Keith Rabois on Miami and Company-Building in 2021

Hey everybody, it's Eric Torenberg, co-founder, partner of Village Global, a network driven venture firm. And this is Metro Stories, a podcast covering topics relating to tech and business with world leading experts. So we're really lucky it's going to be a great session. So maybe we could start by since a lot of us here, at least people who've flown here, have been inspired by your example, maybe let's start with your story. When did you have conviction that you were going to move here? How much of it was accelerated by the pandemic? Like would it have happened otherwise? And why don't you just tell that story?

So I don't think we would, we definitely wouldn't have moved before the pandemic, mostly because I was too conservative and too risk averse and never would have thought about new ideas and new things. And then as the pandemic hit, and lots of people, myself included, spent time in different places, realized that all of the issues and frustrations of California weren't natural to human, the history of humans. It was actually natural to only California. And so as we started traveling around for various things, we realized, well, why don't we just choose to live where we want to live and then build what we want to build in terms of companies and my significant other does politics, build our careers around where we wanted to live. And so we started exploring over the summer, last summer, Actually, our date night activity on Saturdays was to surf Zillow all around the country and look for interesting places to live and compare housing. Because you get a feel for the vibe of a city, you get a feel for the culture of a city based upon houses. If you read the history of cities, you'll see why. And so fundamentally, we just did that. And we narrowed it down. I had lived, this is the seventh or eighth city I've lived in my life, so I had a pretty good feel for what were options in the US. We didn't totally seriously consider things outside the US, at least this time. Maybe in the future, I had someone try to convince me to open a country next in the Bahamas, actually at lunch today. I said, let's slow down here a little bit.

This is just a proof of concept.

Yeah, we're going to prove it in a city. Actually, Brian Chesky also told me that. He's like, a city is too easy for you to build. You need to build a country. But anyway, so we narrowed it down, but I had a pretty good feel of what the choices were. But my husband went around traveling to a few cities, came back and said, we should definitely go to Miami. And so then we started researching it. And the biggest question for me was not whether I would like it here personally, socially, et cetera. Could we build a technology center because I figure my job is to make more money for my LPs this decade than I did last decade. And I was curious about whether that was possible. So I started calling up people who were here, most notably Jack Abraham of Atomic, had moved here in March temporarily in September permanently. And Atomic starts companies, incubates companies, and then sometimes I fund them. And so I asked him what he thought. He said, A, you're gonna love it here, and B, you can definitely be successful here as an investor. And so flew out October, flew out for a weekend, bought a house at the end of the weekend, went into contract technically, looked at four houses, purchased.

One, and the rest is history, sort of. I mean, you and others have been talking a lot in the past about sort of the benefits of clustering and how hard it is to create new startup ecosystems. In a post-pandemic world, what's changed in terms of what does it really take to get a startup ecosystem off the ground? And what are the criteria that makes.

A great startup ecosystem? Well, first question is nobody really knows. I mean, this hasn't been done in a while. And so, like, anybody tells you you need X, Y, and Z is kind of lying. But if you reverse engineer history, you can look at some common ingredients. And I'm lucky enough to be old enough that I actually know most of the people, at least partially, who built Silicon Valley as they were telling their end of their career, I sort of starting mine, and also have read pretty much everything written about the history of Silicon Valley. So, I have a pretty good feel for what actually was important and what wasn't. So, I said, okay, well, what would we need to reverse engineer Silicon Valley somewhere else with better X, Y, and Z? Then secondly, I had a very good CEO, one of my favorite CEOs ever, asked me a question five years ago at dinner saying, Would you need to move 100 people, 1,000 people, or 10,000 people? Kind of a classic brain teaser. And I said, actually, I don't know. And then after we announced that we were moving here in November, he started texting me like, what's going on? And I said, Do you remember that dinner? And he's like, oh, my God. And I was like, It's all your fault. I decided to run the experiment. So anyway, I don't know whether we need 100,000 or 10,000. 2,000 people. We do need a mix of different skills. Like we need some designers, some engineers, some angel investors, some VCs, et cetera. So I sometimes joke that I feel like I'm building Noah's Ark of like we need two of these, two of those, two of those, and then you let them mix and you don't have a top-down view. This isn't like France or something where we have like the government saying, Hey, we need startups. It's actually bottom-up driven.

So we just need the right ingredients and let everybody mix and see what happens. What was really interesting is that a lot of it seemed to take place on Twitter. There seemed to be a strong memetic effect where like-minded people or people who are inspired by your example were following. And that seems new that there's this sort of digital coordination that leads to actually people moving to new places.

