Keith Rabois says Silicon Valley atrophies as talent flees

• Keith Rabois, general partner of Founders Fund, feels San Francisco’s taxes are too high and doesn’t like what he sees as its high crime rate and failing public school system.
• But he has always found it “psychologically difficult” to imagine a big business being built from anywhere else, he told Business Insider in an exclusive interview.
• This changed during the pandemic. Rabois believes the Bay Area is losing its concentration of technological talent, perhaps permanently.
• The famous investor is now moving to Miami in December, where he hopes to distance himself from the liberal political culture of the Bay Area.
• Visit the Business Insider homepage for more stories.

Keith Rabois wanted to leave San Francisco for a long time. He pays taxes which he says are extremely high with, he says, only a failing public school system, rampant crime and terrible commutes to attest to it, he told Business Insider.

And, of course, he hates the liberal political culture of the Bay Area, which he has described as a “world perspective monoculture.” Rabois is known in the Valley as someone who aligns himself with his team of libertarian investors among companies like Peter Thiel, Joe Lonsdale and David Sacks, although he describes himself as a conservative.

But for years, Rabois endured the Bay Area. He built his career in Silicon Valley, as a CEO at PayPal, LinkedIn and Square before becoming a full-time VC at Khosla Ventures, where he invested in unicorns like Affirm, DoorDash, and OpenDoor (the start-up home purchase he helped co-founded in 2014).

The outspoken investor is now a general partner at Founders Fund, where he works with his first PayPal mentor, Thiel.

“If you had asked me before March 2020, if I liked living in San Francisco, I would have said no, but professionally I needed to be here,” Rabois told Business Insider.

“And since I have very strong professional ambitions and goals, I felt I had to compromise my personal preferences to be a successful professional,” he said.

Rabois was referring to the enormous concentration of founders and engineering talent in the Bay Area, which made Silicon Valley the undisputed center of the tech universe for decades. Previously, he said it was “psychologically difficult” for him to imagine a big startup being built elsewhere.

The pandemic, however, changed Rabois’ calculation as more tech companies embraced remote working and founders and CEOs moved across the country.

The Eureka moment, Rabois said, came after a few weeks in quarantine, when he realized the pandemic was already bringing about a “lasting and massive transformation in the way people worked and lived.”

“The idea that there is this powerful network effect in the Bay Area was already eroding,” he explained.

And that meant that the tech world was starting to see that someone could “build businesses in a distributed way or in different places”, and an investor like him could be successful “in a variety of different places”.

While the idea of ​​starting a tech company outside of Silicon Valley isn’t new to billionaires like Bill Gates or Michael Dell, in 2020 a growing number of big-name CEOs are leaving. Among the new parties are Drew Houston of Dropbox and Douglas Merritt of Splunk, who have moved to Austin, where they plan to make the Texas capital their permanent home. Brex co-founders Henrique Dubugras and Pedro Franceschi are moving to Los Angeles, relinquishing their company’s lease to SF in the process, The Information reported earlier this week.

Then there are people like Thiel and SpaceX founder Elon Musk who reside in Los Angeles. Thiel and Lonsdale’s Palantir company moved to Denver, while Lonsdale himself moved to Austin.

Rabois, however, says this list only scratches the surface of a much larger exodus of tech talent from the Bay Area.

“Many of the most ambitious people on the planet have lived here,” Rabois said of his longtime hometown. “But after COVID, I think the concentration of talent has atrophied, maybe permanently.”

Cliff Hawkins / Getty Images

Rabois moves to Miami to regain his annoyance

As known as he is for his successful investments, Rabois’ reputation is also based on his outspokenness. For example, Rabois recommended use the anti-malaria drug hydroxychloroquine to treat coronavirus, despite advice from public health officials that the drug is ineffective against COVID-19 and has caused serious complications in patients. (There is still no conclusive evidence that the drug works against COVID-19.) And two days before the 2020 election, he boldly predicts that Trump would receive 46% of the popular vote, but with substantial support from Hispanic, black, gay and Jewish voters.

This image of oneself as an “annoyance” is also the key to his success as an investor, says Rabois. One example he cited is the Founders Fund’s decision to support drone start-up Anduril Industries, which is working with the US government and US Customs and Border Protection (CBP) to build a virtual border wall and has just been see awarding a lucrative contract with the US Air Force. .

Anduril has sparked controversy since its inception, in part from its founder Palmer Luckey, who sold his first company, Oculus, to Facebook for $ 2 billion. Luckey backed Donald Trump in the 2016 and 2020 elections and the company’s first contract in 2017 was with CBP when the agency enforced tough new anti-immigrant policies. Anduril is now valued at $ 1.9 billion.

“Most people in San Francisco don’t believe in supporting the US Department of Defense,” Rabois said. “When a company like Anduril was founded, very few people would have funded it. We found it to be a comparative and competitive advantage.

And so Rabois says he’s moving to Miami in December not just because it’s a city with no income tax and no sunny beaches. He also hopes the city will help him become a better annoyance, allowing him to distance himself from Silicon Valley culture and allowing him to “identify other blind spots where we can invest and earn a higher return.” .

“The truth is when you spend a lot of time on Twitter and in Silicon Valley, even when you try, like me, to think differently, it’s difficult because all the oxygen around you is of a general arc. “said Rabois.

“Breathing fresh air might help me find new opportunities, because my brain won’t be so corrupt,” he added.

Now read:

Is Silicon Valley Finally Dead?

Keith Rabois was one of the first investors in Airbnb, Palantir and 5 other unicorns that went public this year. He says his success comes from taking risks in companies that other VCs would laugh at.