Goodbye Palo Alto – Hello ... Denver? Why Palantir Made the Surprising Move

28 SEP 2021

Photo by Andrew Coop on Unsplash

In August 2020, data analysis software firm Palantir confirmed the swirling rumors Palantir would leave its Palo Alto headquarters for Denver. For months prior, Palantir CEO Alex Karp had hinted at Palantir moving from California. But why move to Denver instead of a traditional tech hub like New York City, where Karp spends most of his time? To understand that we need to start at the beginning.

Palantir was founded in 2003 to provide data analysis software to the government and private companies. Palantir now has more than 2,800 employees and a market cap near $56 billion.

However, Palantir’s rise was controversial. Its flagship product, Gotham, for example, is used by the Department of Defense and ICE for counter-terrorism activities, like surveillance. But critics fear this data is also used to racially profile citizens and for other controversial activities – leading to public uproar. In Silicon Valley, where top companies like Google refuse to take government contracts focused on surveillance and data collection, Palantir was increasingly unwelcome.

So, it wasn’t much of a surprise when Karp announced plans to relocate from Palo Alto. The surprise, however, came when Palantir’s new headquarters wasn’t in traditional locations like D.C. or NYC. Instead, Palantir relocated its headquarters to Denver.

Speculation swirled around this move. Some pointed to traditional factors that influence company location choices, like quality of life, educated workforce, diversity of viewpoints, and more. Others thought financial motivations like tax incentives or proximity to clients were behind the move. Yet Palantir received no tax incentives to move to Denver.

According to one article, “‘All anyone keeps hearing is that Palantir didn’t get any tax incentives to move, as if that absolves them of everything else,’ says state Senator Julie Gonzales, whose district also includes Palantir’s new headquarters.”

And, still, others pointed to Karp’s comments scorning the “monoculture” of Silicon Valley. As a purple state, Colorado would be more welcoming to Palantir’s government activities than blue California, right? Yet, when Palantir’s move became public, many Denver citizens were distrustful, if not downright outraged. Protests popped up outside Palantir’s Denver headquarters, much like they did in Palo Alto. The average Denver resident seemed little more welcoming than a typical Californian.

Yet, none of these theories present a compelling reason for Karp and Palantir to move to Denver. Even with the governor’s lengthy letter to Karp selling the shared alignment of economic and security philosophy, these incentives aren’t enough to lure a Palantir to relocate. Instead, the magnetic force is talent. And not just an abundance of software engineering talent, but it has the right kind of talent.

According to our data, we found that, in Denver, 10.7% of employers are in the defense/aerospace industry. That’s compared with 9.8% in Washington D.C. and just 1.2% in Silicon Valley. Furthermore, 12 of the top 50 software engineer employers in Denver are in the defense/aerospace industry. And the top software developer employer (Lockheed Martin) is also in defense/aerospace.

What does Denver’s high population of defense/aerospace software engineer employers have to do with Palantir’s move? A lot.

With Palantir’s controversial government work, recruiting top software developer talent can be challenging. Recruiting the best talent to stay competitive becomes much easier when that talent already works in Palantir’s controversial industry. Software engineers who work for companies like Lockheed Martin or Raytheon will have fewer reservations about working for Palantir than a similar developer from Google or Facebook. With access to talent already well versed in defense and aerospace, Palantir can recruit much more easily than in Palo Alto, and this talent distribution is unique to Denver.

Palantir’s seemingly unexpected move to Denver appears to be highly calculated when looking at the controversy it faced in California and the high concentration of defense/aerospace talent in Denver. Like other savvy companies, Palantir knows that the secret to a successful headquarters lies largely in proximity and access to ideal talent. Denver’s rich pool of defense/aerospace talent can help Palantir continue to thrive. Instead of stagnating in an incompatible location with little ideal talent, like Palo Alto.

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