"If you can pay, you have to pay us. If you are a philanthropy stopping pedophiles, we will give you the same product you would get if you are wealthy special forces unit in a very wealthy country," Karp said.
(Read more: CIA-backed Palantir Technologies raises $107.5 million )
"If you're a hedge fund and you make a billion dollars and say you're not going to pay us, well, that's rapacious and we're not going to take your calls anymore."
Palantir's unorthodox business approach helps it recruit the best talent, Karp said. The best engineers want to make a real impact on the world, and Palantir, whose backers include the CIA's In-Q-Tel venture fund and Peter Thiel, gives them the opportunity to do just that, he said.
"We only do it because the mission is really cool. We've played a big role in some pretty interesting things, that we know internally, and that's super motivating," he said. "It's basically very simple. ... We tell people you can help save the world."
Another reason the company has trumped competitors is because it refuses to go public. Karp said that once companies go public they begin to lose their competitive edge and can't stay ahead of the game.
"The minute companies go public, they are less competitive. ... You need a lot of creative, wacky people that maybe Wall Street won't understand. They might say the wrong thing all the way through an interview," Karp said. "You really want your people to be focused on solving the problem not on cashing in."
While Palantir recently made headlines about how much it pays its interns, Karp said his employees' salaries are modest in comparison to other tech companies.
(Read more: Some tech interns make more than US workers and In tech industry, INTERNS make $55,000 a year)
"We have the lowest salary in the valley," he said. "We have very low cash salaries and very low equity salaries, but the minute you start to perform you get a lot of equity."
"The primary payday for the best engineers is that you get to work with the best engineers," he said. "If you don't have that, you will not get best engineers."
—By CNBC's Cadie Thompson. Follow her on Twitter @CadieThompson.