As a senior investment professional at the firm, Rabois, a well-respected startup executive and successful angel investor, will help to select investments and to advise entrepreneurs in the firm's portfolio.
Vinod Khosla, the firm's founder, said Rabois is one of the most sought out startup advisors in Silicon Valley, and his experience running companies would be an asset to Khosla's portfolio companies. "He's gone through the process of seeing companies scale and become significant," Khosla told Fortune. "He's earned the right to advise entrepreneurs."
A lawyer by training, Rabois has held operating roles at companies like PayPal (EBAY), LinkedIn (LNKD) and Slide, which was acquired by Google (GOOG). He joined Square as chief operating officer in 2010 and helped grow the company from a fledgling startup into a fast-growing mobile payments powerhouse.
Rabois resigned from Square unexpectedly in January, after an employee with whom he had an intimate relationship claimed the relationship was unwanted. According to Square and Rabois, the employee threatened to file a sexual harassment lawsuit unless he was paid "millions of dollars." Rabois acknowledged he had a relationship with the unnamed employee but said it was consensual. He said he resigned from Square so as not to cause a distraction for the company. As of now, no lawsuit has been filed.
Square said it investigated the matter and found no evidence to support any claims of misconduct.
Khosla said that as a board member of Square, he has had full access to the results of the investigation and that he felt comfortable with Square's conclusion that Rabois had made nothing more than an error in judgment.
As an angel investor, Rabois made early investments in companies like YouTube, LinkedIn, Airbnb and Eventbrite. He will now make investments only on behalf of the firm.
In an interview, Rabois said that he had long considered becoming a professional investor. But that the opportunity to work with the likes of Max Levchin, a PayPal founder who later founded Slide, and Jack Dorsey, the founder and CEO of Square, kept him in the world of startups until now. Khosla Ventures invested in both Slide and Square, and held board seats at both companies.
After his resignation, Rabois was approached by scores of venture capitalists and companies about potential jobs. He said he chose Khosla Ventures because the company's mission and focus on helping entrepreneurs suited his interests.
The least interesting part of the venture business, Rabois said, is writing a check. "The most interesting part is sitting down with entrepreneurs and working with them closely."
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