted in by the NHS to analyse data on the spread of the coronavirus. 

And it is said to have helped US authorities find Al-Qaeda founder Osama bin Laden before his killing. But the company’s sensitive and sometimes controversial work means it has long been steeped in secrecy – until now. 

This week Palantir partially lifted the veil ahead of its £15billion stock market listing, expected to be one of the biggest recent floats after those of Uber, Lyft, Spotify and Slack. 

It hopes to tap into the global tech boom, which has seen digital companies flourish even during the coronavirus crisis, with other deals including British software giant Aveva’s takeover of Osisoft and the £23billion float of Chinese giant Ant Financial.

Palantir’s prospectus reveals familiar Silicon Valley features: an eccentric chief executive; the view that tech can solve life’s most intractable problems; and a sky-high valuation – despite a lack of profit. 

Indeed, after 16 years in operation, it has never been in the black. 

It brought in revenues of £565m last year, with 35 per cent coming from the US and 20 per cent from the UK, but still lost £441m. Yet the company, led by boss and co-founder Alex Karp, is betting that the explosion in data being collected means its services are needed more than ever. 

It has taken aim at companies like Facebook, which collect vast amounts of user data to sell targeted advertising. 

‘We seem to share fewer and fewer of the sector’s values and commitments,’ Karp said. ‘Software projects with our defence and intelligence agencies, whose missions are to keep us safe, have become controversial, while companies built on advertising dollars are commonplace. 

‘Our software is used to target terrorists and to keep soldiers safe. We have chosen sides, and we know our partners value our commitment. We stand by them when it is convenient, and when it is not.’

Yet working with government agencies has also led to controversies. The data it has pulled together at some organisations, from banks to police departments, is so comprehensive that it has been abused by the staff of some customers to snoop on people such as former romantic partners. 

Trump card: Peter Thiel

Trump card: Peter Thiel

Trump card: Peter Thiel 

In New Orleans, its algorithms to hunt criminals were shut down after accusations of bias and racism. And its work with the US Immigration and Customs Enforcement was divisive among its own staff, after the agency was scrutinised for separating immigrant families at the border. 

Despite a petition from employees, however, Karp said it would continue working with the US government. 

The 52-year-old is a philosophy graduate who reportedly enjoys solving Rubik’s cubes and keeps 20 identical pairs of swimming goggles in his office. He previously branded Google ‘treasonous’ for its decision to stop working with the US military on an artificial intelligence project. 

‘Silicon Valley is telling the average American ‘I will not support your defence needs’ while selling products to countries that are adversarial to America. That is a loser position,’ Karp told CNBC. Thiel, a staunch ally of President Donald Trump, also branded Google’s decision ‘shocking’. 

Palantir admits that its own decision to avoid working with China could also hamper its success. But it still thinks the market for its software is huge – with £90billion per year up for grabs. 

Palantir believes that approach will prove to be the right one. ‘The engineering elite of Silicon Valley may know more than most about building software,’ Karp said. ‘But they do not know more about how society should be organised or what justice requires.’ 

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