Uncapped #2 | Keith Rabois from Khosla Ventures

**Jack Altman** (0:01)
All right, Keith, thanks a bunch for doing this. I appreciate you making time.

**Keith Rabois** (0:03)
Pleasure to be with you.

**Jack Altman** (0:04)
I know you're busy. I know there's a lot of flying going on, and I am committed to talking fast to keep up with you during this podcast.

**Keith Rabois** (0:09)
Ask the questions as slowly as you like.

**Jack Altman** (0:11)
I will, very fast though. Okay, so the first thing I want to talk to you about is the whole idea of investing in outliers. And I saw you recently talk about something that resonated with me, where you're like the top 15 basis points of people. Those are the founders that make the companies that matter both to the world, probably also to venture returns. The question I have is how do you marry that with being a very early stage pre-product market fit investor, and maybe to put a little bit more context around it. We all kind of know what great looks like when you meet a fully developed founder like The Colossians or Brian Chesky today. I think anybody could walk into the room with them and be like, this person's amazing. But you operate for the most part at the very early stages. And so just talk to me about what makes great. How do you know what great is at those early stages? What's inside your brain as you're saying that, talking about pre-product market fit investing?

**Keith Rabois** (0:57)
Well, the reason why I think it's wonderful to be a pre-product market investor is very few people can do it. So as you point out, as companies grow up, as founders mature, many, many investors can figure out that these people are excellent, this company is excellent, the P&L is amazing, et cetera. So in venture, the returns are mediocre across the venture industry. So the only way to produce great returns that are impressive to LP is you have to have an alpha, you have to have a comparative advantage, competitive advantage of some sort. And so mine is to find founders when they have nothing but a keynote deck, because there is nothing else for people to go on. There's no other, there's not maybe even a product, so they can't even look at the product. There's almost surely not product metrics and absolutely not financial metrics. So I think this is the most amazing thing for me because what other investors do, except throw up their hands and kind of barf. So you want to compete like, yeah, kind of a Peter Tillism, compete where there's no competition. Truthfully, there's virtually no competition on a keynote deck in founders for undiscovered founders. Once you've created X billion dollar company, you're going to start your next company? Sure, there's competition. You're going to start the company. I'm sure there'll be competition to invest in around. But you're talking about people starting their first company from scratch and they just have a keynote deck and a co-founder? That's awesome because almost nobody else wants to do what I do. So then the question is, can you do it well? It's like you have to be contrarian to right, not just bet on people, but you also have to be right, a reasonable fraction in an early stage of investing call 40%. 40% is pretty much hall of fame, Ted Williams kind of stuff, if you can be that accurate. So then the question is, what are you looking for? To me, the best I can describe it is, every founder that really succeeds has a superpower. That superpower is something like they're in the top one to 10 basis points in the world on some trade.
So, they're the most tenacious person you've ever met in your life. They're the most disciplined person you've ever met. They're the smartest person. They're the greatest salesperson. It can be anyone, but they have to have a trait.

**Jack Altman** (2:54)
And it has to match the company.

**Keith Rabois** (2:56)
It ideally matches the company. If you can match it to the company, then it's like so set up for success. That's like, please take my money right now. Do not pass go. Don't meet with my partners. Here's the jack. If it's just the trait without necessarily directly matching the company, it's still probably a pretty good investment. Actually, it's like how many dollars at what price. But if it absolutely matches 100%, like lean in, lean in, lean in. The other possible alternative is a Venn diagram overlap that you never see. I'll give you a couple of examples. Two traits that don't usually go together in people. So I remember when I first started working with Max Lovechain in late 2000, Reid Hoffman said to me to prepare me for my first one-on-one meeting with Max that Max is a world-class technologist and a world-class business strategist. And he's like, there's five of those people who are less than all of Silicon Valley. And this is amazing. This is December 2000 So before Max was famous, before PayPal was successful, we were a complete mess. But Reid exactly nailed Max's combination of superpowers. Those two traits don't go together. Jack Dorsey, another very successful founder. Jack actually can do three. He's actually a pretty good technologist. He's a world-class design and has world-class design taste. And he's a very strong business strategist. So that you marry three traits that don't go together, that's another reason to invest. But those are the only two, in my experience, is like you have to have that. If you think about it, it's even globalized this. It's not about founders. It's about anybody who succeeds in a competitive industry. You're a professional athlete. You want to be the best NBA player of all time. You almost surely have some abilities, some traits, some body composition that's very different. Or you want to be a world-class DJ. There's a reason why, or in politics, there's a reason why Donald Trump has been elected to President of the United States twice, despite a lot of people hating him, because he has superpowers. And you can actually, I've spent the last couple of years trying to isolate his superpowers, because I was like, I want to understand, why does he keep winning despite the world? So I think there's two. One is he understands marketing, and that's easy to say, but very rare. And I'll give you an illustration, a very specific illustration. Trump actually cares about what his supporters look like. Now, that sounds crazy if you think about politics. You're like, why do I care what my supporters look like?