Yeah, it was a surprise. I actually didn't expect that to happen. In fact, the announcement that I was moving here was somewhat done Accidentally, I was speaking at a crypto conference in sometime like late October, early November, and it just happened to be that the guy who's moderating it is a writer for Fortune, and about 10 days later he wrote it up as a story, which shows you that he didn't even think it was that newsworthy because he took 10 days to write it. Then it just exploded on Twitter way beyond my expectations, which meant, you know, it resonated with people obviously meant to me that, where what I inferred from that was that I was tapping into some root some really rude resentment and some rude objections to California and people who are seriously looking for an alternative. My Twitter stream that day just blew up and then obviously the mayor chimed in, which I had never heard of him before, truthfully. I certainly had never met him. I probably had heard his name in the background of my brain somewhere, but didn't know who the hell he was until he tweeted at me. And then that created another wave. And then people noticing that the mayor was welcoming technologists and entrepreneurs and investors started a whole another generation of interest. And then people started asking questions. Why? Why is this? Why is this happening here? But yeah, it's been propelled solely through social media, realistically.

It feels different today, although I'm curious what your take is, versus like a decade ago, where if something becomes a meme and starts to get made fun of in some way, it almost gives it more power and more legitimacy. And we see this sometimes in On Deck, and certainly Miami gets it a lot. Was that true a decade ago to the same extent or the extent to which something becoming a meme just gave it more power? Maybe.

I mean, there's the old Gandhi quote about they laugh at you and all that stuff. So it's probably been true for history that, yeah, I'd say it's more important that people pay attention to you, right? And whether it's directionally positive or directionally negative, that can be channeled into ultimately positive energy, but apathy really is the worst. People are busy. And so that's probably the worst reaction.

When people start to make fun of Miami or meme it, you got excited?

Or you're like, this is... Yeah, yeah, yeah. I felt exactly like starting a company again, actually. I actually even tweeted that at a couple of critics. These are all the people ridiculing, just like when a company launches. You watched, you know, my ex-intern, Sue Ha, launched Mighty recently. And the reaction to that on Hacker News and elsewhere was pretty amusing. Probably not as amusing to him as to me, but fundamentally, that's what happened. So when we sort of said, We're coming to Miami, we're going to make technology the centerpiece to Miami and Miami the centerpiece of technology. A lot of people were snickering. I said, this is exactly what it felt like to launch company X, Y, and Z, and the reality is the same. It's already moved, though. Now, very few people are snickering. A few people are still cautiously optimistic or moderately skeptical somewhere in that spectrum. But even the people that were most cynical have either moved here or thinking about moving here or at least texting me saying I was right.

It's interesting how the criticisms go from, Hey, this will never happen to, Now it's happening and it's a problem.

Oh, yeah, it's a real, it's totally trending, I mean, completely transformed. I had one partner of mine was moderately cynical about it and he conceded he was wrong. Sam Altman at YC, you know, has been like doubling down in the Bay Area and he's basically said it's extremely impressive, like, you know, what's going on here? Delian did the biggest 180. Yeah, Delian was critical on Twitter, but like, you know, he's already moved here. He's already the champion. He's moving his friends and family. Everybody's showing up in the Delian circles for better or for worse.

The great conversion. So you must give the pitch all day long. Half the people here have come outside of Miami. Some of them are thinking of moving. Some of them have already moved, perhaps. Some of them may not still be convinced. What do you find is most compelling? Because often people say, Hey, it's great to spend a weekend or a week or great to even raise around. All the investors are here. But are there engineers here? Can my deep tech company exist here? What do you say to those kinds of questions in terms of founders who are thinking of building here?

Well, first of all, I just started and said, Look around. Do you want to be happy? One of my CEOs said to me the other day that he's 30. He moved his company here from the Bay Area. And our one-on-one last week, he said, On an average day, he's 30 to 40% happier. So think about how much that compounds through your life. Another CEO was visiting this weekend, and he said to me over drinks on Friday night, that he could tell that I'd moved here because I was smiling during our Zoom 101s. It's literally that obvious. So you just go out and people are happy. And it's old Peter Thielism that you can't put a price on your happiness. You only live one life and you want to be happy. So then you start thinking, okay, now where's the best? So we use these filters. We were looking for warm weather. We prefer warm weather. We were looking for a certain style workout. We were looking for having food. Yeah, we needed to do our berries. I was like, really out cities that don't have berries. and furiously texting the CEO about cities that didn't yet open yet, like Denver, for example, at the time, or Austin at the time. In any event, we filtered by cuisine, filtered by actually we like to shop, like retail, like with filtered by art style. And so as we went through the filters, the only U.S. city that qualified was Miami, actually. There wasn't really a second choice. So it's like a no brainer. Then to build a company, it's like, well, if we think this is the best place to live, why can't we communicate that to other people? Engineers aren't this foreign species from Mars. It's like they want to be happy too. So you just have to articulate to them, like, do you want to be happy or do you want to sell soda water the rest of your life sort of thing?

