Former Palantir CFO Colin Anderson on scaling finance, defense tech, and the forward deployed model

going to talk about uh different force multipliers for uh finance teams and growing businesses like Palunteer. I mean, who what else do you want? So, we will welcome Colin to the studio. How you doing? Hey, I'm good. Thanks for having me. Good to see you again. It's been too long. It's been almost 48 hours.

I was going to say pretty pretty short, but uh good to good to be here with uh I guess more audience this time. Yeah, for sure. Um uh where should we kick it off? Could you give us a little bit of uh just history for the for the listener on your career, your path uh particularly like the road into Palunteer?

I think that that's an interesting story. You were touching on some of the some of the some of the stories there and then we can kind of take this wherever you wherever you'd like. Totally. Let's do it.

Well, maybe just to situate for those I'm I'm meeting for the first time, uh Colin Anderson, uh co-founder here at Friends and Family Capital, venture firm we started and uh before that was the the CFO at Palunteer for very long time, led finance there for eight years. So, what does that mean?

Uh intersection of supporting uh great businesses through finance uh for two decades and a lot of scar tissue is the other thing that means and how do you share that with people?

um getting into uh getting into Palunteer that was um that was really saying hey who's working on a really hard problem that matters and if you look at the time you had you know we were still post 911 yeah uh we were still trying to overcome the false trade-off between uh national security and being able to defend ourselves and also uh privacy and civil liberties.

Yeah. And people used to think that that was an impossible trade-off and that seemed like a worthy challenge. we only have so many so many hours in the day. We should work on something that matters. And uh talent density was there and uh I was just really attracted to that.

And it helped having spent time deep in the bowels of an investment bank where you realize that humans are a very expensive piece of middleware and what if you could see all the data you're supposed to see nothing that you're not you can probably do a lot of great things there. Yeah.

How did you first hear about Palunteer? What was your first day on the job like? Who was around the table?

I mean at this point people know everyone from Karb to Peter to Sham Sankar like Gary Tan's involved at some point like people people know who's around the table but what was your early uh like first days in the job like totally well uh was introduced to the company uh actually through through Joe Lansdale he he brought me in and I was an industrial engineer by training which means to my uh English major friends I'm an engineer but to my engineering friends I'm an English major So got pretty deep got pretty deep into the process uh at Palantry in the early days.

There were probably 20 30 people. Yeah. At the time and uh Joe said, "Hey, look, I actually think we're not ready for you. You want to go work with uh Peter Teal and myself up at Clarium Capital. " Sure.

So privileged to to work there, learn a lot, and uh fast forward, the company had grown to the mighty number of I don't know, just over a hundred. Yeah. And Peter's like, "Hey, I think I think they might need some some help here. " Great. And um you know, it's really the mission that drives you.

I was like, I don't know what I'm going to do. Maybe I'll sell software. Maybe I'll talk to politicians. Maybe I'll I'll help with this finance thing. And I don't think I was very good at the first two, but the last one stuck. So, uh just just keep doubling down where it works. Yeah.

What was the what was like the day-to-day role like? Is it everything from uh just like financial control to putting together projections, thinking about burn rate? I imagine that the company wasn't wildly profitable in the early days.

It was it's known for being one of those like slower compounders and now is like one of the biggest companies in the world, but uh it took a long time to get there. What was that like at the early stage? Well, Palanteer had its time in the desert, right?

where it's the roughly four years of pre-revenue uh large expense, you know, wouldn't exist without for uh you know, basically Peter Teal and uh the co-founders just pushing through and and bringing capital to bear. So, what does that look like?

And we we see this all the time at at companies now in our portfolio where you spend all this time in the desert building things and then suddenly you realize, oh wow, we actually have a product here and now we have a real business. What do we do?

and and finances, you know, at Palanteer and today something you you wish you had yesterday once you realize you need it. And uh so it's kind of one of these just fire hoses that you you keep your head down and build. What what was the reaction like from venture capitalists around that time?

Because there's there's there's like the this is controversial to be working with the government. At the same time, it's like it is an enterprise software company. It should be pretty easy to underwrite if you're an enterprise software venture capitalist, I would imagine. Hopefully.

