People keep telling us Slide exec Keith Rabois has become the top early stage startup investor, or “angel,” in Silicon Valley.Certainly, from Yelp to YouTube, there’s an impressive list of startups in Keith investment portfolio.
Now that Google has acquired Slide, we’re guessing Keith will eventually become a full time investor.
But who is Keith Rabois, really? And how did he get here?
The last time I visited Keith at work he was sitting quietly at a dark desk in a hushed corner of Slide’s San Francisco office.
I walked over with Slide’s PR maven Lily Lin trailing. Keith half-stood. We shook hands. He said a quiet hello. Lily and I stood there for an awkward second, hovering over Keith’s desk. It was obvious Keith very much wanted to sit back down and get back to work. So I went on with my tour of Slide.
It was funny because if I didn’t already know Keith from emails, IMs, and by reputation, I would have walked away from that greeting thinking he was a very humble – almost meek – person.
Keith is anything but meek. He’s basically arrogant – but in the way that industry people can’t help but admire.
Physically, he is balding but you don’t notice because he’s pugnacious and fit. He looks like Wayne Rooney’s older brother, which is fitting because Keith brings the same aggressive and scrappy attitude to investing (and emails and IMs and Twitter) that the Manchester United striker brings to the football pitch.
Keith is part of what’s known as the PayPal Mafia – a group of Silicon Valley executives and investors who worked at and then sold PayPal to eBay for $1.3 billion in 2002 and have been investing the money in startups since.There are more famous members of the PayPal Mafia than Keith. There’s Reid Hoffman, who’s best known for founding LinkedIn. Former PayPal CEO Peter Thiel runs a big hedge fund and is widely admired for being Facebook’s first outside investor.
But over and over, we keep hearing that it’s Keith’s time now.
Chris Dixon – whom Bloomberg BusinessWeek named the top angel invest in tech – recently tweeted, “now that Reid Hoffman [has] disappeared into the black hole of big VCs, [it] feels like Rabois took his place as top angel in the Valley.”
In an email, Chris elaborated, describing Keith as a “truly independent thinker” who “genuinely gets consumer behaviour.”
Chris says Keith’s best trait as an angel investor is that he spends many hours a week helping his CEOs with their companies. That’s “very unusual for an angel investor.”
The last time we met with Khosla Ventures partner Gideon Yu, he couldn’t stop raving about Keith either.
Yelp CEO Jeremy Stoppelman, who turned down a half billion dollar offer from Google last year, describes Keith as “a fantastic board member and early advisor to Yelp” who is “probably one of the most influential, but still relatively low profile people in the Valley.”
“One day when we were talking about fundraising he sat down with me to discuss how we might lay out the pitch deck. I was walking him through the business – explaining how we drive distribution via content when he had an ah-ha moment and exclaimed ‘it’s like a wheel!’ He then proceeded to draw out a slide that remains to this day the easiest and best way to explain to someone how our business works.”
Another portfolio CEO, Milo’s Jack Abraham told us that he meets with Keith for a couple hours every single Friday to discuss the business. “He really likes to add value to the company he works with,” says Jack.
“Some of the other super angels you could think of are just super super busy and don’t put as much time into the companies they invest in. As a young entrepreneur – I started Milo right out of college – it’s been invaluable to have him sort of as a mentor and helping me a long the way.”
So, what kind of startups does Keith invest in? How does he decide to give them his money?
What is it: 'Send money worldwide online with Xoom.com and save on money transfer fees.'
Why Keith Rabois Invested in Xoom:
I helped Kevin Hartz and Alan Bravarman found the company and raise our initial seedcapital from Peter Thiel. Xoom is an online alternative to Western Union with better fees and a superior user experience. Remittances are a massive market opportunity ($15 B annually) and ripe for disruption. Xoom is an outstanding company (Sequoia, NEA, Fidelity Ventures, Peter Thiel). It was Roloef's first investment.
What is it: 'LinkedIn strengthens and extends your existing network of trusted contacts.'
Why Keith Rabois Invested in LinkedIn:
Reid started to brainstorm about new ideas immediately after we agreed to sell PayPal to eBay in 2002. eBay did not endeavour to retain Reid (in fact, Matt Bannick basically suggested that he could easily replace his expertise) so Reid was motivated to create a major new Internet company. Big mistake: Matt Bannick is now on the ash heap of history; Reid is one of the top 5 most important people in the Valley. I helped brainstorm some early features and a key deputy of mine at PayPal, Lee Hower, joined Reid's founding team.
What is it: 'User Reviews and Recommendations of Top Restaurants, Shopping, Nightlife, Entertainment, Services and More at Yelp'
Why Keith Rabois Invested in Yelp:
I worked with Jeremy and Russ at PayPal. After they initially launched the company, they were having difficulty in raising capital from VCs so I started to work very closely with Jeremy on re-framing the pitch and got deeply involved in the business. I was appointed to the BoD in September 2005.
What is it: 'The ultimate in rehabilitation equipment and athletic conditioning. Train and rehab like professional athletes.'
Why Keith Rabois Invested in Alter-G:
They were literally two guys in a garage of their parents when I discovered them. Great product, large market but very few people would invest in them because the business did not conform to a traditional box. Companies like this that virtually everyone rejects are the most gratifying to support and watch succeed.
What is it: 'Short term & online personal cash loans with convenient instalment payment options.'
Why Keith Rabois Invested in ThinkCash:
ThinkCash is an online alternative to financing by credit card at much better rates than traditional pay day loads. The company is awesome. I was asked to help advise by their investors.
What is it: 'Create your family tree and invite relatives to share. Search 90 million profiles and discover new ancestors.'
