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What Did Colorado Catch When Palantir Moved to Denver?

Palantir's investor day webcast featured CEO Alex Karp roller-skiing in the mountains.EXPAND
Palantir's investor day webcast featured CEO Alex Karp roller-skiing in the mountains.

In early September, Palantir, a controversial tech company set to go public later that month, began its investor day webcast with a smoothly edited scene of Alex Karp, the company's CEO, roller-skiing on a path in a mountain forest.

Pumping his ski poles, Karp heads off the path and up a hill until he stops before the camera. Looking directly into it, he launches into a monologue about Palantir's investor day, reflecting the optimism that earned the company an estimated $22 billion valuation in late September, despite never turning an annual profit in its seventeen-year-history.

The mountain setting alone seems to explain why Karp chose downtown Denver for the company's new headquarters, which Palantir moved into in August.

There are reasons beyond the great outdoors that led Palantir to wave goodbye to the West Coast and head to Colorado. But the company brought some controversy along with it. (Palantir did not respond to multiple requests for an interview.)

Founded by Karp, PayPal co-founder Peter Thiel and others in 2003, Palantir "started building software for the intelligence community in the United States to assist in counterterrorism investigations and operations," and then "later began working with commercial enterprises," according to an August filing with the Securities and Exchange Commission.

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Gotham, the company's flagship product, is used by counter-terrorist analysts, Department of Defense employees and even ICE agents, resulting in massive government contracts for the company. Named after an all-seeing crystal ball in J.R.R. Tolkien's The Lord of the Rings, Palantir has only "125 corporate and government customers, a relatively small number for a large, publicly-traded tech company," according to the Washington Post, which also notes that the company "generated an average revenue per customer of $24.8 million last year."

Even so, the company is far from seeing a profit. "We have incurred losses each year since our inception, we expect our operating expenses to increase, and we may not become profitable in the future," the SEC filing notes in the "Risks" section.

Palantir is looking to start anew in Denver.EXPAND
Palantir is looking to start anew in Denver.
Shutterstock/Ascannio

Palantir software is user-friendly, allowing the input of massive amounts of data to create maps, networks or graphs. Looking at these visual representations, users can potentially discover patterns and draw conclusions. For example, a military intelligence officer in Iraq could input information on all of the militant attacks in the Baghdad area over the past year and then try to determine if they are one-off events or part of a pattern or campaign. (This reporter used Palantir every day during a summer internship with a Washington, D.C., think tank, researching the war in Syria.)

While the U.S. military and intelligence operatives have had software capable of doing this for years, Palantir markets itself as being the most intuitive for users. "We are working towards becoming the default operating system across the U.S. government," its SEC filing states.

In that filing, Karp also notes that Palantir, which had nearly 2,400 employees worldwide at the end of 2019, 850 of them employed outside the U.S., has chosen sides in global politics: "Our software is used by the United States and its allies in Europe and around the world. Some companies work with the United States as well as its adversaries. We do not. We believe that our government and commercial customers value this clarity." The company often highlights the fact that it doesn't work with the government of China, for example.

And by moving to Colorado, it's no longer stuck in the Silicon monoculture. "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," Karp says in the filing, criticizing other California companies for selling, collecting or mining data.

"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," Karp adds.

Denver boosters are upbeat about the company's move from California. "A lot of it comes down to political balance. Although Colorado’s legislature and governor's office are all the same party, I think we still have a much better balance than somewhere like San Francisco," says Sam Bailey, vice president for development at the Denver Metro Chamber of Commerce. "It's definitely a more welcoming and open atmosphere."

Adds Frannie Matthews, president and CEO of the Colorado Technology Association: "I do think that diversity of thought is incredibly important for creativity."

Neither Denver nor Colorado provided financial incentives to woo Palantir here. The company didn't talk with key industry stakeholders in the state before moving, either, following other tech companies such as Salesforce and Slack that had made big commitments in Colorado. "I do find it interesting that they just kind of looked and made a decision without necessarily engaging the economic-development groups," Matthews notes.