The new Steve Jobs. Yeah, that's great. And so you've incubated OpenStore. Why don't you talk a little bit about what OpenStore is and how out of all the company ideas, and we've talked about them throughout the years, why this one and why now?

Well, so first of all, I decided to start a company here because I felt like sort of like the proverbial you should eat your dog food. If you think Miami is the best place to build a company, you should build a company here. So I'm like, okay, well we can set a reference example. We'll build a company, it'll be successful, and then everybody will stop raising these stupid objections. We've actually done really well with recruiting. So we're something like 13 to 14 on offers right now, which I've never had 13 to 14 people moving. Every single person in the company has moved. One person was halfway in Florida, halfway LA. Every other person, I think, has moved from the Bay Area. So it's been really easy to convert people. We have our head of finance is moving from LA. He's on his way, highly likely to close a GC who has to move from the Bay Area after 42 years. So people are willing, if you give them an option that's as ambitious professionally and combine it with Miami. Where you get in trouble is when you force people to make a trade-off, like a stark trade-off. Well, I'd like to live here, but I can't be successful. Or I'd like to be successful, but I can't be happy. But if you can combine the two.

It'S the easiest sales pitch ever. We all had a number of friends visit these past couple weeks, and I had some people say something like, Hey, in Miami there's too many distractions. Which basically they're saying happiness is a distraction.

Which I don't get why, I don't know, discipline. Focus. Well, I think the people, it's sort of like you get, there's opportunities that will magnify character traits you already have. And so if you're very focused and disciplined, you're not going to be distracted. Whether New York City has plenty of distractions. Like, it's not like New York, you know, it's the city that doesn't sleep, like literally. And so if you could build companies, and obviously people have been building technology companies in New York City very successfully for the last 15 years. So if you can build in New York City, there's no reason you can't build it here. Tel Aviv has built very strong deep tech companies. Tel Aviv has got lots of distractions, actually maybe even more than here. So fundamentally, I think it just magnifies, actually, interesting enough, the most disciplined person I've met in my life is a friend I made in Miami, and he doesn't get distracted with anything. So it's very possible. So what it's done for me is there are a lot of distractions. It just forced me to clarify, like, what are my priorities and allocate my time. I speak, you know, when I do management training about calendar audits and mapping your parties against your time, and living here definitely requires you to do that all the time.

Is there any more you could share about OpenStore? I know it's somewhat stealth.

Oh, sure. Yeah. So what OpenStore aspires to do is we're going to provide liquidity really to long-tail Shopify merchants. So think very small businesses typically don't have a lot of options. So they're not growing explosively and they're not a pro. Venture capital is not really an appropriate option for them. Traditional debt providers are not really interested in these type of businesses. They don't understand them. They have a year or less of operating history, etc. and some of the proprietors eventually want liquidity. They haven't raised external capital, so X million dollars, an offer to buy them out of their business is life changing. They also don't live in expensive jurisdictions like the Bay Area or let's say New York City. So you're giving them meaningful opportunity to provide for their family forever. And so we're going to stitch these together into one large business, I guess, by providing instant liquidity. So we will get access to your Shopify data and give you an offer same day. And if you like the offer, we'll take over the business for you.

When you think about how yours, well, obviously, your PayPal and the firm and fintech background make a lot of sense here. And Jack, I guess, on the consumer side of things, where's Jack's? No, it was Jack's idea.

So he pitched me on it. He said, I've got the perfect company for you. And this, we were having brunch on Christmas Day in December. And as he started explaining it, A, the big picture idea and opportunity resonate with me, but the specific skills I have, which is actually a bit of open door meets square. So square back before 2010, if you're running a small business, let's say below $100,000 in sales, you really couldn't easily get access to credit cards. You couldn't process Visa, MasterCard, Amex, and so you're at a disadvantage competing with larger businesses. And what we basically did is got rid of the underwriting process, made it automatic so everybody could accept square instantly. So you didn't have to apply, you didn't have to wait weeks, you didn't have to get a credit check, and you didn't have to have someone come to your business and inspect you. And so that's what we're doing. We're basically going to instantly underwrite these businesses, give them an offer without having to go through massive about a diligence.

