What's up guys and welcome to wall street millennial today we're doing a video about the software and data analytics company palantir after going public in 2020, palantir has garnered significant interest from individual and institutional investors alike. It is now widely considered to be one of the most important software companies in the world with a market valuation of almost 50 billion dollars for most of their recent history. Palantir has been a highly secretive company, helping the us military and intelligence agencies track and mitigate national security threats. They also develop cutting-edge software products for enterprise customers.

Their enterprise solutions can help companies manage their supply chains more efficiently and mitigate operational risks in a wide range of industries. In this video we'll take a look at palantir's history, we'll also take a deep dive into their current product offerings and potential to transform the software industry going forward. In 2003, paypal co-founder peter thiel took some of his paypal money to fund a new startup which he named palantir palutear was named after the all-seeing palantir orb from tolkien's lord of the rings books, paypal developed software systems to flag suspicious transactions on their networks to prevent Fraud or money laundering, these systems were cutting edge at the time and peter thiel thought that he could apply similar solutions to use cases beyond financial transactions. With this in mind, he started palantir as a mission-oriented company, which would work with governments to reduce terrorism, while protecting civil liberties theo went to various venture capital firms in silicon valley, pitching his new idea and asking for startup capital.

Most of them turned down the idea as they thought the technology was unproven and the business would be doomed to fail. However, they did land a two million dollar investment from the cia's venture capital arm, which thought that pallets here could eventually be useful for intelligence gathering applications with only limited venture capital funding available, thiel, put 30 million dollars of his own paypal money into the business and Started developing their first software products in 2004 theo brought in his stanford classmate alex carp to be the ceo of the new startup throughout the 2000s. They started slowly building their software products that could be used to integrate disparate data sources and identify anomalies and data sets. However, they didn't receive any significant commercial interest until 2009, when their software was used to expose a global hacking operation.

In 2009, a china-based cyber espionage group called the shadow network hacked into hundreds of high security servers throughout the world. They targeted nato computer systems and extracted classified information such as nato military activity in afghanistan. Palantir's technology was pivotal in exposing the shadow network and protecting government servers from similar cyber attacks. This high profile success dramatically raised volunteers, prestige within the industry and set them up to expand more aggressively into the clandestine services.

Seeing the potential in defense and government services, ceo, alex carter, shifted palutear's focus to developing a suite of software, which would eventually become known as paluteer. Gotham gotham allows government agencies to integrate data from multiple sources into a unified platform, which can then be used for data analytics simulations and decision making prior to palantir government agencies. Data was siloed, for example, if the fbi had a file on a suspected terrorist, the cia would have no way of getting this information easily u.s intelligence analysts were forced to manually request data from other agencies and search for results in a wide array of complex and Unstandardized databases: this was a complex and tedious process that reduced the intelligence, community's ability to utilize the vast amounts of data that they had at their disposal. Gotham integrated all the unstructured data sources into one platform which intelligence analysts can use to investigate, suspected terrorists, monitor actions of foreign adversaries and a whole host of other national security concerns.

Gotham can also use machine learning, empowered predictive analytics to forecast the movements of enemy military units by 2013. Palantir gotham had become ubiquitous among u.s government agencies being used by the cia department of homeland security fbi, u.s marine corps and the u.s air force just to name. A few gotham has also been used by international agencies to track various security threats, for example, in 2015. The international atomic energy agency used palantir to verify iran's compliance with the 2015 iran nuclear deal.

Palantir's government focused technology solutions are industry, leading with no competitors even close to their capabilities. Going forward. Palantir will likely expand its customer base to include the militaries of nato governments as well as increasing the existing footprint within the u.s department of defense. Palantir also has software for financial services firms such as banks and insurance companies in 2009, jp morgan started using volunteer software to track its own employees, jp morgan's insider threat, group tracked, employee browser, history, emails, phone conversations and gps location of company issued cell phones.

They used palantir software to aggregate search and analyze these records to flag employees for potential abuses of corporate assets, for example, if an employee was trying to access files or enter parts of the building that they were not supposed to be in, this could be flagged as An insider threat, the insider threat team could then send investigators to collect physical evidence or question the employee about his or her actions. The practice was rather controversial because it invaded the privacy of employees. It has even been reported that insider threat teams used palantir to monitor the communications of senior executives at j.p morgan. This project was one of the largest undertakings pounder had taken on at that point.

