Earlier today, Forbes reported that venture capitalist, operator and entrepreneur Keith Rabois is returning to Khosla Ventures (“KV”), the Silicon Valley outfit where he cut his teeth as a full-time VC before joining Founders Fund (“FF”) in 2019, teaming up with former Stanford classmate Peter Thiel in the process.
The move came as a surprise to industry watchers – including this one. I spoke with Rabois in October about working for Founders Fund in Miami, where he moved during the pandemic and also oversees a startup called OpenStore that he co-founded in 2021.
When we’d talked last, Rabois sounded content where he was. Today, he said the decision to switch teams was very recent, stemming from a discussion with his former Khosla Ventures’ colleague Samir Kaul about the possible merits and pitfalls of starting his own fund; Rabois says that chat quickly turned into dinner with firm founder Vinod Khosla, who separately announced today that he is “thrilled” about Rabois’ return.
To learn more, I hopped on a Zoom with Rabois this afternoon; more from that back-and-forth follows, edited lightly for length and clarity.
Congrats on the move, though It was never crystal clear why you left Khosla Ventures in the first place after spending six years there.
The real reason is really simple. I hated coming down from SF to Sand Hill Road, and KV at the time — this obviously was pre COVID — had a very strong in-person, one-office culture and it was pretty demanding from the top down that people should be in the office at least three or four days. And I just felt that the future of venture was more distributed.
I remember talking to Sam Altman about the pros and cons of leaving KV for Founders Fund, which was in San Francisco; I was like, ‘Am I crazy to factor in this geographic commute stuff?’ And he was like, ‘Look, every single study on human happiness suggests the single best predictor is inverse correlation to commute time, and you’re human, and you shouldn’t be shy about that.’
I’m tempted to believe you, but I also just heard ‘demanding from the top down.’ Vinod Khosla is a big personality. I wonder if that played a role in why you left originally.
For people who are allergic to big-personality, successful-founder types. I don’t think either KV or FF would be the best. [Khosla and Thiel are] in some ways very similar. I gave this presentation actually at the [Khosla Ventures] Summit last year. They invited me to speak, and the presentation was about the five sort of bosses I’ve had in my career. And it’s like: Vinod, Peter, Reid Hoffman, Max Levchin, and Jack Dorsey. So I’ve made it through 23 years, working with strong-willed visionary founder types; both firms have that trait.
Regarding your return, was it a factor that Founders Fund cut back the size of its newest fund, while KV just closed on $3.1 billion?
Definitely not. If anything, I was an extremely positive proponent of cutting the Founders Fund [vehicle].
We talked in October about this. You thought it was a smart adjustment to the market. But then what do you make of KV moving in the opposite direction?
Crafting a fund strategy — sizing the fund — is a complicated animal in and of itself.There’s an ideal size for different stages of investing to generate meaningful returns, and then there’s a team composition. Like, how many investments can you make and how much money, and that is a function of how many great investors you have on the team. So you have to take into account all these variables. There’s not like a simple formula.
My perspective at Founders Fund was that $900 million was the largest version of a venture fund that I thought made sense for our strategy and our team. You may also have noticed that FF didn’t alter the size of the growth fund, whereas the KV dollars may look comparable, but they’re allocated differently. There’s a $500 million seed fund, then a $1.6 billion venture fund, then a $1 billion opportunity fund.
How else do the firms differ? You made an interesting comment to The Information. You said Founders Fund provides capital and is happy to help when asked, which is very different from a mentorship model, which has been your forte. That doesn’t sound like a ringing endorsement for Founders Fund, or do you think it’s just a better firm for established founders who need less hand-holding?
I didn’t mean it that way. There’s too much capital, there are too many venture firms, it’s hyper competitive. There’s no way to drive significant returns unless you have differentiation, and I think you have to differentiate as a person. So the way I differentiate is I personally aspire to increase the probabilities of success for any founder and any company I work with. That is my goal when I wake up in the morning: how do I make this company more successful? Other people have been very successful venture with a different model. Founders Fund, as an example, has been incredibly successful over the years with at least a somewhat different model. I think at Founders Fund, each partner has a somewhat different perspective on how [to help companies win].
Is there a way to make the differences between the firms clearer?
I’d say Founders Fund and KV are maybe closer on a plotted line than most others, and I think I made that point in 2019. I think KV prides itself on its technical acumen. Many signature KV investments are hardcore technology investing, which is something I appreciate. It’s not my comparative advantage, but I enjoyed six years of learning . . .and I’m excited to learn more. I think it’s rare in venture to have a skilled institutional fund that’s deeply technical.
You are staying in Miami. Will you grow KV’s footprint there?
I’m thrilled to be in Miami. I think the future of America is going to be based in Miami. I’m excited that KV’s going to be opening an office in Miami and adding to the funds that already have a significant presence here and fleeting founders on so that makes me extremely happy.
I will be commuting to the Bay Area on average one week a month. I have a significant number of board commitments in the Bay Area so I’ve actually been traveling to the Bay Area once every six weeks [meaning] I don’t think things will be dramatically different. But I will attend partner meetings in person. Partner meetings at KV are pretty critical to the way that firm operates.
[As for recruiting], I don’t know. The first thing I’m going to do is get pretty immersed with KV.
Vinod recently said something about never wanting to retire. But let’s say that changes 15 years from now. Do you think you’d be his chosen successor?
I have no idea. I mean, put it this way: It’s pretty irrelevant because I’m pretty sure Vinod wants to be doing what he’s doing forever. He loves what he does. He’s extremely dedicated to his craft and what he does. He sets a great example for the rest of the firm by that level of dedication.