Um, but then at the same time, like you're out of the you're out in the desert. And so, um, there's there's a little bit of like, you know, is the company mature enough to underwrite this particular investment? It's not this like hot no-brainer. It's kind of secretive. It's cool, but it's like behind the scenes.

So, what what was the what was the temperature in Silicon Valley around defense tech around that time? Yeah. Well, first off, defense tech as a term didn't even exist. So, we got it way back. I I met the company in 2007. Yeah. and uh joined in 2009.

Uh and we were very shy because we, you know, no one knew what quite what to think of us.

We were kind of in a you know, a Marvel team up of a bunch of uh superheroes that had weird peaks but also weird valleys and uh just kept our heads down and built the um really in the earliest days, no one no one in the valley, you know, but for a small group understood what we were, right?

And we made every mistake from what they wanted to to invest in, right? At the time, this was Facebook was cool. So, you should be doing consumer, not enterprise. And if you were going to do enterprise, you should sell to big corporate. But it's like, well, we're going to actually sell to the government. Yeah.

And well, if you're going to sell to the government, you should go hire a bunch of experienced operators and generals. We're like, we're going to go hire a bunch of 20-year-old kids. Uh, so like every single on the decision tree was like, we were wrong. And so, that that, you know, sort of pushed us out.

Uh, and it really took building a great product and and showing value to customers to uh to actually prove to to people that it worked. It's been great to see what they've been able to do. As an investor now, how do you try to underwrite uh teams that are still wandering in the desert?

Because there's great examples and survivorship bias that happens when you have a a a team like Palanteer that's wandering in the desert and then you find this, you know, you you uh find something that works and you can really scale out of it.

But then I I've, you know, I've ended up I've invested in teams that stumble into the desert and never make it out, right? So, it's not exactly certainly not there's no guarantee that you're going to find uh you know some palm trees and water. Yeah. You find a skeleton drinking out of the whiskey bottle a decade later.

Not not everyone makes it out of the desert. Uh where we we spend a lot of our time in the earlier stages here at Friends and Family Capital and we put a lot of our dollars once it's clear it's working right. So tech is one of those great businesses where when it works you can run and you can win a whole lot longer.

Um, so we're we're happy to get involved and you know, you know, it's kind of the forward deployed engineering model. We'll we'll forward deploy. We'll help you. We're not going to charge you. Maybe we'll put 50 100k small check in. And uh, but we're really looking for those operational unlocks.

When does it look like Palunteer? Uh, right. We were there. I joined. We got about 5 million in revenue. Right. So you you sort of 5 million revenue to 20 billion valuation. You see full stack what good looks like. And so you're you're watching for those inflections. What are some of those?

Like getting a seven figure software contract is really hard. So if you see that, you should get pretty excited. Uh being in an enterprise and going from uh you know, let's say a million a year to three or five million a year, like a a multiple of the initial land, that's pretty hard. We get pretty excited.

And I think the other thing is just what's the mission? What's the purpose? Why are people joining this company? Why is the you know many people say why is the 20th person? Why is the hundth person? I say, 'Wh is the skeptical, you know, engineer when you're a thousand people going to join you?

Uh, fast forward, why, you know, five years post IPO, why is the skeptical public market investor going to join you? It's got to be, you got to be doing something that's that's worthwhile to dedicate your life to. Um, so find a big mission. Yeah. How do you think about the relationship with the government?

I keep I I I don't know if this is true, but I I I I seem to remember that Inutel made an equity investment.

this the this is the venture arm of the CIA very early on and so you had this situation where Palanteer's like customer is the government and but the government is also on the cap table and we're seeing that today with Intel that there's now the government's taking an equity position and it feels like this has never happened before but then when I flash back I'm like wait actually this this isn't the rarest thing um there's a world where the capabilities that are brought to bear by Palanteer exist within the US government and yet they don't like what uh like how does that uh how does that how should like the American taxpayer think about the interaction between like public uh like uh private companies and the government like when should the government be willing to invest when should the government be buying a capability it's always seemed like palunteer the the actual technology was something that could not be brought to bear with inside the government even though the government had a very clear set of requirements in front of itself it needed to be going it needed to built in Silicon Valley.

