The Pomp Podcast - #648 A Conversation with Keith Rabois on Everything

Episode Date: August 30, 2021

Keith Rabois is a General Partner at Founders Fund and is one of the most respected minds in Silicon Valley. Keith is also a co-founder and CEO of OpenStore. He previously was part of the PayPal mafia, served as the COO of Square, and co-founded real estate company OpenDoor. Keith also has invested in many industry defining businesses including Yelp, Linkedin, and hundreds of others. In this conversation, we discuss building tech companies, great hiring questions, identifying the best founders, Miami, Afghanistan, China, OpenStore, Square, Founders Fund, and the state of the media. ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Do you have a business idea you’ve been dreaming about, but don’t know how to actually start building it? Use Bubble’s drag-and-drop tool to develop custom, interactive, multi-user web apps in hours. Go to Bubble.io to build, launch, and scale real ideas and products without engineers or code! Bubble is the go-to no-code platform for over 1 million builders, and has recently closed a $100M funding round to continue supporting startups like yours, from MVP to IPO. Go to Bubble.io/pomp and the first 500 listeners will get their first month free on any of Bubble’s paid plans.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Keith Raboy is a general partner at Founders Fund and is one of the most respected minds in Silicon Valley. Keith is also a co-founder and CEO of OpenStore. He previously was part of the PayPal Mafia, served as the COO of Square, and co-founded real estate company open door. Keith has also invested in many industry-defining businesses, including Yelp, LinkedIn, and hundreds of others. In this conversation, we discuss building tech companies, great hiring questions, identifying the best founders, Miami, Afghanistan, China, OpenStore,

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opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Keith here with me. How are you? Pleasure to be with you. I feel like there's the mayor of Miami and then like the king of Miami and you may be trying to take over that role. I'm very busy. I don't need any new roles. Trust me. I've got plenty of two or three jobs to do already. My favorite job that I think you have is Barry's instructor, which seems to be now like a thing you're going to keep doing. Yeah. Once a month I try to teach a class. It's kind of a good challenge. I get to play dj uh go on stage turn my introverted character into a moderate extrovert people love it so keep doing it um haven't seen you in class no dellian keeps trying to get me to go

dellian is uh uh at work hard trying to get me to go i will go one time i promise okay good and then you'll be converted it'll change your life forever so don't worry that's why i don't want to go is because i know that that is the end state uh founders fund seems to be investing a ton companies are all doing pretty well from what we see in the press. Like what's an update in terms of what you guys are doing? It's been three years now since you went to founders fund four years, two and a half, two and a half. Okay. Like good, bad, indifferent. How do you kind of feel about, uh, your, your last two and a half years at founders fund? It's well, it's been an interesting two and a half years. Cause obviously I joined founders fund before COVID and then, you know,

one and a half years of the two and a half years have been post COVID said pretty different experience than I would have guessed. Obviously, we work more remotely, more distributed. I've obviously embraced Miami and different geos. None of this was sort of on the radar when I joined. Nevertheless, most of the people, in fact, almost all the people who work at Founders Fund, I've known for most of my adult life. And so everything about working with these people is pretty much as expected. We've made a lot of really good investments from the seed stage to growth stage, we now run a venture fund of about $1.4 billion, a growth fund of about $1.5 billion. So we invest, what I like to say, $1 million to $200 million per round and do them

equally as rapidly pretty much every week, so anywhere in that range. So I've been very happy to be an early stage investor in several companies since I joined Founders Fund. We've now powered money into the growth rounds in several of the companies that I help seed and invest very early on a keynote deck. So getting to see the byproduct two or three years later of the early stage seed and series A stuff that I like to specialize in.

How do you think about investing with such a large fund? So 1.4 million in the traditional venture fund, writing a million dollar check, most people would be like, that's crazy. How do you make that work? Is it more so you're buying access to the later deals? Is it something where you're actually underwriting it and if you don't win future deals or get extra allocation other than pro rata you're okay with

the ownership out of the gate like how do you just think about kind of like portfolio construction and initial investment most of the time i'm trying to invest enough money in exchange for enough equity that if we never let another round again i'd be perfectly happy as an investor uh that isn't always the case but 80 of the time that's what i'm trying to accomplish mostly because i'm typically personally a pretty proactive investor meaning i'm actively involved with the founder sort of serve as pop psychologist slash consigliere to the founder and so i want you know to have the incentive alignment where if the company does well and if we add value that ultimately our lps make money uh so that worked in doordash for example i led the seed round

in the very beginning never led another round it's probably returned one or two billion dollars to coastal ventures all right how much have you returned to lps do you think in your career liquid is four or five billion okay um there's a there's definitely a lot more in the works um but you know like how much more that doesn't include well it doesn't include stuff like that's clearly going to be super liquid like stripe um there's things you know thought spot there's clear public companies you know that are going to be worth billions and billions um but fundamentally and then there's the new stuff at founders fund but uh yeah it lags like the problem with venture is obviously all the stuff that's liquid is based on decisions i made in 2013 and 14 like literally

uh so you don't know whether still making you know really smart wise decisions even if you've had success historically do you have a way to kind of gut check your decision making along the way so a decision you made in 2013 did you revisit it in 2015 you're like hey that was a good decision bad decision or do you kind of make it i usually know emotionally within about a year um it's a bit like a cake you want to let it bake a bit you don't want to overgrade it early you kind of want to sample it like a chef does um but the metric we used to use is subsequent rounds of financing so you could tell like by the valuation increases and the velocity of increases how well the company was probably doing at least you know there's a rough correlation there with the market the way

it is in the last let's call it year and a half i'm not sure i would use valuation increases as as a proxy for success there's just too much money it's just too easy to raise capital for entrepreneurs so i think it's a it's an art unfortunately artificial metric right now so we don't i don't have a empirical based one that i would you know have confidence in right now but because i'm typically a board member like usually i'm a proactive investor join the board i have access to you know all the metrics the kbis and so i'd more look more look at the business examine the businesses very specifically in a detailed way and have my own conclusion about where the company is really going to work how well what's the likelihood and probability of