J.P morgan is a large and complex organization to implement this software solution. They deployed more than 100 engineers to set up the system within jp morgan's offices. This experience increased their expertise in the enterprise software space and eventually led to the development of palencia foundry. The company's premier software solution for commercial enterprises fallen tree helps large enterprises such as fortune 500 companies to manage the vast arrays of data that they have throughout their operations.

This can be incredibly important to business decision making and the intelligent application of foundry can give a company a significant competitive advantage. Imagine you are the ceo of walmart and you want to reduce the cost you purchase. Goods at walmart operates thousands of retail locations throughout the world, with tens of thousands of products and thousands of global suppliers. You want to determine which areas of the supply chain are the least efficient, so you can focus on improving them.

Walmart has thousands of relationships with various suppliers. Each deal with a supplier was negotiated by a different logistics team, and thus the pricing schedule and terms of each contract are recorded in non-standard formats and put into separate databases trying to analyze. Every single contract is a monumental task which could require hundreds of accountants and business analysts and be subject to human error. The prohibitive costs prevent companies from performing this type of analysis and major inefficiencies in supply chains go unresolved.

Palantir foundry solves this problem by integrating all the disparate data sources across the company onto a single platform. This makes the logistics analyst job much easier by orders of magnitude. They can access a single database with all the contracts and supplier relationships. They can also perform simulations of different shipping routes, etc.

This is an extremely powerful tool for analysts to squeeze every last dollar of efficiency out of the supply chain for a company like walmart with thousands of suppliers, a small savings on supply chain efficiency can add up to billions of dollars because their scale is so large. It's not just logistics that foundry can be used for palutear can customize foundry to be applicable to the data analysis needs of enterprises in almost every industry, for example, in 2020 they were awarded tens of millions of dollars from the uk's nhs to develop a specialized software. For tracking and tracing covid cases there is a massive market opportunity, as almost every company in the fortune, 500 is a potential customer for palunder's customized foundry product palantir is able to make customized software specifically tailored to the needs of an enterprise customer. They are able to do this by forward deployed software engineers or fdes.

The ftes solve technical issues and adjust the foundry product to align with the customer's specific needs. Fdes are deployed directly to the customer's location and work with the customer's own software engineers to configure the software palantir software can be extremely complex and difficult to use. Thus, the fdes are vital to making sure that the customer is able to fully utilize the product and get the maximum value out of it. This is very different from traditional software companies, which create a single, rigid solution that is given to all customers.

The highly customizable nature of paluteer software is its key differentiator and allows it to perform tasks that traditional software cannot. This has fueled their rapid revenue growth in recent years as companies data needs become increasingly complex. Traditional copy and paste solutions just won't cut it anymore. Solutions such as foundry will become ever more important while palantir software is unique and compelling.

The key downside is its cost. Fdes are experienced and highly trained professionals who command salaries well into the six-figure range. A complicated project can require dozens of ftes working for multiple months. In some cases, the labor costs of such an implementation can run into the millions of dollars from a business perspective.

The beauty of software is that it has zero marginal cost. Once you develop the code for a software application, it costs almost nothing to give access to a paying customer. Thus, the subscription revenue for a traditional software company, like workday or salesforce, has a close to 100 contribution margin. This allows software as a service companies to become extremely profitable and command very high valuations in the stock market.

Palantir has a different business model because they incur significant labor costs to deploy their product to a customer. They have to charge many millions of dollars per deployment to make each deal profitable. Massive corporations worth billions of dollars today are willing to pay a few million dollars for foundry because of efficiencies they can gain will far exceed the costs. However, small businesses and startups cannot afford to shell out millions of dollars to palantir, thus going forward the majority of palantir's revenue growth will likely continue to be from large enterprise clients such as fortune 500 companies and governments.

Alright, guys that wraps it up for this video. Let us know what you think about pouncer in the comments section below also don't forget to like and subscribe for future videos. As always. Thank you guys so much for watching and we'll see in the next one wall, street millennial signing out.

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