Yeah, I mean enter software is really difficult and some people are you know hardware is difficult too but building worldclass software to handle complex things is is tough and often can be built better in the valley than you know at the coalace and I think pounder is a good example of that but we've got uh you know we've got uh many examples but I I would push back and say you can't build great software or great business in an ivory tower and I think one of the great things about Palunteer and you've seen and we've got a company paragan technology ies they're they're really breaking down the the the barrier of saying we're going to go build it in the you know an ivory tower and then we'll we'll sell it and people will we'll just use it.

It's like no uh if you think of a spectrum of product and services right everyone always put palunteer in the services bucket for you know the reasons we were misunderstood um really what you're doing is you want to capture the perfect value delivery of services right you're solving one thing for one person that 100% solves their their problem but you want to do it as a product but the the product roadmap the traditional playbook says create distance from your customers not create proximity so Palunteer was able to this is that forward or deployed engineering model you hear a lot about.

It's like you need the beauty happens when you get worldclass software talent that's willing to go deep into the the belly of the beast at the coalace. You're going down range. You're sitting in an air gap network with a tie on when you're a sil and like and that's where you you actually see what's the core problem.

Um so we we really I think Palantry did that in spades. I look for that every day at uh friends and family. what companies shouldn't be using the forward deployed model because anytime something becomes a meme then everybody starts applying it. It it sounds it sounds like it makes sense.

This is the whole like you know Uber Uber for dogs kind of meme. People were like we're Uber for this and it's like wait there's actually unique things that in Uber's sort of supply demand consumer package goods. I want Andrew Huberman to come pour this yerba mate into my mouth.

for deployed for for deployed caffeine salesman. Uh yeah. Well, uh it's funny. Yes, you should run. Anytime you hear someone pitch themselves as I'm the X for Y, like just run. Um the the FTE model, it's great in certain markets. It's terrible in others.

The only reason Palanteer could pursue anything with deploying is is you've got to be solving a hard enough problem, right? So you think of a world-class engineer plus their equity dilution. I mean this is an expensive check. So you really have to be a capital allocator uh as as a founder to want to pursue this model.

So if you're selling things uh small and medium business where your average contract land is 20K 100k or less, you shouldn't you shouldn't look at this. Uh unless you're saying let's get out there that's R&D. Let's productize it and push it out.

Um when you start to get up into those seven figure plus contracts that can support it. Um, if you're doing eight or nine figure, it definitely can support it. Um, but then even then you get people think they're doing it. Uh, so I love these conversations.

I get probably one inbound, two inbounds every week of like, hey, how'd you do to plate engineering in the early days? Yeah. And you can understand if someone's in a position to build it by the questions they ask around it. So you'll get these uh like figuring out the footwork. What's the what's the pre-sales?

What's the who who does it pre-sales or post sales? Is it customer success or is it sales AES? And like if you're looking at the the FD model through that lens, you you've lost the plot, right? It's really like let's start with first principles.

Uh how are you thinking about focusing the firm on stage or or theme or sector? Do you have any kind of guard rails? Well, they already have a round named after them.

Well, it's funny on the the round, so friends and family round, it's usually the early days when it's like a deeply consultative relationship and people who have your best interest at heart and want to will, you know, do it and I don't know, but when we got to the later stages of of building talent, you're here, right?

It was there through the series K. The nature of the relationship changes with your investors around the table.

So uh the ethos here in the name is how do you extend Jord to your point how do you extend that friends and family mentality and really partner and and deliver and and sort of uh live live your values so to speak like don't take board seats be deeply consultative um forward deploy your finance people if they need help all those sort of things um do do a lot of Genai companies need help with the finance function we've heard uh we we had a we had a we had a video go viral because we had an investor on the show who made an off-hand comment about account.

She said accounting rules aside and a lot of people picked that up on X and we're we're we're dunking accounting rules in fact do matter but it was a part of a larger conversation and uh but but uh yeah I'm curious like you know what what you're seeing out there in terms of people getting maybe a little too liberal in terms of like what's what's ARR what's not ARR all that good stuff like one of the core functions of finance there's many it's hygiene right it's hygiene it's legibility ility and if you lose that then you're you're building your house on sand.