success and possibly the amplitude yeah do you change the way that people fundraise now given the environment change like should should founders lean into it and go raise more money at higher valuations and kind of capitalize on it should they actually be more nervous and and uh be a little bit more disciplined like how do you think about what a founder can do uh obviously being dependent on the business but but just it does depend a lot on the business so there's some companies where they've clearly proven enough that throwing more oxygen at the problem will yield incremental success. And there's other companies where they have not yet discovered the path to success. And throwing more money at the problem may make things worse. It may

confuse employees about whether they're on the right path or not. It may lead to an artificially high burn rate, which is hard to change later. It may lead to bloated hiring. There's a lot of disadvantages of too much capital. But once you're on the path to success, often more oxygen is good in the environment is definitely entrepreneurially friendly right now, the cost of capital is very, very low at the margin to companies that appear to be working. How has one of your core tenets of just the people you hire is the company you build and just go get the best people? How has that changed now that there's more remote work and kind of this like maybe not complete difference, but there's some companies for sure that are treating employees differently. They're able to

recruit different types of employees. Has that helped or hurt these businesses? It's hard to tell. I mean, I certainly still subscribe to the view that the team you build is the company you build, more like sports. I think a lot of people get distracted with technology, but it's fundamentally about the people and the right people solve the problems and the wrong people get in their way and retard the problems or retard the solutions. So fundamentally, that's still what I aspire to do with companies I'm involved in, whether directly or indirectly. In a remote environment, especially in a very remote environment, I think you have to think about ratios of proven experience and up-and-coming talent a little bit differently

because it's difficult to teach by osmosis. So the way you would typically build a company from scratch, and this is what Peter Thiel taught me in November 2000, is you want to hire as many inexperienced people as possible that have high potential, high upside, and that other larger companies don't know how to evaluate correctly. So basically you want to lean into youth and inexperience. But the best way for those people to learn their craft is through osmosis.

And in a remote environment, it's extremely difficult, if not impossible to teach through osmosis. So if I were building a remote only company or remote first company, I might hire a different level of experience than I would otherwise prefer to do. Does it also change the way that you onboard and train those employees as well, right? So one, you may hire a little bit more experienced, but you also can't kind of have what I would consider more like an apprenticeship, you have young people who are just literally in the room every single day. Do you have to be more thoughtful about like the systems that you put in place or something to make sure that you're actually offloading that knowledge to everyone? You can absolutely try that. What I'm, what's

unclear to me is how you teach through an unstructured curriculum in a remote way. So structured teaching environments that that's very easy to replicate, but I think a lot of the best learnings through osmosis and apprenticeship are actually unstructured conversations. And I don't really know how to do that in a remote world. Uh, you started open store, uh, which is a great name given the past success of the last endeavor. What was the idea for this? And kind of how did you think through, you know, why you wanted to start it? So Jack Abraham of Atomic came up with the idea for OpenStore. And it really was predicated on the idea that, you know, Shopify has exploded. The biggest surprise probably the last 10 years in technology has been the success

of Shopify, $180 billion public market cap company, really displacing Amazon, actually, as the future of online consumption. And at the end of the day, though, not all the businesses on Shopify, there's 1.7 million businesses currently on Shopify, are going to be venture backable. In fact, most of them are not. Many of them are not even debt financeable. And so this long tail of Shopify merchants, let's say a million of the 1.7 million, really don't have exits or access to liquidity. And so we felt that the best thing we could do was provide liquidity for these merchants and stitch together these individual merchants into one cohesive experience. And so by providing access to liquidity, it encourages more people to start

Shopify businesses. Because instead of thinking you have to run a business forever, or you have to be the 1% of the 1% that venture capital makes sense for, you now have paths to life-changing wealth. So for example, we can buy an open store, a business for one, two, three, four, $5 million, which if you don't live in California is actually a significant amount of money that you get to, you know, change your life, change your family's life. And so we're doing that all day long. So basically it was predicated on a notion that we had at Square where before Square, if you were a long tail business in America, it was very difficult to get access to Visa, MasterCard, Amex networks. You had to apply. If you, let's say we're selling less than $100,000

a year. It was virtually impossible. And you'd have to apply for what was known as a merchant account. It would take two to four weeks. You'd have to undergo a credit check. Someone would physically come and inspect your store and count your SKUs. And we made that instant overnight where anybody could apply instantly, be approved. Actually, we approved 93% of everybody and be underwritten to process credit cards and grow their business. So it encouraged people to start businesses, encouraged people and enabled people to grow their businesses. And that's what we're doing basically in Shopify. We're encouraging people to start new businesses, and we're going to give them access to liquidity so when they no longer want to run the business, they have access

to wealth. Why Shopify and not Amazon? Well, so Shopify stores are actually basically mostly run by the proprietor. Amazon has optimized things to death. They optimize the customer purchase experience. They optimize the delivery experience. They optimize the discovery experience. Shopify merchants basically acquire their own customers, typically through Instagram or YouTube or some social media. And then they basically have to provide the fulfillment and a lot of logistical support. So there's a lot of room to improve the businesses after we acquire them. Whereas Amazon stores are pretty Darwinistically evolved. Yeah. When you think about after the acquisition, is this something where you all want to run them? Do you want to offload them?

No, we will be running 100% of the businesses we acquire. Okay. That sounds very daunting. How do you do that in terms of, I'm assuming you're going to buy across all verticals. So how do you go from, I like your business, you're running it. I'm going to give you money, go away. I just changed your life, but now my team's going to take over and do that. We're going to productize most of this. So the goal is to build a scalable technology company that substitutes human labor with technology and product. So some things can be templatized. Some things can be automated. There may be some manual labor still involved, but think of customer support. There's a lot of things that customer support reps do that can absolutely be automated

or are a function of product failures. One of my major hypotheses in life is that every customer support inquiry is a function of a product flaw. Someone doesn't know how to do something that you want them to be able to do. So for example, when you use your microwave oven, you never contact customer support.

