PayPal Mafia Member Keith Rabois is Ditching Silicon Valley for Miami. Here's Why.
And no, it's not *just* for the weather and the food.
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Keith Rabois isn’t quite as well known as his contemporaries like Elon Musk, Max Levchin, Reid Hoffman and Peter Thiel, but he’s had just as much of an impact on the tech landscape as we know it today as his fellow “PayPal Mafia” members have.
He was early at LinkedIn, Slide, Square and more; spent time with Khosla Ventures; and is currently a general partner at Thiel's Founders Fund. He’s invested in everything from Yelp, to Palantir, to Xoom, to Quora (and, yes, also the Alliance of American Football) and is about as central to Silicon Valley as anyone in the industry today.
That’s what this recent news caught my eye…
Silicon Valley is losing another tech heavyweight: Keith Rabois, prolific startup investor, early exec at powerhouses such as Square, LinkedIn, Yelp, and PayPal, and longtime Bay Area resident. He tells me he is "moving imminently."
Rabois revealed his decision to decamp during our conversation at the Meridian conference, an event hosted by the cryptocurrency-focused group Stellar Development Foundation. (Rabois, an investor in Stripe, joined Stellar's board after Stripe made an investment in Stellar six years ago.)
"I think San Francisco is just so massively improperly run and managed that it's impossible to stay here," Rabois said. He believes he is not alone in giving up on the Bay Area, a place he has called home for two decades. He cited anecdotal evidence about many people in his social circles leaving, and noted, "COVID sort of masks this stuff. It's not quite as obvious where people are moving to and if they've actually moved since everybody's working remotely."
As Fortune noted, Rabois is far from alone. Thiel himself moved to L.A. in 2018, Alex Karp relocated Palantir to Denver earlier this year and Twitter’s Jack Dorsey is apparently sticking to his plan to move to Africa sometime soon once this whole pandemic thing blows over.
It isn’t just the big names doing this, either.
“Henrique Dubugras and Pedro Franceschi, the co-founders of fintech company Brex, have both left for Los Angeles and plan to let their company’s office lease in San Francisco expire next year. Meanwhile, DropBox CEO Drew Houston and Splunk CEO Douglas Merritt bought homes in Austin and plan to move there permanently.”
The “why” behind a lot of this has been well-covered. Pandemic challenges, spiraling costs, the homelessness, the traffic, the crime, the taxes, the wildfires, the day-to-day reality of living in San Francisco… the list goes on.
Rabois himself has clearly stated his opinion on all of this stuff.
But he took it a step further last month, telling Business Insider (I know, I know…) that his “eureka moment” came a few weeks into quarantine this spring when he “realized that the pandemic was already bringing a long-lasting and massive ‘transformation of how people worked and lived.’
"The idea that there's 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 companies in a distributed way or in different locations," and that an investor like himself could succeed "in a variety of different places."
Yes, Rabois is well known in the Bay Area for his libertarian leanings and his outright distain for the city of San Francisco and its leadership. He even once said that he “tolerated” the area for his career.
But why Miami?
That’s the real story here.
Because it’s not like Rabois is alone in this. Bling Capital founder Ben Ling, another former partner at Khosla Ventures, is considering making the same move along with other VCs, according to BI.
But Miami?
I’ll be honest here. When I was working on the original “Screw the Valley” book circa 2013 south Florida came up in a few conversations. There was talk of some things happening, some companies making waves, but I just couldn’t justify a trip (expensed and everything) to Miami just for a small ecosystem. I wanted to, there just wasn’t enough “there” there yet.
That has evidently changed.
Exhibit A: In 2019, the Miami metro area showed up on the Startup Genome Ecosystem Report for the first time, cracking the top 30 on its inaugural appearance. Most interestingly, the city ranked seventh globally for its number of female founders, a figure that is only 17.2% worldwide but over 19% in Miami.
Takeaway: A new type of entrepreneur is increasingly active in South Florida, likely bringing new perspectives and new opportunities.
Exhibit B: Miami ranked in the top 10% (Tier 1) of the same report for “market reach,” which measures how connected the community is with other global ecosystems. That’s particularly interesting, because the city was down in the lower tiers for other categories including performance, funding, talent, experience and knowledge.
Takeaway: Miami is a global destination for reasons well beyond entrepreneurship, and that has helped it quickly plug into broader opportunities that other areas can’t access. Tl;dr — Miami Beach is still a draw.
Exhibit C: Miami remains the gateway city to all of Latin and South America, with more flight connections to LATAM than any other U.S. city. That’s one reason why, eMerge Americas, the first tech-focused conference uniting the U.S. and Latin America, is based in Miami.
Takeaway: Not only is there a diverse population in the area — Miami is #1 in the U.S. in Latino business entrepreneurship and has the highest percentage of immigrant-owned businesses in the country — but is it also connected to the emerging economies of LATAM, linking East Coast investors to underrepresented founders in fast-growing industries.
Exhibit D: Edtech and Life Sciences startups are carving out real footholds in South Florida, with the region’s Life Sciences ecosystem ranking in the top 30 worldwide. Part of this is thanks to the University of Miami and its longstanding commitment to research and support in these disciplines. Simply put: the university has been drawing smart, forward-thinking biologists, doctors and researchers to Miami for decades and that is now starting to bear fruit.
Takeaway: When ecosystems get specialized, they start to do better on the investment / growth side of things as investors get savvier and founders learn how to leverage shared resources. Case in point: a Miami biotech company called Aegle Therapeutics closed a $6.5 million Series A in September led by Tellus BioVentures and DEFTA Healthcare Technologies, along with Florida funds New World Angels and DeepWork Capital. Not too long ago, Florida didn’t have investor groups interested in biotech. Now it does.
There’s opportunity in Miami that investors have been overlooking for a long time. Maybe that’s not the only reason that Rabois made the move, but by drawing attention to what’s happening in different parts of the country — particularly as work-from-home and work-from-anywhere become more entrenched — we can expect to see more and more of this going forward.
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