This Company is Billionaire Peter Thiel's Biggest Holding

By Markets Fool.com


Image source: Palantir

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Peter Thiel is the world's 638th richest person, according to Forbes, which pegs his net worth at around $2.7 billion. Thiel got his start at PayPal--a company he co-founded back in 1998 -- but has arguably had more success as a venture capitalist. His firm, Founders Fund, has supplied capital to some of the world's greatest companies, most notably Facebook, as well as SpaceX, Spotify, and Airbnb.

But his biggest holding is Palantir, an enterprise software vendor. What is Palantir and how is Thiel involved?

Palantir uses big data to solve problems

Palantir grew out of Thiel's experiences at PayPal. In an effort to thwart widespread credit card fraud, PayPal employees designed software that coupled the insights of human analysts with smart software algorithms. The combination proved successful, and after his departure from PayPal, Thiel co-founded Palantir in an attempt to leverage that success.

Palantir offers its customers -- generally large companies, government agencies, and NGOs -- software aimed at making sense of big data. Palantir's applications are, at their core, similar to those of a search engine. Users connect Palantir's programs to databases, then create algorithms to find patterns.Palantir's business is highly technical, but its products aren't aimed at engineers. An LAPD detective might feed Palantir crime reports and phone records to locate a suspect; a CIA analyst could comb through financial transactions to find terrorist funding networks. The Centers for Disease Control uses Palantir's technology to track outbreaks; the Securities Investment Protection Corporation relied on it to convict Bernie Madoff.

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Palantir is famously secretive. Much of its business is related to national defense, which often brings the prospect of substantial non-disclosure agreements. And Palantir is privately held, limiting the amount of information the company is required to disclose. Founded in 2004, Palantir is more than a decade old, but has avoided the public markets, instead raising a series of financing rounds, mostly from other venture capitalists.

Late last year, Palantir raised nearly $900 million in a round that valued the company at $20 billion. That makes Palantir the fifth-most valuable start-up in the world, after Uber, Xiaomi, Didi Chuxing, and Airbnb.

Controversy and the prospects of an IPO

But Thiel's fund may be skeptical of that valuation. Late last month, Buzzfeed, citing a leaked slide deck, reported that Founders Fund valued Palantir at just $12.7 billion as of last September. Of course, as a private company, Palantir's valuation is somewhat open to debate. Still, that conservative valuation may have merit.In May, Buzzfeed alleged that Palantir was facing a host of problems, including the loss of key clients and high turnover among employees. Palantir's services are expensive, and it has had difficulty working with some corporations.

Most interested investors can't purchase shares of Palantir directly, although it's entirely possible to invest in the company through other means. Palantir could make its public market debut at some point in the future, but it's difficult to say when Palantir shares could begin trading. In the past, Palantir's management has downplayed the prospect of a public market debut. CEO Alex Karp has said being public would make running Palantir a more difficult task.

Thiel isn't among the company's chief executives, but he serves an advisor. If Palantir does go public, it could propel his net worth to new heights.

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Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and PayPal Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.