Even when you can't figure out what crazy features, advanced features, and how to activate them properly, there's always a default way to make the microwave oven just work. And every product, whether it's an app, a website, should have that default experience. And we're going to build that default experience. So customer support, I think most people can kind of work their way through mentally how

you get there and automate that. So right now, these long tail merchants actually have to kind of basically take someone literally to the FedEx store or whatever and drop off the package and pay an inflated off the shelf rate. At scale, we'll have volume discounts, which means we can charge customers less money and they can probably get their packages faster. And so when you do that, that really allows you to buy a business, certain multiple gives you better unit economics and the whole model kind of works because you're just driving more and more

revenue more profitability it's a better experience for the user you kind of have that alignment with those end customers that's phase one and phase two also we do intend to take buyers that used to buy just from keith store and introduce them to the pops new store and so cross-pollinating buyers based upon some data also will help improve the value of what we're creating how important is it to keep the existing brand so if i buy keith store open store buys key store and you don't buy mine. At some point, do you come to me and say, Hey, you should join us. And also we're going to rename it Keith's store as well, or it's unclear right now for the short term, we're definitely going to keep the brands alive. Um, I don't know. It may be neither. It may not be binary over time.

There may be some verticals where the brand is critical and indispensable and to be a fool, it'd be a foolish thing to do is to destroy that brand value. And there may be other cases where there's not as much brand equity and it might make sense to have a more unified brand. I have a friend who's looked at rolling a bunch of the Amazon store specifically. And one of the things that he told me, which was a little counterintuitive, is it's really hard to be displaced once you've achieved some level of search result kind of superiority. And so it was almost like digital real estate, right? Hey, if you're the number one search result for something, you win. Is there an equivalent in the Shopify ecosystem or is it just pure SEO? and your there's not most most of these merchants are spending money on instagram ads it's direct instagram to merchant acquisition so obviously no one's monopolized instagram and then how do you think about this rise of what i'll call like the creator uh merchants so it's people who have the big audience already that's great because you don't have to spend a bunch of money to acquire

users but it almost changes the economics of a business because if they go away then you're gonna have to spend the money because you don't have access to their audience anymore do you just disqualify those types of businesses? I don't think we're generally buying like influencer based businesses. We're really aiming for a long tail businesses, say, let's say sub $10 million in sales. And most of, at least the most famous influencers are probably exceeding $10 million in sales. Yeah, that makes sense. Uh, Miami is obviously going very well. Uh, I'm here, you're here. A lot of people we know are here. It seems like more people are coming every day. Uh, it was supposed to be really hot. It's hot, but it's not that hot. No, it's much more pleasant

here than let's say new york agreed uh and so it almost feels like people were anticipating a slowdown and maybe even a reversal of the trend people were going to go back it does not seem like that has occurred yet maybe it does in the future how do you evaluate success so far of like miami being set up as a uh technology hub and how important is it to replicate silicon valley versus like build something new great set of questions so obviously miami as a technology center is uh way ahead of schedule like when i first moved here december 9th and announced i was moving here last november i thought this was going to be a 10-year you know sort of crusade and which happens to be nice as a venture capitalist we think in 10-year you know fun life cycle so that was pretty

normal but 10 years a long time um we're now way ahead of the curve we already have success the funding you know just i saw a tweet yesterday that just in the last five weeks over 452 million dollars have been invested in just miami and that will continue to accelerate because there's more more entrepreneurs here there's more and more high growth opportunities ambitious companies ambitious founders and the ability to raise capital here is actually easier as well we have several founders that we've worked with that actually either moved to miami temporarily or permanently to raise capital because they felt it was easier and they've had a lot of success we have one company that i don't think that dellian and i worked on together that i don't think is

announced yet but had been circumnavigating basically the globe trying to find um access to capital had been rejected by over 40 firms came to miami met delian delian was instantly interested basically proposed verbal offer you know the same week and you know we've closed on and i think that company's also going to move to miami now so i think that happens more and more when i first came here the first sunday i had dinner with the mayor and probably about 13 entrepreneurs that had already relocated here and that was about the entire set of people who've already had already had success in technology then moved here now it's probably more like a thousand so you know orders of magnitude um you know just in nine months and so i think that's

amazing this year things are accelerating because everybody for every one person who moves here they have 10 friends family colleagues that also want to move here so it just grows exponentially in a classic sense um then secondarily last year because of covid most of the magnets of getting people to try Miami were closed down. There wasn't Art Basel. There wasn't Ultra. All of these traditional techniques of getting people to experience Miami and falling in love. We created a tech week from scratch. There was a hack week in August, which actually attracted 350 highly qualified engineers. So we sort of created our own momentum. But this year, we'll be able to tap into the historical Miami momentum. So I expect this year to be like a 10x year in terms of

technology people one of the things that's fascinating to me is people ask me like why do you enjoy miami and the answer i've just arrived at is like i'm happier here and i don't know how much of it is like vitamin d from just walking around outside versus it feels like you can go to work and then when you leave you can actually leave and go do things you enjoy and go back to work the next day is there like a one or two sentence pitch as to like what you tell people when they call you and they're like hey is this real should i think so what i what i tell people that actually are intrigued by Miami is please come visit for at least a week or two and not a weekend. The reason why is you want to experience Miami as a real city. If you come for a weekend,

it's going to feel like a vacation. It's going to be great. There's a reason why people come, myself included, used to come to Miami for vacations. However, if you go through an entire normal week, Monday through Friday, you'll see all the benefits. The biggest stark contrast that people notice is absolutely the happiness. You can walk anywhere in Miami, restaurant, bar, coffee shop office and people are just happy and happiness is contagious i think the sun and vitamin d absolutely has something to do with it but the contagious nature of you know any social network has been proven and studied for you know decades actually and then on third on top of that there are just a lot of interesting things to do in miami so you get the best of all worlds you get

excellent weather you get happy people and you get an environment where there's restaurants retail athletic activities three of the in actually in 2020 all four major sports had the number one or number two team so regardless whatever your interest is miami is the epicenter of almost all of those interests one of the pieces that immediately stands out to most people is they come here and uh it's debatable whether english is the native language or spanish and it feels very much like miami is the capital of south and central america i always joke uh but it seems like people really enjoy that. It doesn't feel like a San Francisco, uh, where pretty much everyone looks alike, talks the same. You can't go anywhere and get away from work or tech or whatever.

