On August 5, Palantir CTO Shyam Sankar stood before about 20 nervous new hires in the company's Washington, D.C., offices and delivered the sort of speech you'd expect at a new-hire conference: the company's mission, Palantir's history, etc. But there was one thing that wouldn't have made sense a few years ago: Sankar was talking about the importance of a new wave of defense tech startups founded by ex-Palantir, Tesla, and SpaceX.
Its importance is ideological rather than financial — after all, the business Palantir gets from startups is tiny compared to government contracts — but you can't put a price on philosophical bedfellows.
Palantir is keen to remind the world that it's not like other public companies — stuffy and removed from the private days of the cowboys. At the end of orientation, Mr. Sankar playfully invites new hires to yell “fuck you!” — a way, he says, to encourage a flatter organization. And as they walk from the events room to the office bullpen, they pass signs calling employees “founders” and “pioneers.”
The sign is fitting: Sankar, who has been with the company for more than 18 years, is determined to help Palantir become a powerhouse for defense tech startups, a sector that has been flooded with more than $129.3 billion in venture capital since 2021, according to Pitchbook.
“Having this class of new champions who have experience at Tesla and SpaceX and see the world in a completely different way gives us a lot of energy in-house as we build for them,” he said, referring to startups like Apex Space and Castellion whose founders hail from those companies.
So he's launching “First Breakfast,” a program to provide guidance and tools to defense tech startups in late 2023. In his book, he calls this Palantir's “Amazon.com to AWS moment.” Essentially, it's a strategy for Palantir to get in at a foundational level for the next Palantir. It's a business strategy, but it's also a philosophical one for Sankar, who spends hours a week on calls with defense startups and venture capitalists.
Like his longtime boss, Palantir CEO Alex Karp, Sankar likes to wax poetic about defending Western values and how America's industrial base stumbled after the glory days of World War II. (Though major defense contractors like Lockheed Martin and RTX (formerly Raytheon Technologies) might disagree that the industry clung to glory for 80 years.) Sitting in a conference room lined with whiteboards, with a steady stream of commercial planes buzzing over the Potomac River behind him, Sankar recited his darkest fear: that America may not be ready for whatever the next big conflict.
“I believe we have to start from the premise that victory is not guaranteed,” he said.
He believes the mission of Palantir, a software company that helps governments and businesses analyze data, is “to help the country and the West win. And to do that, we need more companies like this to succeed.”
Creating a defense technology ecosystem
In 2004, Sankar was sucked into Silicon Valley. After grad school, he had a master's degree in management science and engineering from Stanford, was an early adopter of cold showers and health fads, and had a militant attitude toward work, according to Kevin Hertz, Sankar's first boss. Hertz, who would later co-found Eventbrite, called Sankar “the ultimate Boy Scout” and hired him as his fifth employee at Zoom, a money transfer service.
Hartz deployed Sankar overseas to help set up Xoom in more than 40 countries.
To Hart's dismay, Sankar revealed in 2006 that his ambitions had shifted to Washington. “It didn't surprise me at all, because Shyam had really lofty aims,” he says. “Like Peter, [Thiel] In effect, they conscripted Siamese.”
Sankar joined Palantir as its 13th employee. “Back then, Silicon Valley wasn't anti-government. It was more like government was a bad place to start a business,” Sankar says. Investors said, 'We think this is a losing business, we're not going to write you a check,'” Sankar recalls.
The team's rude attitude didn't help either: “Frankly, we just weren't that interested in how government procurement works,” Sankar laughs.
Their first big breakthrough came when CIA-backed startup In-Q-Tel invested in them and helped them get clearance to access classified information. In the two decades since, Palantir has seen meteoric growth, winning big government contracts like a $480 million contract for Project Maven, and facing increased scrutiny over its work with ICE and broader privacy concerns.
It also spawned an entire ecosystem in its wake: Palantir co-founder Joe Lonsdale now funds some of the largest defense tech startups through his venture firm 8VC; alumni Trey Stevens, Brian Schimpf, and Matt Grimm co-founded Anduril, a defense tech unicorn now valued at $14 billion; and former Anduril employees are at the heart of major early-stage defense tech startups, including Salonic Technologies, Salient Motion, and Wraithwatch.
As the defense-tech boom grows, so does Sankar's existential anxiety about America's war readiness. He recalls one officer telling him: “The military we have today is the military we'll be fighting in 2032.”
He asked people to imagine what would happen if a company decided, “The infrastructure that we have today is going to be the foundation on which we operate in 2032.”
“Your company will go bankrupt,” he said.
First breakfast and a good start
He has written publicly about a variety of unlikely initiatives, including creating a reserve army for tech leaders and proposing that the Defense Department be less strict in micromanaging contractors. “What if Congress acted more like a venture capital limited partner than a bureaucratic accountant?” he wrote.
But his biggest effort to put these ideas into action was the First Breakfast, named after the infamous “Last Supper”, in 1993. At the time, Defence Secretary Les Aspin warned major military contractors that the defence budget would be subject to steep cuts, leading to massive consolidation among the largest defence companies.
First Breakfast is centered around a set of software tools that Palantir has used internally for years, marketed to help budding entrepreneurs speed through arduous government approval processes and become eligible for contracts. Sankar wants to help a new generation of risk-taking founders succeed in the field. “We need to bring back that quirkiness,” he said.
One of its main services is FedStart, a program that approves startups to build software on Apollo and Rubix, two already-certified platforms built by Palantir, to give them a head start in the government certification process, a process that can take startups a year and a half or more and cost them millions of dollars in auditors and compliance consultants. Palantir charges a fee for FedStart, but Sankar claims it's a discounted price and that the company is actually only charging “consumption costs.”
First Breakfast also offers a free service that gives startups access to distributed military data, making it easy to access and use through secure APIs. Ben Fitzgerald, CEO of defense tech unicorn Rebellion Defense, said First Breakfast's tool can “save a huge amount of time, a huge amount of technical complexity, and a huge amount of additional compliance.”
“I'm really excited about these innovations because they don't require an act of Congress,” Fitzgerald said. “We don't need to appoint a new deputy secretary of defense to try to innovate. We can do it with the systems we have.”
Talk of a shared mission in defense tech aside, this is also just a smart business move for Palantir. Ross Fubini, managing partner at XYZ Venture Capital, estimates that at least 10 of his portfolio companies use FirstBreakfast's tools. Fubini sees FirstBreakfast as an opportunity for Palantir's software to underpin all new startups in the space. “I think for Shum, this means two things at once,” Fubini said. While Shum cares about “government and social stability,” Fubini said, “I'm convinced that growing the ecosystem is a good thing for Palantir.”
Sankar knows that backing it with software won't be enough to make defense tech a space where venture capitalists will continue to invest at hyped levels, especially when there's a big question mark over how these startups will find an exit. Palantir is one of the few IPOs in the defense tech space. “For the ecosystem to work, you need liquidity on the other side,” Sankar said, believing that at least some of the startups will have to sell to big defense companies like Lockheed Martin or Boeing.
But so far, the “major players” in the defense industry have shown little interest in acquiring new defense technology startups. Sankar expects that to change in the future. “You need a wide range of options to get liquidity,” he said. “Otherwise, everything goes down in value.”
But this is a long-term problem, one that is being solved piecemeal by a host of newly funded defense tech startups.
As for the immediate future of Fast Breakfast? “I wanted to do a literal breakfast,” Sankar says with a sigh. “But I think people in tech are late risers.”