It’s ‘virtually impossible’ to raise funding if you don’t have ‘extraordinary metrics’ right now, says top Valley investor Keith Rabois

Keith Rabois

Keith Rabois

For startups, it’s getting tougher to raise money in Silicon Valley right now, according to Keith Rabois, a Khosla Ventures partner and former executive at LinkedIn, PayPal, and Square.

The investor went on a tweetstorm on Tuesday morning in response to a story from The Information’s Amir Efrati and Peter Schulz, which says top VC firms are spending less investing in early-stage startups than before.

“Why surprising? This has been going on for 3-6 months very acutely,” Rabois said in response to a tweet from writer Amir Efrati, who tweeted that he was surprised by the findings in his report.

Both Rabois’ tweetstorm and The Information’s report build on a growing narrative that winter is coming to Silicon Valley.

Investors are worried that these companies have been subsidized by easy VC money for too long. In many cases, their customer and usage numbers are going up because they’re using VC money to expand into new cities, but customer-acquisition costs remain high and many of them are bleeding money. Worse, mature markets like San Francisco and New York are starting to see some scary, weak customer-adoption numbers, which bodes poorly for these companies as they expand into other regions.

The public markets are more harsh than private markets. This means private investors need to reset their expectations, which leads to downward valuation pressure. Recently, Fidelity marked down its investments in both Snapchat and Dropbox, two private tech companies valued over $1 billion.

Most of Rabois’ tweetstorm is below:

@amir @bgurley @pmarca why surprising? This has been going on for 3-6 months very acutely. Or just read my tweets.

— Keith Rabois (@rabois) November 24, 2015

@StartupLJackson @amir as I wrote, the era of steroids is over.

— Keith Rabois (@rabois) November 24, 2015

@amir @bgurley @pmarca everyone has pulled back their investments levels, particularly for series b and c rounds.

— Keith Rabois (@rabois) November 24, 2015

@amir @bgurley @pmarca ask any founder who has tried to raise money since July.

— Keith Rabois (@rabois) November 24, 2015

@amir the dataset you are analyzing probably lags 2-6 months at a minimum from the real action.

— Keith Rabois (@rabois) November 24, 2015

@amir @bgurley @pmarca seed really shouldn’t change now, but the standard for series a, b and c is substantially greater. 5x more diligence.

— Keith Rabois (@rabois) November 24, 2015

@amir nothing wrong with data but you are missing the real impact. Virtually impossible to raise a round absent extraordinary metrics.

— Keith Rabois (@rabois) November 24, 2015

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