Is that something that you think is important, you know, as people make the decision or is it something that just, yeah, there's some subset of people who like that, but that's not really one of the main selling points. Uh, it's extremely refreshing to encounter a diversity of thought experiences, life backgrounds in Miami. Uh, I think it does yield better success as an entrepreneur. You have to think for yourself, develop first principles thinking, be able to articulate your views, defend your views, which I think is quite indispensable to success as an entrepreneur. Second, I think the blending of industries here is more natural. And so fusing entertainment or real estate or financial services or import-export with technology is the future of

technology. So the blending of culture and technology is much better done through Miami than any other city in the United States. So I think you're going to see different types of startups emerge that would be more difficult to succeed with outside Miami. Last question on Miami is, it seems like there's a number of very influential

or leaders of investment firms that have moved here. We don't need to name them all. How important is that to drawing those founders? Like if it was somebody that represented an organization, but it wasn't the founder or the decision maker, it feels like it wouldn't have as big of an impact. Is that your read as well? Yeah. So you asked a question that I actually didn't answer, which is around, are you building

a different version of Silicon Valley or the same? And I'm trying to recreate the parts of Silicon Valley that propelled success. And I think they're different than the, let's say, mainstream media likes to cover. So in my diagnosis of the history of Silicon Valley, which is based upon lots of study and actually having access to almost all the people who built the foundations of Silicon Valley I've actually interacted with personally over my life. And my diagnosis is different. My diagnosis is that one of the most important things was investors. So fundamentally, Sand Hill Road is the most boring place on the planet. The office parks are drab, dreary, cookie cutter. And the only reason Sand Hill Road became important in the history of the world was

there was a group of people who had a slightly different risk appetite than you could find in scale anywhere else in the world. And so people from all around the globe would trek to Sand Hill Road because they could find risk capital that was different and differentiated. So my thesis was, well, I'm going to move to Miami and I'm going to bring the risk capital that's different than you can find anywhere else. And I want to start with angel investors because they're actually the scarcest, the people who will give you money where nothing's proven and they don't expect to get the money back. There's almost no places in the world, even today, where there's a scaled group of angel investors

with that risk-reward appetite. If you could concentrate them, then entrepreneurs will gravitate towards them. And then we can bring the professional investors here. We're some of the most mobile people on the planet. So we can move to the places that are most welcoming, that have the most aspirational culture, that have the best weather,

that have the best regulatory environment, that have the best family-raising safety profile. And then the entrepreneurs will want to be here. And that's basically what I prioritized. and that's exactly what's happened. So we get, for example, Founders Fund is now investing more actively in Latin America than we ever have before. And I'm meeting Latin American founders who would actually prefer to meet me here than me go fly to them. So it's become a magnet for entrepreneurs. Some of them will set up shop here, some of them may not, but they want to meet me

here because there's a set of VCs that they can meet all in one efficient week than if we all individually flew to Colombia or New Mexico or Brazil. When you think about meeting them that early. The angel investors obviously have that risk appetite, but how important is that to almost top of funnel recruiting also to get companies to move here, right? If my investor is there, if I think I can hire engineers there, I might as well go build the company there. And then you almost are recreating a flywheel that as that company succeeds, more people spin out. They want to start companies. They go right back into the same pool. And is that kind of the idea of how you do this? Yeah. One of the reasons why we started OpenStore in Miami was I wanted to

set an example, first of all, for other founders. If I believe Miami is the best place to start a company. I should start a company here. But secondly, I suspect that lots of people who work at OpenStore have the aspiration of starting their own company one day. This is exactly what happened at Square. There's probably like five or six very successful companies that, you know, Square colleagues of mine have now founded. So I want them to start their companies in Miami. The best way to do that is to have them experience Miami now. And if they're happy, they're going to start their company here. There's no way they're going to move anywhere else. So by having a magnet, we now have 29 employees at OpenStore. I'm sure we'll wind up with 50 plus by the end of

the year, probably a third of them have some desire to start their own company. So they're going to create their own companies here because they're going to love Miami. Do you interview all of them? I try to. I'm probably running at 80 plus percent. And when you interview them, are you interviewing them for competency and merit of like the job or culture fit? Or like, how do you think about that interview for someone that's be a direct report? It actually varies by role, what I'm probably focused on. I'm probably interviewing for upside potential is the most common. And then partially interviewing for maybe organizational matchmaking,

which is what box, what role should they be in in the short term? Because there's people who have a broad skill set and not as clearly defined skill set and you're trying to match make their talents against problems the company and challenges the company has. So I'm probably usually doing one of those two things. How do you measure upside potential or try to get at it, interview it, et cetera? I know you got some good interview questions. Great question. Obviously, that's the same thing. To me, it's a species of the same problem of how do you decide what founders to invest in? Because you're not trying to assess where is this founder today. You're trying to plot out the future trajectory, three, five, seven, 10 years in the future. And so that's what I'm trying to get a feel for. I don't know that there's a magic question to ask and a magic answer. Like a framework that you use. So the framework I use is what I'm really looking for is a spike.

