Keith Rabois: Sparking Great Companies – The Boost VC Podcast

Key Takeaways

  • “The people who change the world are often quite exceptional on at least 1 or 2 dimensions and you can often see a spark of irrational potential. It takes an irrational person to transform society.”
    • You need heroic/irrational confidence plus unreasonable tenacity and skill
  • One common characteristic of successful people – they’re strong systems thinkers
    • They’re easily able to integrate a whole set of business problems into one equation
  • If you construct a team properly, your odds of success as a startup are somewhere in the range of 35-40%
    • NOT 1-5% like typically thought
  • To build a great team, first consider what the major challenges/risks of the market that you’re entering into actually are
    • Then find people who are world class at solving those problems
  • “Unless you have some asymmetric ability or asymmetric advantage, there is a question off whether you should be investing in any particular company”
  • “In any field, if you can develop a voice that’s unique and consistently observe things that people miss, you have a shot of getting people’s attention”
  • Something pretty cool:
    • Keith has offered people jobs, without meeting them in person, just by reading their published material on sites like Quora and Twitter

Resources Mentioned

Intro

Keith’s Background

  • Keith just started a new position as a General Partner at Founders Fund
  • Prior to this Keith was an executive at companies like Paypal, LinkedIn, Square, and Slide (but this one didn’t do so well)
  • In 2013, Keith began his angel investing career
  • He joined the board of Yelp and Zoom very early on

The Jump From Building to Buying Companies

  • “Running startups is VERY emotionally draining”
    • “Every day at a startup is like a sine wave – there’s constant ups and downs
    • Your employee’s crisis become your crises – and figure, 1% of your employees will have a crisis EVER day (whether professional or personal)
      • With 100 employees, that’s one crisis per day
  • Keith looks at his role now as an adviser/mentor to the founders he works with
  • “The investment is just part of the bundle, but the least important part in many ways”
    • “Propelling an entrepreneur with advice is more difficult than providing a check”

Keith’s Definition of Success

  • One metric Keith personally uses:
    • The number of people he’s been able to identify and propel forward
    • Related: What explains success in Silicon Valley is often the critical density of people which propel a company forward
      • Being able to hold that critical density of talent for a long enough time is what matters most when it comes to success
  • Another metric:
    • Being able to identify people who are underappreciated/undervalued and then mentor them and give them opportunities to prove their ability
  • Another:
    • Overall, Keith tries to help create iconic companies that propel the world forward

How does Keith identify great people?

  • It first comes down to just meeting a lot of people – you need a large sample size
  • The he assesses for signals of potential
    • If someone’s early in their career, they may not have a lot to show for it
    • How does Keith assess?
      • “The people who change the world are often quite exceptional on at least 1 or 2 dimensions and you can often see a spark of irrational potential…you want to see that spark. It takes an irrational person to transform society.”
      • “Starting a company is an irrational act”
        • You need heroic/irrational confidence plus unreasonable tenacity/skill
      • “If I see those spikes, there’s a chance that if you learn at the same rate, leverage that spike and compliment yourself with other people, you might actually be able to transform the world”

Why are so many of the people like Keith describes located in Silicon Valley?

  • Silicon Valley is a magnet – just like Hollywood is the epicenter for people who want to produce/direct/star in films
    • In a simple sense – these tech-minded types of people just geographically organized themselves around the area
  • That being said – “You can absolutely build a successful company almost anywhere”
    • But in Silicon Valley, there’s an endless supply of these companies
    • Also – typically one of the hardest things to attract outside of Silicon Valley are executives familiar with high growth startups and how to scale a team as the company is growing >100% year over year
  • Keith thinks that Groupon would have turned out to be a much more successful company had they been based in Silicon Valley

What is Keith’s superpower?

  • Identifying unproven talent and being able to put them through osmosis-like learning (aka Rabois’ Bootcamp) 

Common Characteristics of Successful People

  • They’re strong systems thinkers
    • They’re easily able to integrate a whole set of business problems into one equation

Who does Keith go to for advice?

