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Palantir SPACs' Crucial Role in the Network
Behind the poor financials results, SPACs could generate critical network effects.
Some things that appear bad, could become relevant if seen from a different perspective.
In the previous article (PLTR: the Biggest Networks Start Small) we saw how Palantir could be seen as an Enterprise Network. This could help us better understand the rationale behind certain decisions like the ~20 SPACs, as highlighted previously (PLTR Q1 Outlook), which seem like very weak decisions from a business perspective.
As a Network, Palantir’s primary goal is to increase its members - nodes - until a critical mass is reached.
The path to get there is not linear.
Asshared, the biggest networks we know of had to execute “things that don’t scale” in order to facilitate the network's growth towards its critical mass when the product is still not good enough for mass adoption. (The Struggle full article)
To reach critical mass companies boostrap growth with non-scalable actions.
Notable examples shared by The Struggle are:
Facebook accessed the entire Harvard directory early on, to provide immediate utility for early adoption;
Airbnb founders literally went door to door in New York to recruit new users;
Reddit created several accounts on its own and started submitting interesting content to make the site feel alive for new users.
SPACs could be seen as the bootstrap component to reach critical mass
Palantir can’t systematically invest in SPACs to grow, but their contribution to the flywheel spin faster to stimulate further organic growth.
SPACs play a crucial role
Despite the disastrous investment results from the SPACs, ~70% losses, to date, they could play an important role in speeding up adoption as they are:
covered by media;
involved in events and networking;
targeting multiple emerging and established sectors;
connected to pools of talents and investors;
exposed to problems which could generate archetypes for other Palantir clients.
It is worth spending ~$500mn for network effects? I will write a future article, dedicated to SPACs from a financial perspective.
Here I’ll share a couple of examples of the SPACs network effects.
Wejo, one of the most known SPACs, is building an EV Operating system built on Foundry.
Retailers: 3M, Kimberly-Clark, Henkel, CVC, P&G, Wendy’s, Pepsico;
Utility Companies: Edison, PG&E;
Automakers: Stellantis (FCA, Pegeout), BWM, Ferrari, Faurecia, Honda, GM;
Charging Stations: Tritium.
Another interesting component of the network effect comes from the relationship between Sompo, one of the biggest Japanese insurance groups and Wejo.
Sompo is directly involved in Wejo’s operations as a commercial partner and a member of Wejo’s Board of Directors.
Last month Sompo contributed directly to Wejo’s $ 15.9mn capital raise.
Palantir’s network provides resources for Wejo to keep scaling.
Another example of a Key strategic partnership comes from BlackSky, a satellite company that is using Foundry as its operating system.
The ability to integrate Blacksky’s localization models with Palantir makes Metaconstellation more valuable.
Blacksky has been recently awarded a $1bn Electro-Optical Commercial Layer Contract from the National Reconnaissance Office to support the Commercial development of space.
As we mentioned previously (PLTR’s $140bn Opportunity to Monopolize Space), RioTinto and BP, both relevant Palantir clients, are already integrating space information into their operations.
With the development of the infrastructure, other Palantir Commercial clients should become more interested in the space economy.
In addition, the recent partnership between BlackSky and Esri, an international supplier of geographic information system (GIS) software, indirectly exposes Palantir to 350k Organizations in 100 Countries.
SPACs investments are inarguably bad from a financial perspective. However, if we see them from a Network perspective we should see they could have a real strategic role in Palantir’s Enterprise Network.
In particular, SPACs could be seen as Palantir’s Bootstrap strategy to help the network reach the Critical Mass from which the network effects generate a dramatic increase in the speed of the Palantir flywheel which is needed for exponential growth (Palantir: This Time It’s Different)
A good metaphor would be the cranks that car engines had before they got electric starters. Once the engine was going, it would keep going, but there was a separate and laborious process to get it going. - Paul Graham, Y Combinator Co-Founder
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View expresses are my own. Do not represent Financial Advice.
I own (many) PLTR 0.00%↑ stocks.