So let me talk first from an investor standpoint. It's a slightly different perspective from an employer standpoint. As an investor, what I'm looking for is a spike. And what I mean by that is this person on some dimension will be in the top 10 basis points of somebody I've ever met in that dimension. So they can be the smartest person I've ever met. They can be the most tenacious person they've ever met, the most creative, the most reality distorting salesperson, the best recruiter, the best talent assessor.

But a one dimension, they will just strike you as I've never met anybody this good before in my entire life. And the reason for that is, truthfully, if you're going to change the world, it's kind of a ridiculous, somewhat irrational goal. The people who wake up in the morning and say, I'm going to transform the entire planet, or I'm going to transform this entire industry, you kind of have to have an irrational disposition. And the only people I've ever seen succeed are so talented and so off the charts in at least one dimension that you walk away from the initial meeting and you say, you know what? There's a non-zero chance that this person could actually change the planet. And if you don't feel that, in my view, the chance they actually change the planet is basically rounds to zero. So I'll just pass as an investor.

So now in the employee context, it's a little bit different because you're not going to build a company of just people who are Steph Currys. Like you can't actually build a company of just Steph Currys. As an investor, you want to just invest in Steph Currys. I was joking the other day that with one of my colleagues, I don't want to fund Andre Iguodala. He's a great compliment. I'd love to hire him, but I actually don't want, that's a mistake when I fund him as opposed to someone who has the potential to be Steph. When you think about that one thing that somebody is the world's best at, does that immediately have a trade-off of like, they're probably really really bad at other things or usually for a well-roundedness uh i doubt there's

anybody who's truly well-rounded um in that sense of like they're in the top one percent of everything um so there's usually areas that they're either not interested in and or not proficient at the self-awareness is pretty important so they the ones who are best have some self-awareness this is what i'm awesome at this is what i hate to do this is what i'm bad at and i'm gonna go find somebody who's complimentary to me so that's the pairing is part of the art that's actually one of the roles I've sort of have to assume as a VC is helping source, assess, and recruit the appropriate pair. You have a ton of ideas. You've been very successful building companies, very successful investing. How do you decide when you should put together a team and almost like fund it from the

beginning? And it's really an idea that you're handing to a competent team that you think can go do this versus you should start the business versus, hey, this is somebody else who's bringing me an idea and i should fund it like so 99 of the time an entrepreneur is walking in with an idea that he or she is incredibly passionate about and possibly with a team already you know an inchoate team but at least some team built around the idea and that's what i do almost every day it's very rare in contrast where i have an idea or i'm willing to be the point person for an idea that's a once every four or five years kind of you know sort of uh decision for me so it's extremely rare open store falls in that category yeah so open store open door was my idea and i

recruited people to join my sort of crusade finally after a decade of trying and open store was not my idea it was jack's idea but it immediately sparked with me as a very good idea and right down the middle of my specific unique skills that it was designed for me to do this it's actually one of the reasons why i joined square initially was i'd actually been planning to be a VC that summer and got intercepted and asked if I would meet with Jack. And what ultimately persuaded me to take a professional detour was the Venn diagram overlap of what Jack and Square needed was right down the middle of my unique skills, which is some financial services, expertise, and some ability to be innovative. And that at the time in 2010 was a very rare set of

skills. Now it's more common. You can find a handful easily of people that can do that. uh but open store because it uses we're trying to underwrite assets using just data we're trying to acquire very long tail businesses we're trying to use a combination of math and data and and people in a very elegant way is are all unique skills that uh you know sort of polished over 20 years it's like a keith raboy playbook right there it is well open source definitely right down the middle like literally when jack pitched me i think one minute into the pitch i concluded this is a great and really awesome and differentiated idea. And probably two minutes into it, I was pretty willing to commit to being CEO. Was he going to, was he there to ask you to be the CEO or was he

pitching you for an investor? Like how did that? I don't know what you said. We had breakfast, you know, like, uh, it was the day before Christmas in December last year. And I don't know what he, you know, I don't know what he had in the back of his mind, but by the end of the, by the end of two minutes, I was pretty convinced that I was going to pioneer this one way or the other. We were going to will this into existence. And if it required me to be CEO, I'd be happy to do it ramp is somewhat like square in terms of financial services seems to be growing incredibly incredibly quickly uh walk us through like how you look at that business and then why do you all continue to double and triple down it seems like every time i talk to delian or you ramp comes up

at some point in the conversation yeah ramp is an interesting exception for me because i almost never have a top-down hypothesis as an investor typically an entrepreneur walks into what used to be my office um and says hey i've got the greatest the greatest idea ever you know we're gonna change the world, blah, blah, blah. I just need some capital and some advice. And I'm like, yeah, that makes sense. In the ramp case specifically, I was actually actively looking to fund something, a bunch of entrepreneurs that wanted to tackle this specific problem. I thought there was a very big opportunity there. And that insofar as other people were trying to tackle it, they weren't appropriately tackling it and addressing it. So we were actively looking

at persuading people to tackle this problem and that Delian and I would fund. And then as we were doing that, Delian intercepted, uh, what was when we came one of the founders, um, playing, uh, video games. Uh, and he said, I think I found the people. And I said, okay. So I met with them and actually call it five minutes into the conversation. I looked at Delian. I was pretty impressed. And I said, you're right. You found the people to do this. We told him he was right. Yeah. Oh yeah. Yeah. Definitely. I was like, we need to, We definitely need to invest. You just found the people to do this.

