On August 5, Palantir’s CTO Shyam Sankar stood in entrance of about 20 nervous new staff on the firm’s Washington, D.C. workplace and gave a speech you’d anticipate at a brand new rent assembly: firm mission, Palantir’s historical past, and so forth. However there was one half that might’ve appeared unfathomable a number of years in the past: Sankar evangelized the significance of a brand new wave of protection tech startups, spun up by Palantir, Tesla and SpaceX alums.
The importance was extra ideological than monetary. Any enterprise Palantir will get from startups is dwarfed by its authorities contracts, in spite of everything. However you’ll be able to’t put a value on philosophical bedfellows.
Palantir likes to remind the world that it’s not like different publicly traded corporations; i.e. buttoned-up and appropriately distanced from its cowboy personal days. Sankar ends his orientation by cheekily inviting the brand new staff to shout “f–okay off” at him — a manner, he says, to encourage a flat construction. And as he walks out of the occasion room into the workplace bullpen, he passes an indication referring to staff as “founders” and “trailblazers.”
The signal is becoming: Sankar, who’s been on the firm for over 18 years, is decided to assist Palantir develop into a driving power for protection tech startups, a sector that’s been flooded with over $129.3 billion in enterprise capital since 2021, in keeping with PitchBook.
“To have this class of recent champions who’ve all minimize their enamel in Tesla and SpaceX and see the world in fully other ways, it’s offering an enormous quantity of vitality internally for us as we construct for them,” he mentioned, referring to startups like Apex Area and Castelion, whose founders hail from these corporations.
That’s the reason, in late 2023, he began a program that gives steering and instruments to protection tech startups known as First Breakfast. He referred to it in his writings as Palantir’s “Amazon.com to AWS second.” Principally, it’s a play for Palantir to get in on the floor degree for the subsequent Palantirs. It’s a enterprise technique, but in addition a philosophical one for Sankar, who spends hours every week on the cellphone consulting with protection startups and enterprise capitalists.
Like his longtime boss Palantir CEO Alex Karp, Sankar likes to wax poetic about defending Western values and the way America’s industrial base stumbled after its WWII glory days (although maybe prime protection contractors like Lockheed Martin and RTX, previously often called Raytheon Applied sciences, would disagree that the business has been resting on its laurels for 80 years). Sitting in a convention room lined with white boards, and a relentless stream of economic planes flying over the Potomac River behind him, he reiterated his darkest fears: that America might not be prepared for no matter nice battle comes subsequent.
“It’s a must to actually begin from the premise that successful will not be assured, which I consider,” he mentioned.
He feels the mission of Palantir “is to assist the nation and the West win,” he mentioned of the software program firm that helps governments and companies analyze knowledge. “That’s going to require many extra of those corporations succeeding.”
Spawning a protection tech ecosystem
In 2004, Sankar was destined to get sucked into Silicon Valley: he was getting a grasp’s in administration science and engineering at Stanford, was an early adopter of chilly showers and wellness developments, and had a militant strategy to work, in keeping with Kevin Hartz, Sankar’s first boss out of grad faculty. Hartz, who would go on to co-found Eventbrite, mentioned Sankar was the “final boyscout” and employed him because the fifth worker at Xoom, a service to assist folks ship remittances.
Hartz despatched Sankar overseas, the place he helped arrange Xoom in over 40 nations.
A lot to Hartz’s dismay, Sankar revealed in 2006 that his ambitions had drifted to DC. “It wasn’t shocking in any respect, as a result of Shyam actually had the next function,” he mentioned. “It makes good sense that like Peter [Thiel] successfully drafted Shyam in service.”
Sankar joined Palantir because the thirteenth worker. “On the time, the Valley wasn’t anti-government. It was extra like the federal government’s a dumb place to construct a enterprise,” Sankar mentioned. Traders, he recalled, advised them, “we received’t provide you with a examine as a result of we predict it is a loser enterprise.”
The group’s brash angle didn’t assist. “Frankly, we weren’t that desirous about how authorities acquisition labored,” Sankar laughed now.
They’d their first breakthrough when In-Q-Tel, a CIA-affiliated enterprise agency, invested and helped them receive safety clearances. Twenty years later, Palantir has had a storied rise, successful main offers with the federal government, like a $480 million contract with Venture Maven, and going through intense scrutiny for its work with ICE and broader privateness considerations.
