Episode Summary
Executive Summary: Keith Rabois argued 2023 would be a normalization year after the 2021 bubble: inflation, labor costs, and recession risk will determine the macro path, while startups must cut burn, plan multiple scenarios, and raise on far more disciplined terms. He also discussed hiring dynamics, VC entitlement, founder coaching, AR/VR, ChatGPT’s promise and limits, IP/legal risks, and a bearish view of Trump’s political future.
Main Topics: 2023 Macro Outlook and Scenario Planning (Priority: 5/5): Rabois said inflation and labor costs are the key macro variables, making 2023 hard to predict. Founders should plan for several possible environments rather than single-point forecasts, and keep burn and hiring flexible. Startup Valuations Return to Historical Norms (Priority: 5/5): He argued the market is not uniquely bad; it is reverting to long-term averages after irrational 2021 pricing. Seed, Series A, and Series B valuations should be much lower and more disciplined. Big Tech Hiring Freezes and Startup Talent (Priority: 4/5): Layoffs and freezes at Google, Meta, Salesforce, Microsoft, Apple, and Twitter reduce employee entitlement and strengthen startups’ recruiting position. He prefers founders hire people who would not choose big tech. VC Entitlement and the Harder Job of Investing (Priority: 4/5): Rabois criticized the surge of new venture firms and said many were built on easy markets, paper markups, and low discipline. He emphasized that VC success requires post-investment support, judgment, and multiple market cycles. Founder Management: Focus vs. Distraction and Conflict (Priority: 4/5): He advised founders to simplify, concentrate resources, and avoid spreading talent across too many projects. He also noted that abrasive founders can succeed if friction is intentional and tied to mission-critical priorities. AI, ChatGPT, and Legal/IP Concerns (Priority: 4/5): Rabois saw ChatGPT as impressive but constrained by cost and uneven quality. He warned that AI products raise fair use, derivative works, and creator compensation issues, especially when commercialized. Consumer and Enterprise Tech Bets: AR/VR, Google Search, OpenDoor, and Media (Priority: 3/5): He was skeptical of Meta’s VR strategy, more open to AR’s industrial uses, and said Bing+ChatGPT is more of a marketing threat than a substantive Google threat. He also discussed OpenDoor’s operational resilience and the need for founders to communicate directly amid adversarial media.
Key Arguments: Inflation is the central macro variable; if it stays high, the Fed may tighten further, and if it falls, recession risk still remains. Founders should stop assuming perpetual growth and instead build 2-4 scenario plans with editable hiring and burn decisions. 2023 fundraising terms should reflect normalized historical tech valuations, not 2021 bubble pricing. Big Tech freezes and layoffs reduce salary-comparison leverage and make startup recruiting easier for the right kind of candidate. The best startup hires are people who would not be attractive or willing to work at Google/Facebook/Amazon/Apple/Netflix. Most new VC firms lack the ability to return capital, survive rebalancing from LPs, or do the operational work required after the check is written. Abrasive founders can work if the conflict is deliberate and tied to important company objectives rather than collateral damage. ChatGPT is impressive but will not become broadly productized until costs fall by roughly an order of magnitude and outputs become more reliable. AI-generated content raises fair use and derivative-work questions, especially when commercialized or when it replaces paid creative labor. Meta’s core culture is better at iteration and mimicry than inventing new paradigms, making VR a poor fit and AR a better, though still difficult, opportunity. Bing embedding ChatGPT may help consumer perception, but it does not solve Google’s substantive search advantage on most queries. OpenDoor’s challenge is as much communication/optics as execution; in many markets it is already gross-margin positive. Founders and companies must communicate directly, but not rely on owned channels alone; they still need earned media and engagement with skeptical audiences.
Data Points: Seed valuation guidance: $10 million - Rabois cited this as roughly the normal maximum for a seed round in the current market. Series A valuation guidance: $20 million - He said this is the normalized benchmark for a strong Series A. Series B valuation guidance: $40-$50 million - He described this as the upper range for a good B round in normalized tech investing. SOC 2 compliance speed with Vanta: 2-4 weeks - Podcast ad copy contrasted Vanta’s timeline with manual compliance. SOC 2 compliance speed without Vanta: 3-5 months - Used as a comparison to emphasize Vanta’s efficiency. Acquire marketplace monthly messages: 35,000+ - Described buyer-seller activity on Acquire.com. Average 12-month revenue of listed startups on Acquire: almost $600,000 - Shown as evidence of marketplace quality and activity. Buyers on Acquire: 120,000+ - Indicates the scale of the acquisition marketplace. OpenDoor markets with gross margin positivity: 48 of 52 markets - Rabois said only four markets were not gross-margin positive. U.S. home transactions in a normal year: ~5 million - He used this to explain OpenDoor’s dependence on transaction volume. U.S. home transactions during the GFC: ~4 million - Provided as a stress-case comparison for real estate activity. ChatGPT query cost (fully loaded): 10-12 cents - Rabois estimated current cost as too high for broad productization. Needed AI cost improvement: ~10x reduction - He said the cost structure must fall by at least an order of magnitude. Meta layoff scale: 10,000 people - Referenced as a major first step in Meta’s restructuring. Opendoor stock price reference: 94 - He said he bought the stock when Meta announced the 10,000-person cut; used as a trading example. OpenDoor market count: 52 markets - Referenced while discussing the company’s operational footprint. Big Tech market share context: Google ~90%, Bing ~8-9% - He used this to frame search competition and Bing’s challenge.
Pivotal Quotes: "You have to plan for two to three or four different environments and have a burn rate, have a fixed cost structure, have hiring plans that can be edited on a quarterly basis at a minimum." — Keith Rabois: Advice to founders on scenario planning in an uncertain 2023 macro environment. "If you can't return capital... in the hottest market in the history of technology, there's a question of when the hell you're ever going to return capital." — Keith Rabois: His critique of many newly formed VC firms and their lack of durability. "You want to ensure that the friction you're causing is not collateral damage, but it's intentional." — Keith Rabois: Guidance for forceful founders on how to channel intensity productively.
Implications: Founders should operate with capital discipline, flexible hiring, and honest pricing expectations. VCs must prove real judgment and returns. AI, AR, and search will create opportunities, but legal, cost, and product-market constraints will shape who wins.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.