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  • Writer's pictureAmit Kukreja

Palantir's Hidden Gem: Powering SaaS Companies with FedStart

This article was edited by Andrew Salamon, head of content at Daily Palantir. You can follow him on Twitter here

The Challenge of Government Accreditation

Last year, Palantir Technologies, a publicly traded company known for its advanced data analytics software, quietly launched a new product that flew under the radar. But, a recent blog post has shed light on this hidden asset, reinvigorating interest in this secret weapon. The product, known as Palantir FedStart, could redefine how software-as-a-service (SaaS) companies do business with the U.S. government.

The blog post underscores the significance of Palantir's IL-6 accreditation level. IL-6 is a security clearance held by the Department of Defense (DoD), and only three entities globally have it – Microsoft, Amazon, and Palantir. This accreditation opens up an enormous market opportunity for Palantir, as it can help other SaaS companies navigate the complexities of government contracts and accreditation.

The U.S federal government spends around $100 billion annually on software, which presents a lucrative opportunity for software companies. However, obtaining the required Federal accreditation is an arduous, expensive process. It takes months, if not years, to secure an agency sponsor, build out technical controls, and pen hundreds of pages of documentation, all while bearing a price tag of at least a million dollars. The process is especially burdensome for innovative, cash-strapped startups.

For Palantir, reaching FedRAMP and IL-5, key government security accreditations, took four years, countless sponsorships and proofs of concept, and the work of 60 people across 25 different teams. Their investment, however, has equipped them with the highest levels of security clearance, placing them among an exclusive club of software companies.

FedStart: The Game Changer

Palantir's FedStart is designed to help other SaaS companies navigate this complex process. It serves as an on-ramp, allowing other companies' products to run within Palantir's secure and accredited environment, thereby negating the need for separate FedRAMP or IL-5 accreditation. If a company can containerize its software, it can use FedStart to sell as an accredited solution. This not only speeds up the product delivery process but also opens up significant market opportunities.

What makes FedStart remarkable is its potential for high margins, similar to other SaaS offerings. Palantir essentially licenses its accredited platform for other companies to containerize their SaaS products. As the platform is already certified and trusted by the government, this creates a defensible competitive advantage or moat for Palantir.

In essence, FedStart serves as both a consulting service and a product with SaaS margins. Palantir can guide companies through the accreditation process while licensing its software. This dual offering positions Palantir to maximize its revenue potential from the product.

Looking forward, FedStart will play a crucial role in the implementation of AI infrastructure. Large language models (LLMs) and generative AI have transformative potential for the government, and FedStart can ensure that these technologies are implemented in a secure and ethical manner. This opens up a massive market opportunity, as U.S. venture capitalists have already invested nearly $17 billion in over 200 defense and aerospace deals in the first five months of 2023.

Palantir's FedStart is set to transform the way SaaS companies do business with the U.S. government, providing a faster, more cost-effective pathway to accreditation. It's an underrated asset that further solidifies Palantir's position in the data analytics and government software sector.

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