It has additionally spawned an entire ecosystem in its wake. Palantir co-founder Joe Lonsdale now funds a number of the greatest protection tech startups by means of his enterprise agency 8VC; different alums, Trae Stephens, Brian Schimpf and Matt Grimm, went on to co-found Anduril, the protection tech unicorn now valued at $14 billion. And ex-Anduril staff are on the coronary heart of key early stage protection tech startups like Saronic Applied sciences, Salient Movement and Wraithwatch.
Because the protection tech growth grows, so do Sankar’s existential fears about America’s war-readiness. He recalled one thing an officer advised him: “The navy we’ve as we speak is the one we’re going to combat with in 2032.”
Think about, he mentioned, if a enterprise determined that “the infrastructure I’ve as we speak is what I’m going to run my enterprise on in 2032.”
“You’re going to be going out of enterprise,” he mentioned.
First Breakfast and a head begin
He’s written publicly about numerous long-shot initiatives, like making a navy reserve for tech leaders and suggesting the DOD loosen up on micromanaging contractors. “What if Congress acted extra like a restricted companion of a VC than a bureaucratic bean-counter?” he wrote.
However his greatest effort to place these concepts into motion has been First Breakfast, named after the notorious “Final Supper” in 1993, when then-Secretary of Protection Les Aspin warned the main navy contractors that the protection price range was about to sharply lower; it led to mass consolidation amongst the largest protection corporations.
First Breakfast is basically a set of software program instruments that Palantir has used internally for years, marketed to assist up-and-comers shortly navigate the troublesome authorities approval course of and qualify for contracts. Sankar is hoping he might help the brand new era of risk-taking founders succeed within the sector. “We want that eccentricity again,” he mentioned.
One of many key choices is FedStart, a program that approves startups to construct their software program atop Apollo and Rubix, two already-accredited platforms constructed by Palantir. This offers startups a head begin within the authorities accreditation course of, which might in any other case take a startup over a yr and a half and price hundreds of thousands in auditors and compliance consultants. Palantir prices for FedStart, although Sankar insists it’s discounted and that the corporate is simply “actually charging you our consumption prices.”
First Breakfast additionally presents startups a free service that gives the businesses entry to in any other case disparate navy knowledge, making it simple to entry and use by means of safe APIs. Ben FitzGerald, the CEO of protection tech unicorn firm Insurrection Protection, mentioned that the First Breakfast tooling “can save a ton of time, a ton of technical complexity,” and “a ton of extra compliance.”
“These are the kinds of improvements that I’m actually excited to see, as a result of it doesn’t require an act of Congress,” FitzGerald mentioned. “It doesn’t require a brand new Deputy Secretary of Protection to come back in and attempt to innovate. We are able to work with the present methods.”
Past all of the discuss of protection tech’s shared mission, it’s additionally only a good enterprise transfer for Palantir. Ross Fubini, managing companion at XYZ Enterprise Capital, estimated not less than ten of his portfolio corporations use instruments from the First Breakfast. He mentioned he sees First Breakfast as an opportunity for Palantir software program to underpin all the brand new startups within the area. “For Shyam, I feel it’s two issues directly,” he mentioned. Shyam, he mentioned, cares about “the federal government and social stability” — however he additionally “positively believes it’s good for Palantir to develop the ecosystem.”
Sankar is aware of offering a leg-up with software program isn’t sufficient to make protection tech an space the place VCs will frequently make investments at hype-like ranges — not when there’s an enormous query mark round how these startups discover an exit. Palantir is among the few IPOs within the protection tech area. “For the ecosystem to work there must be liquidity on the opposite finish,” he mentioned, musing that not less than some startups should promote to the main protection gamers, like Lockheed Martin or Boeing.
But the protection “primes” have so far proven little curiosity in snatching up the brand new protection tech startups; one thing Sankar hopes will change sooner or later. “You want a broad set of choices for liquidity,” he mentioned. “In any other case, every part’s much less priceless.”
However that’s a long run downside, one to be chipped away at by the various protection tech startups newly armed with warfare chests.
As for First Breakfast’s instant future? “I’ve been eager to do a literal breakfast,” Sankar mentioned, earlier than sighing. “However I feel the tech crowd wakes up late.”
