It helps to have an old law-school buddy like Peter Thiel, Alex Karp found out, when you decide to disrupt the spy trade with your new high-tech venture:
“We were very naive. We just thought this was a cool idea,” says Palantir’s 41-year-old chief executive Alexander Karp, whose usual dress is a track-suit jacket, blue jeans, and red leather sneakers. “I underestimated how difficult it would be.”
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Palantir’s roots date back to 2000, when Mr. Karp returned to the U.S. after living for years in Frankfurt, where he earned his doctorate in German social philosophy and discovered a talent for investing. He reconnected with a buddy from Stanford Law School, Peter Thiel, the billionaire founder of online payment company PayPal.In 2003, Mr. Thiel pitched an idea to Mr. Karp: Could they build software that would uncover terror networks using the approach PayPal had devised to fight Russian cybercriminals?
PayPal’s software could make connections between fraudulent payments that on the surface seemed unrelated. By following such leads, PayPal was able to identify suspect customers and uncover cybercrime networks. The company saw a tenfold decrease in fraud losses after it launched the software, while many competitors struggled to beat back cheaters.
Mr. Thiel wanted to design software to tackle terrorism because at the time, he says, the government’s response to issues like airport security was increasingly “nightmarish.” The two launched Palantir in 2004 with three other investors, but they attracted little interest from venture-capital firms. The company’s $30 million start-up costs were largely bankrolled by Mr. Thiel and his own venture-capital fund.