Jan 12, 2024 · 1h 15m · news
Keith Rabois on Rejoining Khosla Ventures | E1102 · 20VC with Harry Stebbings
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Venture capitalist Keith Rabois joins host Harry Stebbings to discuss his return to Khosla Ventures, contrasting the operational and investment philosophies of Khosla and Founders Fund. He shares deep insights on seed-stage pricing, board governance, growth-stage investing, and the personal sacrifices required to achieve elite performance in venture capital and fatherhood.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 14.2% of the talking time here. How this is scored →
Harry as informed peer 4.0 Guest teaching 4.1 Guest disagreement 1.8 Harry pushing back 3.2
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 34:40 Keith dismisses growth investors as spreadsheet chasers
Keith forcefully criticizes growth VCs, stating that most growth funds are dead or dying because they rely on financial models rather than understanding fundamental human-driven company building.
Hardest push from Harry ▶ 30:35 Harry challenges Keith's refusal to compete at Series AHarry directly challenges Keith's competitive drive, asking why he doesn't simply beat rival tier-one firms directly at Series A rather than retreating to seed rounds.
Biggest teaching moment ▶ 15:40 Keith recontextualizes Peter Fenton's price lessonKeith reframes Peter Fenton's famous quote ('Price is always a trap'), explaining that walking away over price at the seed stage is actually a mask for a lack of investor conviction.
Harry holds his own ▶ 40:10 Harry challenges fund math and reserve allocationsHarry cites Twitter criticism of Khosla's $3B fund, breaking down check sizing and portfolio math to push Keith into justifying the fund's deployment strategy.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Why Keith Rabois Decided to Return to Khosla Ventures | 2 | 3 | 1 | 1 | Harry asks a direct conversational question about why Keith returned to Khosla Ventures. Keith gives a long historical background detailing his ongoing co-investments and close ties with Khosla partners. | |
| The Value of Vigorous Partner Debates and Deep Tech | 3 | 4 | 1 | 2 | Harry asks about what specific factors made Keith return. Keith details the intellectual sharpness gained from Monday partner debates and the ongoing education in deep tech like CRISPR and AI. | |
| Contrasting Meeting Dynamics: Khosla Ventures vs. Founders Fund | 4 | 3 | 2 | 3 | Harry quotes Vinod Khosla regarding internal firm autonomy to challenge Keith on how he handles dissent without making bad calls. Keith explains the social capital dynamic inside venture partnerships. | |
| Learning from Regrets: The Rippling, Robinhood, and Fair Decisions | 3 | 5 | 2 | 3 | Harry presses Keith for concrete missed investments caused by partner feedback. Keith shares detailed stories of passing on Rippling and Robinhood board seats before admitting he secretly joined Faire's board without asking. | |
| The Art of Price Sensitivity and Conviction in Venture Capital | 5 | 5 | 2 | 4 | Harry quotes Peter Fenton ('Price is always a trap') to spark a discussion on price discipline. Keith breaks down why price sensitivity reflects conviction at seed/Series A versus financial discipline at Series B. | |
| Courageous Investing: High-Price Seed Successes | 5 | 5 | 3 | 5 | Harry challenges high seed pricing on Ramp and forcefully declares his dislike for reserves in venture. Keith counters by explaining how top-down reserve models contrast with ad-hoc follow-on investing. | |
| Venture as Poker: Capital Dosing and Fueling Milestones | 4 | 4 | 2 | 4 | Harry questions inflated seed valuations in AI. Keith uses a poker and capital dosing metaphor to explain how much fuel a founder needs to hit critical milestones. | |
| Why Keith Rabois Prefers Seed Investing Over Series A and B | 5 | 4 | 3 | 5 | Harry questions why Keith avoids Series A given market conditions. Keith uses the 'liquid concrete' metaphor to explain early culture shaping and details term-sheet win rates against top-tier competitors. | |
| How Operators Transition into Great Venture Capitalists | 5 | 5 | 3 | 6 | Harry playfully calls Keith out ('You are a competitive motherfucker') and asks why he does not directly beat Series A rivals. Keith explains how operator-investors provide conceptual frameworks rather than tactical answers. | |
| The Broken State of Growth and Momentum Investing | 4 | 5 | 3 | 3 | Harry asks if growth investing is dead. Keith dismisses growth investors as spreadsheet-driven momentum chasers who fail to understand human-driven company building. | |
| Sizing a Multi-Billion Dollar Venture Fund Correctly | 6 | 4 | 2 | 5 | Harry brings Twitter criticism regarding Khosla's $3B fund size and does real-time math on check counts. Keith defends the structure by breaking down fund allocations across seed, venture, and growth stages. | |
