Palantir’s CTO, and 13th employee, has become a secret weapon for Valley defense tech startups | TechCrunch

On August 5, Palantir’s CTO Shyam Sankar stood in front of about 20 nervous new employees at the company’s Washington, D.C. office and gave a speech you’d expect at a new hire meeting: company mission, Palantir’s history, etc. But there was one part that would’ve seemed unfathomable a few years ago: Sankar evangelized the importance of a new wave of defense tech startups, spun up by Palantir, Tesla and SpaceX alums.

The significance was more ideological than financial. Any business Palantir gets from startups is dwarfed by its government contracts, after all. But you can’t put a price on philosophical bedfellows. 

Palantir likes to remind the world that it’s not like other publicly traded companies; i.e. buttoned-up and appropriately distanced from its cowboy private days. Sankar ends his orientation by cheekily inviting the new employees to shout “f–k off” at him — a way, he says, to encourage a flat structure. And as he walks out of the event room into the office bullpen, he passes a sign referring to employees as “founders” and “trailblazers.”

The sign is fitting: Sankar, who’s been at the company for over 18 years, is determined to help Palantir become a driving force for defense tech startups, a sector that’s been flooded with over  $129.3 billion in venture capital since 2021, according to PitchBook. 

“To have this class of new champions who have all cut their teeth in Tesla and SpaceX and see the world in completely different ways, it’s providing a huge amount of energy internally for us as we build for them,” he said, referring to startups like Apex Space and Castelion, whose founders hail from those companies.

That is why, in late 2023, he started a program that provides guidance and tools to defense tech startups called First Breakfast. He referred to it in his writings as Palantir’s “Amazon.com to AWS moment.” Basically, it’s a play for Palantir to get in at the ground level for the next Palantirs. It’s a business strategy, but also a philosophical one for Sankar, who spends hours a week on the phone consulting with defense startups and venture capitalists.

Like his longtime boss Palantir CEO Alex Karp, Sankar likes to wax poetic about protecting Western values and how America’s industrial base stumbled after its WWII glory days (though perhaps prime defense contractors like Lockheed Martin and RTX, formerly known as Raytheon Technologies, would disagree that the industry has been resting on its laurels for 80 years). Sitting in a conference room lined with white boards, and a constant stream of commercial planes flying over the Potomac River behind him, he reiterated his darkest fears: that America may not be ready for whatever great conflict comes next. 

“You have to really start from the premise that winning is not assured, which I believe,” he said. 

He feels the mission of Palantir “is to help the country and the West win,” he said of the software company that helps governments and businesses analyze data. “That’s going to require many more of these companies succeeding.” 

Spawning a defense tech ecosystem

In 2004, Sankar was destined to get sucked into Silicon Valley: he was getting a master’s in management science and engineering at Stanford, was an early adopter of cold showers and wellness trends, and had a militant approach to work, according to Kevin Hartz, Sankar’s first boss out of grad school. Hartz, who would go on to co-found Eventbrite, said Sankar was the “ultimate boyscout” and hired him as the fifth employee at Xoom, a service to help people send remittances. 

Hartz sent Sankar abroad, where he helped set up Xoom in over 40 countries. 

Much to Hartz’s dismay, Sankar revealed in 2006 that his ambitions had drifted to DC. “It wasn’t surprising at all, because Shyam really had a higher purpose,” he said. “It makes perfect sense that like Peter [Thiel] effectively drafted Shyam in service.” 

Sankar joined Palantir as the 13th employee. “At the time, the Valley wasn’t anti-government. It was more like the government’s a dumb place to build a business,” Sankar said. Investors, he recalled, told them, “we won’t give you a check because we think this is a loser business.” 

The team’s brash attitude didn’t help. “Frankly, we weren’t that interested in how government acquisition worked,” Sankar laughed now. 

They had their first breakthrough when In-Q-Tel, a CIA-affiliated venture firm, invested and helped them obtain security clearances. Twenty years later, Palantir has had a storied rise, winning major deals with the government, like a $480 million contract with Project Maven, and facing intense scrutiny for its work with ICE and broader privacy concerns. 

