Weekly Update #147: An Inside Look at Palantir

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Hello Investors,
An Inside Look at Palantir
BuzzFeed reporter William Alden has made a bit of a name for himself lately, covering the less-publicized activities of the largest pre-IPO tech companies. And this week was no different, with Alden's coverage of the secretive big data company Palantir.
In the long-form piece, Alden pores through internal emails, company presentations, and quotes from anonymous sources to seemingly suggest that Palantir is falling apart. For example:
"...documents and interviews show that Palantir 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."
For those that are short on time, some key metrics of interest from the article:
  • Palantir announced a 20% pay raise to all employees that have worked there for over 18 months
  • Palantir's 2015 bookings rate was $1.5 billion. The company collected $420 million in revenue in 2015.
  • Palantir spent $500 million in 2015, implying a net cash burn of roughly $80 million for the year.
  • Palantir's employee turnover rate has increased to over 20%

Palantir co-founder Joe Lonsdale (who is no longer in an operating capacity with the company) quickly went to Quora to voice his counter-argument. Lonsdale dismissed the article as taking "a few select facts out of context" to paint a negative picture of Palantir, which I tend to agree with. The gap between bookings and revenue is actually quite common: bookings convert into revenue when services are delivered in the future. If Palantir signs a pharmaceutical company to a $50 million contract that pays $10 million a year for 5 years, only 20% of the revenue will be recognized in the current calendar year (Fred Wilson covers this difference in more detail on his blog). 

In other news...
A cache of internal documents shows that despite growing revenue, Palantir has lost top-tier clients, is struggling to stem staff departures, and isn’t collecting most of the money it touts in high-value deals.

Palantir adviser Joe Lonsdale says Palantir is doing just fine (Fast Company)
Palantir's cofounder Lonsdale called BuzzFeed reporter Will Alden's piece "self-congratulatory and negative which is to be expected in the low-paid clickbait environment where some in the media are jealous of the growing and healthy parts of the technology economy and feel it is their duty to 'hunt unicorns'."
Josh Guttman discusses the state of the venture market and the increased frequency of boom and bust predictions.
Three months ago, David Sacks became CEO of Zenefits after an internal investigation brought to light deficiencies in the company’s licensing compliance. Regulators and the public have an expectation that their rules will be followed, and the new leadership is completely committed to doing that.
Cisco may be about to expand its hyperconvergence strategy yet again. According to a CRN article, three sources have confirmed Cisco is in partnership discussions with hyperconvergence vendor Nutanix.
The ‘tech bubble’ puzzle (McKinsey Quarterly)
Public and private capital markets seem to value technology companies differently. Here's why.
Phil Haslett | Founder + Head of Investments | EquityZen 

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