Critics suggest other reasons for the move. "They are trying to distinguish themselves and separate themselves from the Silicon Valley vibe," says Denise Bell of Amnesty International, which has been looking into Palantir's human-rights record. "Not just the venture-capitalist, techie culture, but also the activist culture. I think they’re trying to insulate themselves from all of that."

The Homeland Security Investigations branch of Immigration and Customs Enforcement uses Palantir; HSI's official duties include taking down human-trafficking rings and counter-terrorism actions. But the Enforcement and Removal Operations (ERO) branch of ICE does not use Palantir, which company officials often point out.

Still, Palantir's contracts with ICE bother human-rights advocates like Michael Kleinman, Amnesty International's Silicon Valley Initiative director. "Their contract is not with ERO. That’s absolutely correct. But that does not mean that the technology does not facilitate the operations that lead to deportation," says Kleinman, who notes that workplace raids, which HSI sometimes conducts, can lead to individuals not responsible or even suspected of any crimes being detained and eventually deported.

And local activists have taken note.

On September 22, Colorado immigrant-rights advocates organized a demonstration outside of Palantir's new headquarters, an office building on Blake Street right next to the 16th Street Mall.

"Palantir’s work endangers Colorado communities and is unwelcome in our state. Coloradans, from tech workers to elected officials, from immigrant leaders to students, will gather to throw the company an 'unwelcome party,' expressing firsthand the impacts of their unethical software and showing how unwelcome Palantir and its collaborative work with ICE is in our state," read an advance on the event.

But Palantir isn't the only Colorado firm that contracts with law enforcement and military entities of the federal government. Among other companies, Boeing and Lockheed Martin have massive operations in Colorado.

"I don’t see it as a challenge for them in Colorado," Bailey says of Palantir. "I do see their engagement with the federal government being a component of their commitment to national defense and security, especially in an age when we’ve seen a lot of threats to that."

Although Matthews is excited about Palantir relocating to Colorado, she thinks that all tech companies should be aware of the potential negative consequences of their work. "We need to be thinking policy-wise on what this world looks like and the power of data for good and what’s scary," she explains. "It could lead to lack of due process, it could lead to unfair accusations, all sorts of things. I think that we need to be aware of that and really paying a lot more attention than we are right now."

Such awareness helps keep the business climate positive. "We have a good ecosystem for a pretty business-friendly environment," Matthews says. "I think we’ve got a good ecosystem from a higher-education perspective. We have more national labs in Colorado than any other metro city except for the D.C. area. We're very strong on that and very strong on public-private partnerships."

There's also that work-life balance.

"For companies that are in the Bay Area, it’s extremely saturated with tech companies," says Bailey. "It’s also difficult balancing how you grow your company with the lifestyle of your employees. If you work in the Bay Area, you could have a one- or two-hour commute. You're unable to create balance."

By contrast, in metro Denver, he notes, "You can live urban, rural, mountain or suburban and still be close to a growing economy and lower cost of living relative to cost."

Despite landing such a plum, Colorado officials were reluctant to agree to interviews about Palantir.

"Colorado’s world-class talent, quality of life, and collaborative environment continue to be major drivers of business relocation and expansion," says Betsy Markey, executive director of the state's Office of Economic Development and International Trade, in a statement about the move. "Palantir’s decision to relocate their global headquarters to Colorado underscores these core strengths."

"We are not surprised by companies such as Palantir deciding to relocate to Denver; the city has been attracting innovative tech companies for the last ten years," says Leesly Leon, a spokesperson for the city's Department of Economic Development & Opportunity. "Having another public-traded firm will continue to add to the business attractiveness of our city, further our tech ecosystem, expand the tax base, and it may entice investors to look at and select other Denver firms. And while we still do not know about Palantir’s long-term real estate or number of jobs, we trust these are areas that will benefit our local economy."

And one more thing:  "More importantly, we are looking forward to seeing how Palantir, once properly settled in Denver, engages with our community and aligns with our cultural values."

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