| Team Sizing and Structural Learnings from Founders Fund | 4 | 4 | 1 | 3 | Harry asks what Khosla Ventures can learn from Founders Fund. Keith cites late-stage pro-rata evaluation rigor as a key skill he learned from Napoleon Ta and the Founders Fund growth team. | |
| Founder Matchmaking and Intentional Company Culture | 4 | 4 | 1 | 3 | Harry asks why founders choose specific firms over others. Keith highlights founder-investor matchmaking and compares cultural alignments using Mike Shebat and Jack Dorsey. | |
| Why Keith Rabois Avoids Starting His Own Venture Fund | 3 | 4 | 1 | 2 | Harry explores whether Keith considered starting his own firm. Keith explains the heavy 'drag coefficient' and high fixed administrative costs of starting a fund from scratch. | |
| Eulogies and Impact: What Motivates Keith Rabois Today | 4 | 4 | 2 | 3 | Harry notes Keith has 'more cash than Rockefeller' to ask what drives him today. Keith shares a story about wanting his eulogy to reflect transformative personal impact on founders. | |
| Effective Board Governance: Questions vs. Prescriptions | 4 | 4 | 2 | 3 | Harry asks if Keith worries about his words carrying too much weight with young founders. Keith outlines governance frameworks taught by Roelof Botha and Pierre Omidyar, emphasizing questions over prescriptions. | |
| The Art of Selling: Vinod Khosla's Square Decision | 4 | 5 | 1 | 3 | Harry brings up timing sales of VC positions. Keith praises Vinod Khosla's foresight in holding Square stock and highlights Vinod's decade-long technological vision in AI. | |
| Lessons from Multi-Fund Leadership | 3 | 4 | 1 | 2 | Harry asks about personal lessons from leading multiple funds and whether fatherhood changed Keith's mindset. Keith highlights early childhood brain development as a machine learning process. | |
| The Responsibility of Raising Non-Entitled Children | 4 | 4 | 2 | 3 | Harry asks about avoiding entitlement in children and the personal trade-offs required for extreme career success. Keith asserts that top-0.01% success requires clear, intentional trade-offs. | |
| Quick Fire: Bitcoin and Geopolitical Stability | 3 | 3 | 2 | 2 | Harry begins the quick-fire section by asking about Bitcoin. Keith outlines his macro thesis that Bitcoin adoption inversely correlates with global rule of law stability. | |
| Quick Fire: Tech M&A and IPO Horizons | 5 | 4 | 2 | 4 | Harry asks about M&A regulation, IPO windows, and personal investment flaws. Keith admits his biggest flaw is filtering first meetings, prompting Harry to share his own scheduling delegation strategy. | |
| Education and the Thiel Fellowship Crusade | 3 | 3 | 1 | 2 | Harry asks quick-fire questions on college alternatives, European tech, and feedback for the podcast. Keith praises the Thiel Fellowship and encourages Harry's content strategy. |
Statements from this episode (48)
Rabois: Khosla Ventures holds hours-long Monday partner meetings for vigorous debate
“So we had very extensive partner meetings every Monday for hours at a time, and we vigorously debated new investments as well as the Impact and a potential upside of the current portfolio.”
Rabois: Founders Fund partners operated like independent PMs without collective debate
“Founders Fund, especially when I joined, was very much people running their own investment strategies. Think of it as like a PM running their own investment strategies, and there's a way of syncing and getting a certain number of critical mass and votes to sup…”
Rabois: Sponsoring non-standard venture deals consumes internal social capital
“If I want to do something that's very not standard or very controversial or not expected, I'm kind of burning and consuming some social capital. Now, if I make the right call that That gets paid back with interest, and you know, the next time I want to make a …”
Rabois: Lost Rippling seed to Gary Tan over $10M valuation gap
“Rickling came in, Parker came in and we gave a term sheet. It was, you know, obviously controversial at the time, for the seed, and Gary Tan, initialized, also gave a term sheet. And at the time, there was about a ten million dollar gap. I probably offered fiv…”
Rabois: Passed on Robinhood seed after Khosla banned seed board seats
“I had already, like, locked in a turn sheet to lead the series seat for Robin Hood chilling at 20 post, which was pretty expensive, but they came back and Really wanted me to join the board in the seed round, and this was in maybe my second year at KB, so I as…”
Rabois: Multi-stage venture investors cannot constantly join seed-stage boards
“You cannot be an institutional investor in a multistage fund, constantly joining boards at Seed, so you have to be very judicious, so the feedback wasn't wrong, it was just wrong as applied to that company.”