The pain of diligence, the friction of diligence, and the cost of diligence makes it prohibitive for anybody to buy these businesses. I want to get into some elements of company building in 2021, and we'll do a future even deeper dive in our next chat. But there's a lot of questions right now around distributed versus all co-located. There are other sort of new questions that are emerging in a post-pandemic world about what's different about company building. Where do you stand on some of these issues? Presumably you're flying all these people in, so you want everybody in the same place?

Yeah, I'm a big advocate of people being co-located, at least until you have a predictable roadmap. business traction, hopefully like a network effect or accumulating advantages kick in. That said, we're going to run this social experiment for the next two years. Nobody knows how it's going to play out. Different companies are going to try different things. I think there is no one size fits all is going to be the answer. Different companies are in different markets with different needs for talent at different stages. There's so many permutations on this that it's not obvious. I think we'll start seeing some examples of the best way to do X, the best way to do Y. and people will emulate those. We might even get lucky and see some research on the topic, on the topics. It's a very common question that virtually every CEO I work with is asking. It's not going to be possible also to go back and forth. I think it's going to be like driving a school bus back in the day. If you kind of steer left as a bus driver, all the kids are going to fly around. So you can't really do that. You're going to have to make a decision pretty soon for most companies about what kind of culture they want to build, where, and what are the rules and frameworks around that? and you're going to have to stick with that because it's going to be also self-fulfilling. So for example, if you do a remote only workforce, you may be productive. I can certainly see some data from some companies that suggest the productivity goes up, at least in the short term. However, for a lot of people, especially younger in their career, a job, a professional opportunity is a bundle of things including social. Like they get to meet new people. They may be foreign, they may be new to a new city, new country, they want to meet peers. And so when you're working remotely, It's basically impossible to do that. Similarly, if you're going to hire young up and coming people that have potential, they need to learn their craft somehow. And learning through osmosis is a much better way to do it than a structured environment. Structured coaching and mentoring works once someone has some fundamentals, but if you're taking someone sort of off the street with a lot of without a lot of context, osmosis is really the best way to learn. And so that's going to be extremely difficult to do. So you're going to have to change the ratios of experience and inexperience. and companies. So there's a lot of second order consequences, but nobody has a formula that's like, hey, just do this and you're set.

Are there other experiments that you think we're running now or going to be running soon that you think will provide some interesting learnings? Like one, for example, might be, you know, are more if we do do distributed, are more people going to leave the cities?

Yeah, I don't know. There's some data on that, too, but how much of that is polluted by, you know, COVID related policies and differences in various places? I think there may be more premium on space. outdoor space, for example, gym space in a home, absolutely a premium on people, roommate selection. I think people learn the hard way that you might spend more time with your roommates than you thought you would. So I think that was something people took for granted, especially in dense urban environments where you could almost never be home except to sleep in your bed. So people just didn't care. But now that people have seen that the downside of being locked in a small place with a stranger, They may spend more time and there might be opportunities to start companies that do that matchmaking, etc. Better.

Not to downplay everything that the mayor has done, but it seems that the bar has been so low to just be welcoming to new people coming into the city. Do you think the vision of sort of like governments competing for business is going to are there going to be more Miamis of this sort of fashion?

Well, absolutely, everybody's watching him. Politicians, you know, different parties, different levels. It's been pretty remarkable to watch and people are noticing how much attention he's getting. And, you know, what he does with his career will sort of like, just like startup companies emulate successful companies. So Facebook gets a growth team, everybody gets a growth team, you know, Etc. If the mayor does well in his political career, everybody's going to emulate the mayor.

And if you were the, well, you are an advisor to the mayor. And you were advising him on his 30-year political career, you know, what would you advise him?

Well, I think he'll wait for, you know, a good opportunity to run for another office and, you know, repeat the same playbook, bringing the future, the future of Technology, high paying jobs, future of Education, future of different Industries to the state, to the federal level, wherever.

And how do you think he or someone balances the desire to, to bring people in with the desire to keep you know, existing people happy. Most people are, one probably, but some people are maybe sensitive to certain dynamics of new people coming in. There's two things.