We don't have to do this ourselves and we don't have to recruit these other crazy people to do this. And was it hard to convince them to do it? Or were they pretty much- They somewhat in parallel had their own goal of doing something like ramp. And we happened to intercept them with,

we want to fund someone who wants to do something like ramp. So it was a match made sort of in heaven, but he had correctly found and accurately found the people who could pull off the vision that we had in the back of our brains. What makes it so special? I think now it's a $3, $4 billion business. It literally, in a three-year period or whatever, has just come out of nowhere. Why is it so successful? Well, I think there was a couple of macro trends that they were

tapping into, which is why we were interested in finding founders to tackle this problem, which is, at the end of the day, almost every company is going to be running on software, modern software. And it started with small companies running on modern software. I think SaaS, this product, this service. But the CFO suite, the financial services part of the companies are running on legacy software or using manual labor. Like if you look at a company that goes public these days, the finance department is typically 100 people. And this is for a fairly small publicly traded company. And that makes no sense whatsoever. Almost everything done by finance can be done with machines. And yet nobody had built that suite. And so we really wanted to

find someone who understood that vision, that all companies were going to run on software, and that someone could stitch the software together to create value for the CFO. We thought that there was very specific apertures to go to market around access to corporate cards for a variety of reasons, but that was always part of the vision, always like a step in the vision,

I guess a phase in the vision, not the vision. And then we thought that what we needed was someone who could stitch together the value proposition provided by these cards into something that would make sense to the decision makers within the enterprise and eric and cream had the idea specifically around incentive alignment which is we're going to help you save money and here's how in a very specific tactical way based upon actually some of their experiences in their prior startup so the

combination of the vision plus the practical experiences of being able to connect the dots was exactly what we wanted i want to switch gears talk about some geopolitical stuff uh about China, we can start there. We can talk about the book. We can talk about what's going on in China. What's kind of your assessment? You have not been shy in the past about sharing kind of your opinion. So how do you look at where we are right now? Well, we're clearly in a very confrontational state with China. And the biggest risk is to be in denial about that and being unwilling to admit that China has an agenda that's very unfriendly to the future of democracy. And China's been very strategic and wise, and to their credit, been very clever about

using technology specifically to achieve their agenda. And so my husband wrote a book. It's going to be published by Simon & Schuster, released on October 11th, called Wires of War, which details mostly China's success, both using the front end of technology, I think information content, as well as the back end, the deep end, the deep technology elements to manipulate democracies. also talks a little bit about russia but it's fundamentally a book about how china's been manipulating uh democracy to the benefit of authoritarianism and so we're gonna we're gonna

have to confront this one way or the other uh we have to compete in some dimensions we're gonna have to invest in the military and other dimensions this is going to be a very severe problem for the united states over the last decade and the longer we've neglected it the worst problem is there's an old concept in political science that was borrowed from the soviet union of what the Russians used to refer to as correlation of forces, which is basically, you should always compare your leverage as a military force against the alternative. And the ideal time to attack is when the correlation of forces is in your favor. And as we've been in neglect, benign or active neglect for the last 40 years, basically, China has been shifting the correlation of forces to

be closer to in their favor than ever before. I want to kind of bifurcate the conversation for a second, there is what I'll call more of like a military aspect to this. There's a technology, actually, there may be a third category, which is like the capital markets. So let's start with capital markets first of like these ADRs and VIEs. I was completely unaware of this until recently, started looking at it. And for those that don't know, basically a Chinese company creates a shell company in the Cayman Islands. They sell shares in the Cayman Islands. It's named identically. So the US investor, unless you're sophisticated, you think you're buying, call it 10 cent shares, but actually you're buying a shell company that has some IP or whatever

addressed to it. Is this something where the US is going to say, hey, China, you have to play by the exact same rules as an American company? Or is there going to be this game of like national security and we're not going to audit you and you can keep doing this ADR thing? How do you see it playing out? I think almost surely the SEC alone will crack down on this. I think some of this stuff was in the works anyway, and the geopolitical reality will maybe accelerate it. I think some of this was, there's a lot of people who've made a lot of money in China, many who've served in Republican and Democratic administrations that intentionally cast a blind eye to this. But I think just given the macro dynamics, the politics are not going to allow this to be swept

on the rug anymore, but it's been abused for a decade. From a technology standpoint, if you're president of the United States, like what do you do as a response to a lot of what they've been doing on that technology front? Well, I think unfortunately, the United States is going backwards from a government perspective

in advancing technology. I think we have to realize that the future of the world is predicated on technology. And whichever countries produce the best technology are gonna have the most power in the future. And so the best we can do

is encourage technologies and the best way to encourage technologies is to get the government out of the way for the most part. There are some fields where that's not true, where there's an amazing upfront initial investment that's required for innovation, but those are the exception, not the rule. Most entrepreneurial pursuits can be created with a very small amount of capital and a very reasonable timeframe.

There are some unique projects that require massive investment that are, like, think in the chips and semiconductor space these days, although the industries were created with a fairly small amount of money and actually did pretty well when they had to be entrepreneurial. But fundamentally, I think that's the exception, not the rule. We also need to truthfully appreciate entrepreneurial pursuits, meaning like one of the things I like most about Miami is this is an aspirational culture where people here are taught to emulate success, not penalize success. And if we want more entrepreneurial success, we should be emulating entrepreneurs, not criticizing them. From a military standpoint, I think Founder Fund has funded Anduril and other kind of technology led defense approaches. Is that our only response is to basically meet improvement with improvement or innovation with innovation and continue to increase the technical capabilities that we have from a military standpoint? Well, surely, like, harnessing private enterprise entrepreneurial talent, like, the entrepreneurial talent on Andoril would be better or on par better than any other company on the planet. Like, they recruit the best of the best. And that's certainly if we're in a competitive dynamic, we want to recruit the best of the best that have, you know, our national security interests at heart.

I think having a vision that I'm an American company, I'm an American founder, and I want to help the United States of America is a good thing. And some of our companies in Silicon Valley have got away from that model mantra. We at Founders Fund love to back founders who have that belief about the world, that being an American company is something to be proud of and something they should embrace and they should recruit on that dimension. And we're happy to provide the capital if we're the only ones, the only VCs that want to provide the capital, even better. I almost am laughing as I ask you this. Are you investing in China? No. We have never invested in China, nor would we.