Why Keith Rabois Invested in Geni:
I reported to David at PayPal and was extremely impressed with the elegance of the first version of the product.
What is it: 'Yammer is a tool for making companies and organisations more productive through the exchange of short frequent answers to one simple question: What are you working on?'
Why Keith Rabois Invested in Yammer:
Nobody has truly succeeded with revolutionizing internal corporate communications. Yammer adopts a consumer viral model and creates an enterprise solution which will dominate the way information is disseminated professionally.
What is it: 'YouTube is a place to discover, watch, upload and share videos.'
Why Keith Rabois Invested in YouTube:
Ran into Jawed at a PayPal colleague's BBQ over July 4th weekend. Asked him what he was up to and he replied, 'I just launched this thing called youtube.' 'What is it?' He explained. I asked 'Can I invest?' 30 seconds later.
What is it: 'Find products in-stock now at local stores. Compare product ratings/reviews and find the best price from the web.'
Why Keith Rabois Invested in Milo:
I was introduced to the founder by his friend Doug Sherrets who reports to me at Slide. Invested prior to launch with Kevin Hartz and Jawed Karim.
What is it: 'Connect with mums you know. A private circle for sharing family updates'
Why Keith Rabois Invested in Circle of mums:
Founder and CTO was a colleague at PayPal and LinkedIn. Mike was one of the key anti-fraud innovators at PayPal. Massive market opportunity if you can aggregate mums at scale. They have the best opportunity.
What is it: 'Group video conferencing made simple. Connect face to face with 2 to 200 people. No fuss. No download.'
Why Keith Rabois Invested in TokBox:
Browser-based video chat, helped Seed the company prior to launch (then financed by Sequoia and Bain Capital).
What is it: 'Interior design online. Browse designer portfolios, get design advice from professionals, and shop'
Why Keith Rabois Invested in Decorati:
I am one of the few people who is actually an Internet professional an amateur interior designer. When Peter Thiel invested, he suggest the founder recruit me to be involved.
What is it: 'Set up your event online and start selling tickets in minutes!'
Why Keith Rabois Invested in Eventbrite:
Eventbrite was founded by my friend from college Kevin Hartz, who is my frequent investment partner and who previously invested in PayPal as well as founded Xoom.
What is it: 'Don't stay at a hotel. Airbnb is a global network of accommodations offered by locals'
Why Keith Rabois Invested in AirBnB:
Within 3 minutes of meeting the team, I exclaimed that it was the most interesting company I had seen since YouTube. Disrupting 2-3 massive markets. Great founders, awesome culture.
What is it: 'Palantir provides analytics platforms for premier financial and intelligence clients.'
Why Keith Rabois Invested in Palantir:
Amazing company. Best recruiting machine for talent in the Valley. Co-founder was easily in the top 20 most impressive people at PayPal.
For the most part, I actually enjoyed the practice of law so it was not an easy decision to abandon it:
1. I billed 365 hours in January 1999. This is not an exaggeration.
2. Associates at my firm were expected to be total generalists. There were components of practicing law that I enjoyed, particularly research and drafting briefs, and elements of the job that I detested, especially document review. Unlike in the business world, there was no realistic method of focusing exclusively on areas of my competitive advantage. (Imagine, for example, if I were required to write code 25% of the time. I see some of my engineering friends recoiling in horror right about now.)
3. A high fraction of my billable hours were devoted to ensuring that a document was 99.9% perfect, whereas the creative and rewarding elements of the job were the first 80% of the effort.
4. Top-tier associates are compensated on a purely lock-step comp model (at most, a slight deviation was possible) which would frustrate all of the best associates. As a result, the best corporate associates in my class all jumped into i-banking.
5. In a client-services business like law, you have no control over your schedule. I would never truly be able to commit to attending events, holidays or weddings. Even at the same level of professional commitment, most entrepreneurs have greater flexibility and control over their lives which is a key factor in satisfaction.
6. Many of my undergraduate friends from Stanford were actively involved in building the first generation of the Internet. They actively recruited and seduced me. I was attracted by the challenge of mastering something new.
7. Finally, Geoff Donaker, now the COO of Yelp, succeeded in persuading me to jump off the cliff and join him at a new startup he had just joined.
In February of 2000, I agreed to leave the safety and security of large law firm life for the wildnerness of Internet startups. The market crashed less than a month after I started my job at Voter.com, a hot startup funded by over $15 million from CRV, Sigma Partners and Bessemer. Our CEO was a 22-year old Harvard graduate.
This decision would eventually alter my entire identity. Until that moment, I had followed the most predictable, well-established paths and chased the most well-established credentials (Stanford poli sci, HLS, federal appellate clerkship, S&C etc). I eschewed risk.
I had never even used an Internet browser until one year before that decision. We were not even allowed to have an external email address at work until 1998. I spent nearly all of my life with people from the same educational backgrounds and pursuing identical professional aspirations.
I jumped into a world I knew nothing about, with no real life-line. I needed to learn everything on the fly, forge a completely new network, and navigate people who were unreliable, even willing to lie or betray you in a second. We had to fire a guy on my team who would frequently show up for work drunk; this did not happen at Sullivan & Cromwell.
The first month was rough. But by the third month, I was hooked. Fortunately, Geoff Donaker was able to teach me the fundamentals of Internet BD and Excel-modelling quickly. I mastered the BD part, and could at least fake a decent model (although Geoff always barfed on the formatting.) I received a promotion in my fourth month.
If I had not quit the law before the market collapsed at the end of March 2000, I never would have been able to.
To quote a friend of mine from Stanford from the mid 1990's: 'Rabois, you went from the most risk averse person I knew'.... to someone who intentionally embraces risk.
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