Rabois: Hid Faire seed board seat from Khosla partners for a year
“Fair came back and said, Max said to me, you know, we chatted, I chatted with my co-founders, and, you know, we'll say yes, but you have to join the board, and having learned and been burned by the Robinhood experience, I never really told my partners that I w…”
Rabois: Khosla, Founders Fund, and Sequoia historically led VC price discipline
“KB and Founders Fund may be the two most disciplined. I think Sequoia has also historically been very price disciplined to their credit. They've also relaxed that a bit but they're, I think, very top down and consciously, but I think historically, those three …”
Rabois: Walking away over seed price signals weak conviction, not discipline
“When at a seed round or a series A round, when you're walking away at price, it is a bit of lack of conviction, and you really should be looking at the mirror and say, why don't I have conviction? Because if you call, if you make the right call at seed, you're…”
Rabois: High Series B entry valuations destroy the risk-reward ratio
“At series B, you can pick a good company and invest in it, but you pay the wrong price. The risk reward is totally out of the, totally out of whack. You may not even make real money.”
Rabois: Invested in Ramp's seed round at over $30M post-money
“It probably, it might have been 40 posts, but it was more than 30.”
Rabois: Ramp will beat Brex and become 10x more valuable
“Ramp is absolutely going to be the winner. Probably will be two, three, four, five, 10 times more valuable.”
Rabois: Overvaluing step-function startups kills them if they miss milestones
“And those step function ones, if you slightly miss and your valuation entry price is too high, that company's dead, and that's a real problem.”
Stebbings: Reserving capital would have caused bad investments in Hopin and Clubhouse
“If I had done reserves, I would have put money into Hopin, Clubhouse, and be real. That would not have been a good set of events.”
Rabois: Venture funds should make ad hoc follow-on decisions, not reserve
“You're probably better off not reserving, and then making ad hoc decisions based upon the quality of that particular opportunity, which includes who's the investor, what's the traction of the company, what do we believe about the founder, what have we learned …”
Rabois: Venture funding rounds act like poker cards providing priced information
“It's like playing poker, and every round is like a card you're being dealt, and there's different informational content, and there's a different price point for that round, so what's the information you get from that new card, and then what's the price?”
Rabois: Opendoor required a $10M seed round to prove unit economics
“We raised 10 of the seed for Opendoor. That was actually the correct dose. Buying homes, you really can't prove that you can buy cohorts of homes accurately, like priced accurately and resold properly in less, for less than about ten million.”
Rabois: Most VCs are terrified to invest based on slides alone
“Most investors are terrified of assessing a team and a keynote deck and handing over one, two, three, four, five million dollars.”
Rabois: Startups solidify like concrete post-Series B, making changes painful
“So, early stage companies, it's kind of like liquid concrete. It's very valuable. And then it solidifies. Post Series B, it's totally solidified. And if you want to change something, you know, that's concrete, you have to mold this jackhammer, which is incredi…”
Rabois: Lost two-thirds of missed deals to the same competitors
“In about 11 years doing this, I think there's somewhere between five or six or so term sheets I've extended where I didn't close them, like I lost to somebody, and the reality is that four of the sticks, or two thirds of them, are the same, are to the same peo…”
Rabois: I can win 100% of the seed deals I target
“At seed, I can probably close a hundred percent of the things I want to invest in if I want to.”
Rabois: No VC maintains a 100% win rate at Series A
“And so if I want to pay, you know, pay an appropriate price, there's no way that go head to head with the top two or three other investors at series A that you're going to have a hundred percent win rate, period.”
Rabois: Every great company is its own unique cult
“Every great company builds its own muscle. It's its own cult. It's your unique cult.”
Rabois: Most growth VC funds are dead or dying from chasing momentum
“Chasing momentum, not really understanding fundamental company building, thinking spreadsheets dictate results, like, you know, not understanding the inputs versus the outputs, that these companies are built by people, not by math. At the end of the day, still…”
Rabois: Stripe Series C was Khosla's highest entry price ever
“At the time at KV, when we invested in Stripe Series C, it was an order of magnitude more expensive than the entry price for any investment in the history of KV.”
Rabois: Khosla Ventures' $3B fund includes $415M for seed investing
“So KV, although that's a, sounds like a big number, four hundred fifteen million of that is for seed investing, 1.5 billion or so is for venture, and only about eight or nine hundred million is for growth.”