All right. Do you want to elaborate as to why not? Well, I think, you know, certainly not just me, but several of my colleagues have had this view about China, at least since 2015, where I think some of this stuff was obvious if you're looking. I've actually had this view on China for 20 plus years that the US strategy of entanglement was actually backfiring. So basically, if you look at the history of China policy in the US, really, we started

embracing China in 1972 as a counterweight to the Soviet Union, which may have been actually a pretty prudent strategy, truthfully. It's actually somewhat clever, Nixon, Kissinger, et cetera. But after the Soviet Union collapsed in 1989, so a pretty long time ago, 30 years, no one really rethought what's our strategy with China. Does it make sense where there is no Soviet Union? And we never really reinvented ourselves and rethought the policy from first principles. And then by certainly 1995, 1996, 1997, the intellectual bankruptcy of our policy was very obvious. So basically, it's lagged for 20, 25 years, and the correlation of forces has started to work against us now, because of the neglect of the politicians in the political class

and the bribery, the actual motivation, economic motivation of people, you know, sort of making money in China. You're one of the most voracious readers I know. Is there one book that you would suggest people go read that, uh, other than maybe Jacob's book. There is no other book. That was cheating. I shouldn't have asked it that way. Well, I will say to be fair, Jacob's probably read 50 books on China. So, um, you know, he's definitely standing on the shoulder of giants sort of thing. Um, there was a book I used to love. It's a little dated now. Um, when I was first really studying China policy, um, written by James Mann, um, I'm forgetting the title offhand, but I will tweet it. Um, yeah, pretty sure that that was one of

the better introductory books. Um, I used to write speeches on China policy back in the day and have to study this stuff, um, and get quickly up to speed. And I felt like that was one of the better ones. Um, but, um, there's, there's now a quite serious library sitting at our house of China books. So if you want the entire selection, uh, I can walk you through the whole wing of our house. Yeah. Uh, all right. Uh, Afghanistan is another place that actually now may have some, uh, relationship to China, Russia. I mean, it's all, all kind of coming together here, but what's your view, uh, as we sit here, uh, we're recording this, uh, the U S has decided to pull out the pulling out of troops has been, uh, highly controversial. And, uh, I

think at this point, pretty much widely accepted as not done correctly or well. Um, there may be some people still disagree with that. Uh, and now there seems to be violence at the Kabul airport And it's kind of getting worse and worse. So how do you just evaluate, I guess, like one, the efficacy of what we've done so far? And then how do you look at what we're going to do for what we should do? I think it's certainly debatable about what the right sort of exit strategy from Afghanistan is or should have been. I think many people with lots of interesting perspectives have disagreements on that. I think it's hard to debate the wisdom and or the execution of, you know, the detailed tactical level, I think was insane, insane and extremely naive. And I think that's, you know, getting worse and more clear every day. Obviously, I also feel that many of the left wing people in America are extremely inconsistent

with their criticism of U.S. policies and their willingness to tolerate significant abuses overseas. So I made this point years ago about Saudi Arabia. Like, I don't take money from Saudi Arabia. I think it's, you know, they intentionally discriminate against gays, women, Jewish people, et cetera. And I think that shouldn't be something anybody in the entrepreneurial world wants to uh be involved in the taliban is literally going around executing gay people god forbid if you're jewish you probably get executed twice um you know so like i just find it like inconceivable that the left tolerates um the idea of taliban running a country um where they you know complain about the labeling of bathrooms in north carolina um versus stoning gays to death i think one is a

significantly greater problem and yet they're totally you know completely silent or they have the celebrities who you know whine about this and that in the united states which are pretty tactical differences versus like executing people so one of the things that i've started paying a lot more attention to is like the memes of the internet really tend to drive like what people feel the truth is and it's almost uh not everyone can be a comedian everyone knows comedians can say whatever they want and mean it barely well yeah but at least they get away tim dillon has been a fantastic follow for example on uh on twitter um but the memes really are kind of that replacement it's the way for a person to say something and no one gets like super super offended

and so we saw things like the taliban uh congratulations guys you guys aren't wearing masks right you know that type of stuff all the way down to more of the more like serious uh things that were going on and it just felt like america woke up like almost overnight to the fact that like we were negotiating and you saw soldiers, you saw special forces, folks, combat veterans, et cetera, be like, wait a minute, we know that they're all in one building and we're not just bombing the hell out of it. Like it just felt like people were waking up to what had probably been going on behind the curtain for a long time. And does that have like longstanding implications of the way that people trust? You know, one of the things I always go to is like, I do not think

that my generation of kind of let's call it 20 to 45 you're going to convince them as the united states to go to war again right it feels like that trust has been almost broken and so you're going to literally have to wait 20 years until there's like a new generation of people who you could convince unless some catastrophic event happened yeah but that's kind of what happened post vietnam and as someone who's old enough to kind of i didn't grow up until post vietnam basically. But there is a good decade where it's basically impossible to convince the United States to go to war in any sense. And that's why we wound up with these proxy wars in, let's say, Central America, et cetera. And it really wasn't until midway through Reagan's re-election

that that started changing in the United States. So it wouldn't be surprising. Just takes time. It wouldn't be surprising. Second, though, I do think that people are paying more attention to this. And I think that was basically where the Biden administration massively miscalculated. They thought this was going to be a niche topic and a niche issue and kind of be dusted on there and kind of under the radar. And it's become top of mind. It's actually crowded out basically almost everything else in the news. And I think the reason why is things that were people were not paying attention to are so starkly inconsistent with American ideals in history

that it's actually causing people to wake up and say, what the hell are we, what the hell are we doing? Why are we doing this? Why are we acting this way? Yeah. Um, I have a, uh, somebody that I know who, uh, we're Facebook friends and he's a former Navy SEAL. And he posted recently a photo of him looking at a watch, uh, submerged in water. And he said that at one point he captured a Taliban soldier. And during that, uh, encounter, the Taliban soldier said to him, you have a watch, but we have time and he remembers at the time basically laughing at it like you're an idiot whatever and now he's basically like he was right right and so i do think that there is whether it's afghanistan china whatever it just feels like the american political kind of system and

the cyclical nature we're just constantly worried about like what's happening today what's happening in six months whereas some of these countries seem to be you know maybe it's not 300 years but a decade right it just seems like there's a very different mentality for some of this stuff than the American culture allows. Yeah, well, there's a translation to business and startups. Reid Hoffman taught me this, which is one dimension in any negotiation is time. And is time your friend or foe?