First of all, most of the reason why people are sensitive historically is because the idiotic powers that be in the Bay Area refuse to build housing. So housing prices did only one thing, but go up and infuriating a lot of people. If you build housing, and if you look out here, there's plenty of space to build housing. prices are not going to go up. There's almost no appreciable rise in condos right now in Miami, despite all the people moving here. Single family homes, a little bit different story. It depends on where, but it's even that's not an unequivocally like price appreciation. When I first moved here, I had dinner that Sunday night with the mayor and he said, Look, Miami, Miami looks like a big city, but it's 20 to 25% build out. We can take 4x the number of people we have here easily and accommodate them. Plus, Miami doesn't have a problem, if you notice, building up. Like if you build skyscrapers, it's amazing what you can do. You know, go to Hong Kong sometime and check it out. You can fit a lot of people in a very comfortable, interesting way to live. So there's plenty of room for companies here. There's room for people. So I think that's by far the biggest and most important element is ensure that there's housing that people want and that they can afford. The other, yeah, I mean, other than that, oh, so when I also moved here, I got a call from one of the senators here. and he called me up and said, welcome to Miami. How's it going? I said, it's great, blah, blah, blah. He's like, are you happy? And I'm like, yeah, yeah, it's amazing. I feel like I escaped Alcatraz. And he laughed and he said, Miami and Florida has always been that way. We have the only state legislature where more than 50% of the representatives are not from Florida. In fact, three of the last four governors elected here are not actually from Florida. He said, people here don't care where.

You'Re from because everybody's moved here at some point. Yeah, that's awesome. Do you think San Francisco will change at all or will they respond to all these people leaving?

Well, I think it's going to take a bit of a crisis first. I grew up in a commuter suburb of New York when I was younger and New York City went through the most ridiculous crises in the late 70s, early 80s. And it took so many different crises before people were willing to try something new. So I think both San Francisco and to some extent, California as a whole.

Are going to have to go through that first. Yeah. What's the next inflection point for Miami? Is it sort of like just day after day keep getting more people in and just wait for successful companies? Or what's the sort of the midterm strategy here?

Yeah, I think it's like, you know, you want to compound your effects or we're in a network effect business and we now have a great network and so we want the network to keep growing. But that should propel itself. Like each person who moves here has five or 10 friends and five or 10 colleagues. And if they get 20% of their friends and 25% of their colleagues to move. This just keeps skyrocketing. So I think continuing momentum, it's just like managing a company. You need to go from inertia to momentum. That's the hardest thing in company building. Once you have momentum, you want to increase it or amplify it if you can, but at a minimum sustain it. So you just need to sustain the momentum.

Do you think some version of digital nomading is the future in terms of people being much more mobile, bicoastal, is that going to be a very common thing? And if so, what does that mean for real estate?

I think the role, it depends on the role in industry. Certainly for an investor, that's absolutely easy to do. I suspect most of my investor competitors will wind up owning places in two states, two cities. It's just we're very mobile, what we do. I don't know if that'll work as well for company builders. Yeah.

Makes sense. I've heard LA as a comp to Miami. And I think when the people say that, that have said it to me, what they mean is sort of that there's a certain type of company that will thrive here tends to be more consumer driven or more entertainment driven or more behavioral driven as opposed to maybe deep technical breakthrough.

I don't totally buy that. I think there's a competitive advantage in starting a consumer design driven blend of entertainment driven company here compared to any city in the world. But I also think you can build technology companies that are pretty deep. Like, so for example, there's a few robotic surgery companies here. That's about as hard as it gets. And so I think that's just an excuse. The original innovative database in the last 20 years was built in Florida. So you can Magic Leap, which actually is a real product on the enterprise side, is a very complicated product in a set of technologies. So all of these are sort of refutations of the stereotype.

Maybe gearing towards closing here. Let's give people more ammo. So they were trying to recruit engineers or they're trying to recruit their teammates to move here. And most people are responsive to the happy, but not everyone. Not everyone is persuaded by that or has their own definition of happiness. What else do you tell those people?

So let me reverse engineer my recruiting sort of experience. First thing I tell people is do not visit just for a weekend. If you come for a weekend, you're gonna have a great time, but you're gonna think of it as a vacation and that doesn't give you a feel for the vibe and the reality of living in a different city. So you must come for at least a week, ideally two weeks or three. So you go through the tempo of a Monday, Tuesday, Wednesday, Thursday, Friday. And then B, do not stay on Miami Beachside. Stay in Miami and get a feel for what it's like to live here. You can go to Miami Beach whenever you want. to go out for dinner or whatever, but don't stay there. And then see if you'd like it here and just test it out. And you don't have to do much more than that.

I think that's a good place to wrap on. Please give a huge round of applause for Keith Rabois for whom this wouldn't be possible otherwise. If you're an early stage entrepreneur, We'd love to hear from you. Check us out at villageglobal.vc.