Rabois: The optimal venture fund portfolio size is 30 to 50 companies
“I think the guidance I learned, and I don't know this is as rigorous as many things, but is roughly a good portfolio for a fund? Should be about 50, like that. So 50 is the right, 30 to 50.”
Rabois: Khosla historically lacked analytical rigor on late-stage follow-on decisions
“And I don't think back in my day at KB that we had a lot of analytical rigor to those late stage parada decisions. Whereas the founders fund, the growth team is very dialed in to evaluating those opportunities.”
Rabois: COVID-era Zoom speed-dating in venture capital was a disaster
“Speed dating during COVID was a disaster for everybody. It wasn't good for founders to do Zoom-based investing. It wasn't good for investors”
Rabois: Avoided launching a solo fund due to administrative drag coefficient
“Over the years, and I'd say over the fifteen-year time horizon, the last 15 years of my life, I have occasionally thought about, should I start a fund? There's definitely a lot of drag coefficient associated with that that I was not particularly excited with, …”
Rabois: Venture capital returns outside the top funds are horrific
“The general returns in venture are not strong at all. The general returns in 7580, and if you normalize against, like, the two hot periods of the last 50 years, like, 1996, 99, and take out, like, I 2019 and 21. The returns are horrific except in maybe the top…”
Rabois: Khosla systematically matches founders to partners, unlike Founders Fund
“Founders fund, we do, we did it too, but more on an ad hoc basis, not systematic, but at KVU is very systematic, like top down.”
Rabois: Board members should probe founders with questions, not prescribe answers
“As a board member, one of the best ways is to ask things in terms of questions, not in terms of answers. So you probe by questions, because then you're never leading. You may be leading a little bit, but you're never prescribing, and it's a very big difference…”
Rabois: Vinod Khosla published papers on AI replacing doctors before 2013
“He was on the, you know, the AI crusade before I even joined KV in 2013. He published papers about, you know, how AI was going to replace doctors in medicine, and this is like before I joined KV, so way ahead of the curve.”
Rabois: Vinod Khosla sometimes works 8 AM to midnight on Sundays
“I've seen him work eight a.m. To midnight on Sundays sometimes, like taking meetings.”
Rabois wants his children to have the work ethic of having nothing
“I want them to have the work ethic of someone who has nothing.”
Stebbings: Top venture investors cannot be home for dinner every night
“You can be like eight out of 10 good and be there for dinner, I think, but if you want to be like 9.9 out of 10, which you have to be in venture, I don't think you can be home for dinner every night.”
Rabois: Bitcoin adoption is inversely correlated with the rule of law
“So my theory was always from 2013 or 14 that adoption of Bitcoin would globally be inversely correlated to the rule of law in a specific market or specific country. And I think that's proven to be true.”
Rabois: Donald Trump will not win the 2024 Republican presidential nomination
“You know, as you've probably seen on Twitter, I don't even believe he's gonna be the Republican nominee for president.”
Rabois: FTC's Adobe-Figma challenge was standard antitrust enforcement
“Figma in some ways was easier case for the government in the FTC, which has been very aggressive than many other cases. You know, Figma Is competitive with Adobe's products. Like at the end of the day, that's not like a stretch where the FCC has been taking so…”
Rabois: IPO windows do not close; market success criteria shift
“So I don't believe that IPA windows really close or open. I think just the criteria for success is different in that, you know, what the bar is on, let's say revenue or what the bar is on your unit economics.”
Rabois: Most technology startups are better off going public early
“I'm going to get, I believe that most companies, you know, and I have a chapter in Eli Gill's high growth handbook on the topic in a fairly lengthy core answer as well on, I believe most companies are better Off going public early period.”
Rabois: Growth VCs can meet all prospective deals, unlike seed investors
“It's like not possible in like C to literally meet every company, whereas the growth people can meet every company that's ready for a growth round.”
Rabois: I have never passed on a multi-billion dollar founder
“Once you get me in the room with founders, I've made those calls really, really well. Like I was mentioning the other day that I'm not sure I've ever passed on somebody that's turned out to be building a multi-billion dollar company, but I have definitely decl…”
Roelof Botha: Deciding which first meetings to take is VC's hardest part
“Roloff mentioned this to me. I remember talking to him a year after he joined Sequoia. It was probably like 2004 and we had coffee and I said, what's the hardest part of the job? And he said, deciding which first meetings to take.”
Rabois: I would send my children to the Thiel Fellowship over college
“Teal Fellowship. We're definitely on the Teal Fellowship crusade.”