Palantir’s HQ relocation says a lot about what's coming next for tech

It's just one company, but the move points to some much larger truths.

Palantir was a rock star in the Bay Area.

Launched in 2004, the big data company brought in $739M in 2019 revenue, employs 2,500 and works with clients ranging from the U.S. intelligence agencies and DoD to hedge funds, banks and corporations like Merck and Fiat Chrysler. The CIA’s venture capital arm, which is in fact a thing, was Palantir’s first investor.

It also brought more billions to Peter Thiel (he’s the chairman), when he decided that "the approaches that PayPal had used to fight fraud could be extended into other contexts, like fighting terrorism.”

Thiel has said that the company is “mission-driven” and dedicated to providing untraceable security and data mining services and bringing the full power of data analytics to law enforcement, intelligence services and other clandestine work. Its software is used as part of ICE’s Investigative Case Management System, which has been used to plan & carry out raids and deportations since 2014, and that work (among other dodgey contracts) led to protests in front of CEO Alex Karp’s home, campus campaigns to discourage recruitment and plenty of bad press.

All of this is to say that Palantir is and was pretty controversial.

But it’s also massively successful, valued at more than $20B with millions in revenue. Data analytics is a hot market right now and companies like Palantir are popping up left and right. It might not be pretty, but the demand is there.

That baggage didn’t go unnoticed when Palantir announced plans in August to relocate from Palo Alto to Denver, CO. As I write this, the company lists its headquarters about five minutes from my office.

From the Denver Post:

“The stealthy arrival of Palantir Technologies last week ranks among the biggest tech company relocations to Denver ever, and, given its work with U.S. immigration officials, one of the most controversial, too.

“The move comes at a pivotal time for the Silicon Valley-born data analytics company, which is valued at around $20 billion. Palantir provides software to clients in defense, law enforcement, pharmaceuticals and dozens of other industries, working in areas ranging from health data tracking to logistics to government surveillance.

“The company, which now lists its address at 1555 Blake St. instead of Palo Alto, California, filed paperwork with the Securities and Exchange Commission on Tuesday laying the groundwork for a long-awaited initial public offering. The filing comes after the company told the SEC in July it was seeking to raise $961 million in private markets.”

It’s not about Denver

I live in Denver and have watched the tech scene here develop over the last decade-plus. I wasn't surprised at all to see a large and successful company like Palantir move here.

Yes, this means Colorado jobs in a hot and growing sector.

Yes, it makes Denver a “city to watch in tech,” whatever that means.

And, yes, it’s a sign to other big time Bay Area companies that moving to Colorado might not be such a bad idea. The cost of living is certainly cheaper, there’s enough talent here and we’re looking at a growing community of tech companies statewide (but mostly in Boulder).

“A lot of things can be done remotely and in the proximity of being near the San Francisco Bay Area, near Boston ... you don’t need to be there every single day. And so digitally, we connect really easy because we’re right in the middle of the U.S.,” J.J. Ament, CEO of the Metro Denver Economic Development Corporation told CNBC. 

But here’s the thing: Palantir is here for different reasons.

In an investor letter announcing the move, Karp wrote: ““The engineering elite of Silicon Valley may know more than most about building software, but they do not know more about how society should be organized or what justice requires. Our company was founded in Silicon Valley. But we seem to share fewer and fewer of the technology sector’s values and commitments.”

The gist? 

“Software projects with our nation’s defense and intelligence agencies, whose missions are to keep us safe, have become controversial, while companies built on advertising dollars are commonplace. For many consumer internet companies, our thoughts and inclinations, behaviors and browsing habits, are the product for sale. The slogans and marketing of many of the Valley’s largest technology firms attempt to obscure this simple fact.”

He doesn’t say it, but he’s talking about Facebook, Google and all the rest that profit off the data of their users. 

It’s cultural.

That’s not to say that Denver is 100% cool with the controversial side of what Palantir does. To the contrary, the local reaction was more or less hmmm when the move was first announced, and it sparked a discussion in the local tech community about what we value and what we want to see this ecosystem become. But this story is more about Palo Alto than it is Denver.

It’s not only about costs

Decades ago, Silicon Valley became the place for entrepreneurs to come together and take big swings on new innovations. It had the talent, the capital and the infrastructure to support the creation and growth of American success stories like Hewlett Packard, Intel, Apple, Facebook and so many more. 

But that trend is reversing. It’s no longer required to be physically in the 650 area code to do big, world changing things. In fact, there are many other places that might actually be better suited depending on what kind of business you’re building. Yes, it’s cheaper to locate in Omaha or Orlando than it would be in San Joes, but culture matters most of all.

The jig is up on monetizing the data

It’s been accepted for a decade-plus now that the most effective way to bring in revenue in consumer tech is to gather data on your users and sell it to the highest bidder. Facebook does it. Google does it. Everybody does it. 

But, privacy concerns aside, consumers are getting savvy to what the big players are doing and new companies (like Palantir) are stepping in to give them what they want. It’s basic capitalism. As more and more stories get written about exactly what, for instance, Facebook is doing with all of the data it’s collecting on its users more people will jump ship from the platform. That will open the door for new monetization streams that don’t make the user the product. Palantir’s approach is just one example.

Talent is everywhere

That was always the rub around starting your company someplace else – how would you ever find the right people to work there? Or, more importantly, how would you ever find investors willing to take a chance on your big idea when you’re in Texas or wherever? That’s over. 

Remote work was already changing the talent equation before COVID hit, with offshore developers and back office services taking care of most of what needed to be done. Case in point: Eric Yuan built Zoom into the videoconferencing platform that everyone uses with an offshore dev team and just a handful of US employees. It’s still like that today.

Palantir is just one company making one move to one city. But its reasons point to some larger truths: Silicon Valley needs to look in the mirror.

[Read More: Here’s Alex Karp talking about the Silicon Valley “monoculture” back in May]

More next week.