And understanding that allows you to calibrate and manipulate other terms in a negotiation. And the same thing is true in geopolitics. Explain more in business. So for example, like let's say you're losing money as a startup. I'll give a very simple example first. But let's say you're losing money as a startup.

Time is your foe. So every day a deal doesn't happen that would be good for you is actually very painful. Whereas, let's say you have a market share and you're an incumbent, every day that preserves your market share is actually good for you, so you arguably want to go slow. So just understanding who time helps,

what the defaults are in a more conceptual way to think about it. And that's true in geopolitics. People with different time horizons might act very differently. Yeah. Uh, the media's coverage of the pandemic, the Afghanistan withdrawal, uh, pretty much everything seems to be received very differently. And, um, politics is probably the like area where I think people can see it the most clearly right now is, uh, the simple example of like remove

Biden as president, put Trump, if this was going on, it would be like a massacre, right? Uh, in the media how do you fix it like i think it's a you know beating a dead horse that like there's problems how do you actually fix it or can you not fix it it's a great question i i i think some of the sort of cats out of the bag and in some sense which is gatekeepers have been removed and that's what the media doesn't like in my view going back to something nabal wrote maybe seven 10 years ago. The reason why the media is hostile to technology is we've removed the gatekeepers and their monopoly on information, power and control is basically permanently destroyed. And people who are journalists don't like that. So they hate the people who've unlocked,

you know, democratization of ideas and content. And they've been fighting back and, you know, losing battle, but rear guard action against technology and empowering people. however i think the model that does kind of work is when i was living in the uk you know there was basically three zones of daily publications there was the conservative publications and there were the liberal publications or the intermediate ones and if you watch people getting on uh you know sort of the subway system in the morning they typically buy two papers they'd buy basically their favorite one which if they're a liberal they buy one of the liberal two choices. If they're conservative, they buy one of the conservative

ones. And they usually buy a middle one. And they're basically, you know, reading the stuff they wanted to read with the angle they wanted to read, reinforcing their own beliefs, and then getting a little bit of exposure, you know, to the middle ground sort of thing. And I think as long as people know what the bias and framework people are starting with is actually can be very, a very useful exercise. It's when the media either masks their bias, professes there is no bias, and then therefore surprises people and shocks people that I think it's really unfair and unscalable. So I think we may see more of a official

sort of partisanation, I don't even know what that word is, of the media. And that might actually be a fairly stable solution. One of the things that this has kind of shown itself is in the financial media with the whole Bitcoin crypto world is most journalists will say,

hey, I can't hold a financial asset because I want to be unbiased. but if you're writing about something that is competitive to dollars right then you're basically holding one side of the debate and they don't disclose it there's bias all stuff a second piece that recently people have started a debate is if you were a journalist you knew about bitcoin in 2012 2013 but you weren't allowed to buy it and now it is appreciated quite a bit you actually may be negatively biased towards it because i could have bought it i didn't whatever and so it almost feels like just we all have to accept there's no such thing as like not being biased

and just everyone put your bias out there and move on with the world. I think disclosing your bias in perspective is probably the best versus trying to exterminate it. But not perfect. I think there are better and worse ways to reduce bias. And I think reducing bias can be helpful too. Yeah.

Last question or topic is Bitcoin. Where are you on it right now? So we've at Founders Fund been, you know, long-term investors in Bitcoin directly. over the last year, we've started really accelerated investing in, let's say, crypto-based companies, which is more new to us. We were historically occasional investors in crypto-oriented companies and very bullish on Bitcoin. And we've now invested in five to 10 crypto companies just in the last quarter or two. So very active. We just announced a crypto-based company this morning

that's going to hopefully reimagine the music industry. But we also funded several other that I believe are announced crypto companies and a few more in the works. Tell me kind of the pitch around Royal. I know JD did Open Door with you. You've known Justin for a while. What's kind of the... Well, the music industry is basically broken because it's an artifact of history.

So traditionally, music labels provided multiple functions to artists. They provide a cash advance up front, and then they provide effectively distribution. So the cash advance up front allowed an artist to live, to recruit collaborators, you know, think vocalists or background musicians, et cetera, et cetera. And then traditionally, the label would get, you know, secure, procure placements on the radio to get exposure for songs and actually ship albums to retail and, you know, provide all of the indispensable ingredients to success for an artist. And in exchange, the economics kind of works something like 20% to the artist and 80% to the music label. well nowadays distribution is not the the industry the current labels provide nothing in terms of distribution we don't ship you know record we don't ship records to record stores

don't ship cds even um secondly you know spotify's algorithms or tiktok or the solo the artist's individual following on social media whether instagram or twitter drives adoption and nobody's really rethought the economics. Do they make any sense when the label isn't providing distribution and it's just providing a bit of cash up front? That bit of cash up front is basically commodity. And so one of the things Royal will do is fix that in the artist's favor. The second thing is obviously fans are critical components of the trajectory of both songs, albums, and artists. And we want fans to be able to participate in the success. And that's where we're going to tap into the kind of movements you're seeing in NFTs

where fans can be both an economic and social collaborator with the artist. Last question, a much more fun one. I was asking a couple of people what I should ask you and this question came out twice, but I can tell you from who. There is a rumor that you have a fish tank in your house that a scuba diver needs to clean.

True or false? I've read that in real estate blogs. What a great answer. All right, where can we send people to find you on the internet? At Raboy, R-A-B-O-Y-S on Twitter, or you can email me, Keith at Founders Fund, if you have a really good investment opportunity.

All right, thank you for doing this. Pleasure to be with you.