Addepar's Software for the Super-Rich
About nine years ago, Joe Lonsdale started working at Clarium Capital Management, the hedge fund of billionaire technology investor Peter Thiel. Lonsdale was fresh out of Stanford University and had little practical experience in finance, but found himself consulting on Thiel’s early investment in Facebook and overseeing projects for Clarium’s other holdings. On the side he dabbled with a handful of his own ventures—a restaurant, a Nascar magazine, and an outfit that built software for spies.
Now 30, Lonsdale remains a tireless overachiever. The spy software company he co-founded, Palantir Technologies, just closed a funding round that valued it at $4 billion. Along with a handful of other partners, last year Lonsdale launched a venture capital firm, Formation 8. Meanwhile, he’s chairman of Backplane, a social network backed by Lady Gaga. Oh, and he’s also running a new company called Addepar that’s attempting to modernize the software that ultrawealthy families and foundations use to manage their billions. “I work 110-hour weeks,” he says. “I’m always investing and building things at the same time.”
Lonsdale may not be a household name. But he’s well known in Silicon Valley as a guy claiming to have a unique take on how contemporary business software should look and work. “He’s really good at conceptualizing complex ideas and getting them off the ground,” says Alex Karp, chief executive officer of Palantir. “He’s a very rare talent.”
In 2004, Lonsdale co-founded Palantir to solve the government’s Sept. 11 problem: The CIA, FBI, and other agencies had tons of information in huge databases but struggled to analyze and share it. Palantir built software that could unite all the data and make it easy for analysts to run queries on a suspected terrorist’s activities or a gun smuggler’s whereabouts. More recently, Wall Street firms have turned to Palantir to uncover fraud.
Lonsdale left the company in 2009 but remains an adviser. That same year he launched Addepar, whose name comes from a Latin verse by the Roman poet Ovid that translates to “add a little to a little and you’ll have a great amount.” Addepar’s software is aimed at wealth managers who have to keep track of billions of dollars in assets, from real estate and artwork to stocks and investments in venture capital funds. Many companies rely on Excel spreadsheets to do this type of work, while others use old software that can’t combine different types of assets in a single view. Addepar has developed ways to organize assets into a consistent format and displays the information with the gloss of a consumer Web app.
Say you manage $500 million for 20 different clients. With a click of a mouse, you can measure your exposure to Apple or the energy sector across all the accounts. Want to track your rate of return over the past 15 years as measured against the U.S. dollar? Another click. Against gold? Another click. Customers pay quarterly, and pricing varies based on the complexity of the work they need.
Kelli Cullinane, director of finance at Legacy Venture, has been using the Addepar software for about three months to track the more than $1 billion her firm manages for wealthy executives and philanthropies. In the past, she would manually wade through documents such as quarterly reports from the venture capital funds Legacy invests in. The firm now uses the software to bring in all this information automatically and run instant calculations on such things as how its clean-tech investments are faring. “We’re able to ask questions that would have not been possible before,” Cullinane says.
Addepar, which Lonsdale says now has a couple dozen customers, has about 80 people working in a building not far from the Google headquarters in Mountain View, Calif. The style of the main work area could be described as dorm room chic. Teams of mostly young, male engineers sit at groups of computers with Ethernet and power cords dangling from the ceiling. Cardboard boxes, bikes, and the occasional potted plant serve as the décor. To keep employees coding, the company pays them $300 extra per month to live within a mile of the office and provides free laundry and food. Lonsdale has an office away from the hubbub—a massive affair with room to support large leather couches and a fully stocked bar.
Lonsdale has a history of operating at the extremes. He was a chess champion growing up in Fremont, Calif., memorizing hundreds of games played by 19th century masters. Later, as an intern at PayPal, he would take on more work than he could handle and farm it out to other students. His personality tends to carry over to his companies. Palantir is not just selling security software. It’s developed an entire ethos borrowed from The Lord of the Rings in which its employees walk around saying they are going to “save the shire.” “They act in a cultish manner like they know how to see things differently and can do magic with their computers,” says Avivah Litan, an analyst at Gartner Research. “But with Addepar, I can’t imagine profit management being turned into a religion.”
Lonsdale thinks it can be. He describes Addepar as starting out at firms managing family fortunes and moving all the way up to banks. “There will be trillions of dollars under Addepar,” he says. “You will have tons of money and information flowing through it.” And because Addepar can shine a brighter light on financial performance, it will provide more transparency and accountability, Lonsdale says. “You are helping influence how all the money in the world is allocated, and you learn how to make the world function better.” If only the boy had learned to dream big.