It has also spawned a whole ecosystem in its wake. Palantir co-founder Joe Lonsdale now finances some of the biggest defense tech startups through his venture firm 8VC; other alums, Trae Stephens, Brian Schimpf and Matt Grimm, went on to co-found Anduril, the defense tech unicorn now valued at $14 billion. And ex-Anduril employees are at the heart of key early stage defense tech startups like Saronic Technologies, Salient Motion and Wraithwatch.  

As the defense tech boom grows, so do Sankar’s existential fears about America’s war-readiness. He recalled something an officer told him: “The military we have today is the one we’re going to fight with in 2032.” 

Imagine, he said, if a business decided that “the infrastructure I have today is what I’m going to run my business on in 2032.”

“You’re going to be going out of business,” he said. 

First Breakfast and a head start

He’s written publicly about various long-shot initiatives, like creating a military reserve for tech leaders and suggesting the DOD loosen up on micromanaging contractors. “What if Congress acted more like a limited partner of a VC than a bureaucratic bean-counter?” he wrote. 

But his biggest effort to put these ideas into action has been First Breakfast, named after the infamous “Last Supper” in 1993, when then-Secretary of Defense Les Aspin warned the major military contractors that the defense budget was about to sharply decrease; it led to mass consolidation amongst the biggest defense companies. 

First Breakfast is largely a set of software tools that Palantir has used internally for years, marketed to help up-and-comers quickly navigate the difficult government approval process and qualify for contracts. Sankar is hoping he can help the new generation of risk-taking founders succeed in the sector. “We need that eccentricity back,” he said. 

One of the key offerings is FedStart, a program that approves startups to build their software atop Apollo and Rubix, two already-accredited platforms built by Palantir. This gives startups a head start in the government accreditation process, which can otherwise take a startup over a year and a half and cost millions in auditors and compliance consultants. Palantir charges for FedStart, though Sankar insists it’s discounted and that the company is only “really charging you our consumption costs.”

First Breakfast also offers startups a free service that provides the companies access to otherwise disparate military data, making it easy to access and use through secure APIs. Ben FitzGerald, the CEO of defense tech unicorn company Rebellion Defense, said that the First Breakfast tooling “can save a ton of time, a ton of technical complexity,” and “a ton of additional compliance.” 

“Those are the sorts of innovations that I’m really excited to see, because it doesn’t require an act of Congress,” FitzGerald said. “It doesn’t require a new Deputy Secretary of Defense to come in and try to innovate. We can work with the existing systems.”  

Beyond all the talk of defense tech’s shared mission, it’s also just a smart business move for Palantir. Ross Fubini, managing partner at XYZ Venture Capital, estimated at least ten of his portfolio companies use tools from the First Breakfast. He said he sees First Breakfast as a chance for Palantir software to underpin all the new startups in the space. “For Shyam, I think it’s two things at once,” he said. Shyam, he said, cares about “the government and social stability” — but he also “definitely believes it’s good for Palantir to grow the ecosystem.” 

Sankar knows providing a leg-up with software isn’t enough to make defense tech an area where VCs will continually invest at hype-like levels — not when there’s a huge question mark around how these startups find an exit. Palantir is one of the few IPOs in the defense tech space. “For the ecosystem to work there has to be liquidity on the other end,” he said, musing that at least some startups will have to sell to the major defense players, like Lockheed Martin or Boeing. 

Yet the defense “primes” have thus far shown little interest in snatching up the new defense tech startups; something Sankar hopes will change in the future. “You need a broad set of options for liquidity,” he said. “Otherwise, everything’s less valuable.” 

But that’s a long term problem, one to be chipped away at by the many defense tech startups newly armed with war chests.

As for First Breakfast’s immediate future? “I’ve been wanting to do a literal breakfast,” Sankar said, before sighing. “But I think the tech crowd wakes up late.”