Keith Rabois, General Partner, Founders Fund.[/caption]
With Coronavirus closures, investors have to rely on digital tools for all their work, including actual investments. This can be a particular challenge since that work relies heavily on intuition and judgement calls.
Keith Rabois is famous for investing in companies such as Paypal, LinkedIn, and Airbnb, making him one of the most influential entrepreneurs on the planet. He is also an investor of Run The World, the first company he invested in over video chat. Recently, he sat down for an interview with CEO Xiaoyin Qu for The New Playbook series. Here are ten of the most fascinating lessons we learned from him about remote investing.
- The criteria remains the same: Look for extraordinary people who want to change the world. Rabois also admitted to a slight preference for first time founders because they have a kind of naivete. "I think unfortunately building a business in a company is really hard and very painful, and it creates a lot of scar tissue," he said. Naivete gives the courage to just charge in.
- Pitch decks are more important. Rabois is a big fan of decks. He describes a solid deck as indispensable for Zoom meetings to keep the meeting focused.
- Retrain yourself. The hacks you use to assess people under normal situations may not work over the computer.
- The caliber of the founding team is paramount. Rabois described it as the number one priority, and perhaps also the number two and the number three. For him, it is that important. Founders Fund, the San Francisco-based venture capital firm where he is a general partner, holds to this principle as well.
- Extend your networks. Importantly, from the investor's side, if you only invest in people already in your network then you are just repeating the network. The ideas that are really revolutionary might never find their way to you.
- Ask "why now?" Is there a reason why this project is perfectly timed? They will probably be asking this in the little voices in their heads. Even though the pandemic has impacted things, fundamental human behavior will probably not change all that much. Still, timing is important.
- Seek out anomalies. "What I'm looking for in the deck is somespark of anomaly," he said. Sometimes the best ideas come from somewhere you don't expect, Rabois reflected. Be open to this. Whether it's odd data, or a team, or an insight, this can light the spark required for stunning success. This is what Rabois said he's on the hunt for. With Lyft, it was apparent that the team had an unusual background and was already deeply thinking about the issues of the market during the initial meeting.
- Do your homework: assess the market. Founders Fund, Rabois said, looks for founders who have an "unfair advantage" to achieve their goals. It takes the strategy, the team, the vision. Referrals are a common way of getting a foot in the door, though Rabois expressed some queasiness to outsourcing investing judgements. According to him, unlike in hiring processes where secondhand opinions might be very useful, investing is a more rare talent. Still, looking outside your networks is important.
- Search for the correct formula. Having a general idea is one thing. Having a vision for how this works and the team to do it are another.
- Seek out the contrarian. In a response that echoes Peter Theil's book Zero to One, Rabois recommends contrarianism, over digital video or in person. Think different.
So, next time you want to pitch your startup idea to an investor over Zoom, don't worry. Investors are willing to hear you out, but make sure your vision comes clear through the screen.
Tip: Invite both investors and founders to an event and create a Cocktail Party with group-based matching. You can have two groups: one group of founders and the other of investors and we will do our best to match founders with investors.
Create your cocktail party here.