So there's a very important part of the world for for accounting for uh for getting those entries right. Now you can disagree on the exact accounting treatment. You can do your uh you know your proforma here's your gap to non-GAAP reconciliations. Every company has their own version of how they run the business.

But it's helpful to have some standard way of looking at it. So I think you you got to get it right. But uh really with finance, it's what's the past, what's the present, what's the future, and you've got to do all three. If you're running your business just on the accounting, you're going to have some trouble.

If you're just looking forward, but you can't pay your bills on time, or you know, a pounder, the the cell phones in the Nordics went out cuz we, you know, the credit card bill that we paid didn't apply. Like, you got to really hold that as a first class priority.

And then on the the future, like there was times where it's like, hey, look, Sham, who I know you've been on your your your program, the CTO at Palunteer, it's like, look, we're going to hit our numbers this year and we're going to hit our numbers next year, but we got to do more pilots or we might have problem three or four years out and here's the data why.

Um, so you finance has to do all of them. So it can't just be world class accounting. It's got to be world class everything. lessons from Palunteer's IPO that you think uh now that the I the IPO window feels extremely open uh God willing it'll stay open forever.

Uh but uh uh any any lessons from from the Palunteer IPO or that you could that you would uh advise a founder that's exploring uh you know opportunities in the public markets today. Totally. Well uh first off uh so I I was not the CFO taking it public.

my my dear friend who I pulled into the finance team, Dave Glazer, he's he's the CFO and and took it through there and and a lot of the team that joined and worked with us back in the day is still running the company, which which is refreshing.

I think that's, you know, as as you're getting ready for the public markets, I think you really need to be able to articulate like why you have a strong core business model. Uh you have to back it up with data and you have to have a narrative that says here's why it's going to keep going for a while.

And we we have a bunch of companies, you know, whether it's friends or it's in our portfolio that are at the scale where they could they could go public. And I think you're seeing a lot of people start to weigh uh, you know, is the window open, should I run through it.

I think there's still some question marks depending who it is. But if you're, you know, you're operating at scale, you've got accelerating revenue growth, expanding free cash flow margins, and a good narrative, I think we're going to see a lot more of that, which is exciting.

But if you can't articulate your core business model, it's I I think the window's not open yet. Um, so you got to keep building and that's probably healthy. And that's healthy. Yeah. How how are you thinking about like opportunity in defense tech broadly right now?

Um there's the the you know there's the meme of like the anderol for ax is anderol you know palenteers like this compounder that's going to take a lot of market share and uh the ship has certainly sailed on a few of like the really big companies but at the same time like there's a boom and people are starting to you know start companies in the space because there's more appetite from investors and it's more um more just accepted to hire people.

Um what's your temperature check right now? Yeah. Well, so been honored to be a part of uh you know some of the great names of the people now called defense tech. So Palunteer we've been investors in SpaceX since 10 billion and since around four billion know you know built Paler those guys.

So love that the whole ecosystem is starting to develop. Uh back in the day there was there was no defense tech. I think uh what does the world need? The world needs a strong America right?

So Pax American I think has you know we can argue debate this many people do but I think it's good to you know to be able to back up at the uh hopefully we never have to use it but just to be able to to negotiate um and look we need more of it and I think you're also seeing the uh the intel news from today you're starting to see that hey vertical integration matters y uh uh a saying we had deep in the bowels of of pounder was trust no one's execution but your own right and if you're beholden to someone else whether it's on the supply chain or whether it's the value delivery to customers.

Like the tail might wag the dog. And so I I I think it's great that we're starting to see more capital flow here. I think as with anything where you turn on the spigot, not everything is going to be the highest ROI project, but let's look at the other truth.

If we do nothing, then then we're we're certainly not at a local maximum. So we need to do something. I'm I'm excited with the developments. Yeah. Um there was a uh a post by a a founder talking about the state of defense tech. I want to get your take on some of this. Uh, uh, the end user is not the buyer.

In commercial, the person who uses your product often decides to buy it. In defense, the operator might love your system, yet it means nothing. The buyer is a program manager with a budget. The operator's endorsement is at best a data point, not a scalable purchase order.