  • Peter Thiel
  • A group of 3-4 friends he goes to for most important decisions
  • Keith actually learns a good amount from some of the younger people he works with
    • He always tells new hires – “It’s your job not to allow me to make a mistake. Do WHATEVER you have to do from preventing me from making a mistake.”

The Odds Are Better Than You Think

  • Keith thinks one should aim for a 35-40% success rate with a startup
    • “If you construct a team properly and seek the right counsel, your odds of success are somewhere in that zone, whether it’s innovating a company or starting one from scratch”
      • NOT 1-5% like typically thought

Then how do you build a good team?

  • Related to this, check out How to Operate – a lecture given by Keith as part of the Stanford How to Start a Startup series
    • Building a team is something Keith expanded well on in the above
    • There’s also a Genius Transcript of the lecture
  • First, consider what the major challenges/risks of the market that you’re entering into actually are
    • Then find people who are world class at solving those problems
  • A lot of founders tend to have networks that are similar to themselves and thus only know people just like them
    • A good VC can help bridge this gap, and find people who compliment your skill set (and who are world class at solving the challenges you need to solve)

Keith’s Thoughts on Bitcoin

  • He’s both “cautiously optimistic” and “optimistically skeptical”
  • In 2013-2013, Keith predicted that Bitcoin adoption in certain countries would be inversely correlated with the rule of law of that country
    • In markets/countries where the rule of law is less established and less predictable, Bitcoin would have more value
    • In the U.S., after the turmoil of the 2016 election, you could see an opportunity for Bitcoin that didn’t seem to be there before
  • Keith is involved with a few Bitcoin/cryoto related startups:
    • He serves on the board of Asteller
    • He’s also invested in a few (not mentioned)

Keith’s Investment Criteria

  • Check out his tweet with a list of them
  • One of the criterion – “Why do we [as a fund] have a competitive advantage?”
    • Why is this important? 
      • “Unless you have some asymmetric ability or asymmetric advantage, there is a question off whether you should be investing in any particular company”
    • Keith always tries to ask himself – “Why do I have an unusual advantage here?”
      • Perhaps he knows the founder really, really well, allowing him to thus assess their abilities better than anyone else
    • “Most investors don’t ask this”
    • “You can’t leverage your competitive advantage 100% of the time, but the more you do, the better off you’ll be”

One of Keith’s Competitive Advantages

  • Keith calls himself a “founder driven investor” – He likes to invest early ($1-3MM in early seed rounds)
  • But the key – he’s investing before there’s any data (so he’s investing mainly in the team/people)
    • “Once, there’s data, other people can analyze that data at least as well as I can”
    • “I can do this [invest early without any data] as well as probably anyone, except Mike Moritz and maybe Peter Thiel
    • “Several of my best investments were just keynote decks at the time”

Rapid Fire Twitter Questions

  • What’s the next big thing in tech that Keith’s not convinced about?
    • Virtual Reality (VR) – “I think VR is incredibly overrated”
    • Keith does believe in AR though
  • Has Keith had any false positives? Any big losses that he thought would be a big success?
    • It’s the wrong question to ask
    • When looking back at past investments, Keith just tries to ask himself:
      • “Given the information available at the time, did I make a smart decision?”
    • Similarly – There are times when you make a decision to invest and it turns out well, but that doesn’t mean you actually made a smart decision at the time
  • What’s the most impactful thing Keith has ever done?
    • Hire people out of left field without a top-tier resume, and give them access to Silicon Valley where they previously had no connections
      • Keith was their entry point
    • If Keith could dine with anyone in history, who would he pick?

How can someone get access to Silicon Valley without any connections?

  • Use Twitter well
    • Keith has discovered insightful people on Twitter and ended up meeting them in person
    • “In any field, if you can develop a voice that’s unique and consistently observe things that people miss, you have a shot of getting people’s attention”
  • Keith has offered people jobs, without meeting them in person, just by reading their published material on sites like Quora and Twitter
    • In a way – “Twitter is what we think LinkedIn is” – Adam
    • “With the right eye and the right worth ethic and right expression, you can break through the clutter”

Random

  • Keith is a huge fan of Ben Thompson’s Stratechery
    • “It’s the only tech publication I read”
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