I don't care that some E6 a drum played around with your product and thinks it's cool. It doesn't really matter. True, false. What What's your take? You know, you're hitting on this caused us many sleepless nights, months, years at Palanteer. Ultimately, I mean, it's Palanteer had to sue the US Army.

You can go to Palunteer versus US Army for uh should you buy CS versus got um there's many that must have been a fun that must have been a fun decision for you for you to be weighing in on like how much litigation is litigation is already expensive, but going up against your customer.

Yeah, it's uh it's not the preferred let's just say they don't teach that in a classroom. Yeah. Um the look I think I think enterprise sales is tough but enterprise sales inside you know the government or any large institution is even more difficult. And there's a couple different things you have to do.

And number one you've got to create the facts on the ground, right? That's that's the mission wins that you're you're referencing there. But that's not enough. It's it's necessary but not sufficient. At the other side you have to go and and make sure the the decision makers know what to do.

And then you can do a pinser and say, "All right, let's just move it and put some pressure on the middle. " Um, and I like to think of as when is it riskier to not act than to act. So you're sort of creating this constellation where you can get movement.

But uh the the advice to anyone embarking on the defense tech journey is make sure you're very well capitalized because it's going to take you a long it's a long uh road to hoe and so make sure you can withstand it.

I also think and this is a point Shamsart you know at Palunteer has made is you've got to you know dual source really helps because it can bring down that cost curve as you scale especially if you're working with atoms and not just electrons and that that can help you survive while you're waiting for the door inside the government to open.

Pounder you would not have had a strong government business if it didn't have a commercial business and vice versa. Um, on that note, uh, Chris in this post says, "If you're pitching dual use, you're probably just unfocused. Real Dualuse companies are vanishingly rare. " The example he gives is Palunteer.

Uh, most that try end up with a watered down product. No real defense tech traction, no commercial fit, pick a market. Do you disagree with that or does it just depend like what nuance would you add to actually understand if a company can meaningfully be dual use?

because you do see founders kind of bolting it on now that it's a little bit trendy. Oh, we have this thing. Yeah. And we also have a office in DC and we we have one person and we work out there.

Um and and yeah, how how would you how would you how would you lay out like if a company can actually get the benefit out of dual use as opposed to it be just being marketing? Totally. Well, it's easier to change lines of marketing than lines of code. Y, right?

So, you got to start out from a first principle and say, what is the thing that ought to exist?

Y and if you look at Palunteer or any other class that's that's built dual use, it's saying I can build one product and with a little bit of customization at the end and just the end then it can be sold to both for a very important but different reason.

Um so an example you know also in our portfolio we have uh Astronis right they're building micro geo satellites. Yeah, same same, you know, broad category. There's a few tweaks, but who doesn't want the sovereignty over their data, right? And so if you need that, you can sell it in a defense capacity.

They're they've been down selected on $2 billion plus programs. So, you know, a lot of work to do, but that's exciting. Stronis, we love those guys. Yeah. And then, yeah, they John's John on the show. He's great. Yeah, he's great.

And then like also on the commercial side like let's say you need you know more trunking and back haul and a lot of telos are turning to this from the disruption they're seeing in the market. Sure. So I think that's one of those ones where they're not building two types of satellites.

They say that's a terrible idea but if you can build one thing and sell it to both parties that helps bring down the cost curve. Fantastic. Totally. Jordy, do you have anything else? No. This is great. Thank you so much for taking the time to hop on. This is fantastic. We will talk to you soon.

You're our new finance correspondent. Is that Sleeping Bear Dunes behind you? Uh, close. But well, I'll tell you next time. Okay. You'll tell me next time because so somebody in the chat said bullish on the painting of Sleeping Bear Dunes in the background.

I was just trying to take credit for being identifying it, but I was wrong because they were wrong. But anyway, we'll talk soon. Well, good to see you guys. Thanks so much. Thanks for coming on, Colin. Cheers. Bye. Bye. Uh, we have Truman Saxs coming on in a few minutes.

But in the meantime, let me tell you about Adio, customer relationship magic. Adio is the AI native CRM that builds, scales, and grows your company to the next level. And you heard Dr. Drew talking about the importance of sleep. You got to get an eight sleep. Yeah.

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