ReadWrite recently hosted Keith Rabois, the outspoken startup investor who joined Khosla Ventures from payments company Square earlier this year, at our San Francisco headquarters for ReadWriteMix, an events series featuring free-wheeling discussion with prominent tech figures.

We started the conversation with an observation Rabois once made to me—tech companies have created a trillion dollars of value for investors over the past decade, but that value has been incredibly concentrated. The rise in value has come from at most 10-15 companies—the likes of Apple, Google, and Facebook.

And while hundreds if not thousands of startups get funded every year, only a dozen or so even stand a chance of joining that pantheon.

So the question for Rabois, who has worked at PayPal, LinkedIn, Slide, and Square, and backed startups like Yelp, Airbnb, and Yammer: What's the trick?

It's The Product—But It's Not Just The Product

When Rabois was at PayPal, he ran strategy and legal affairs—including figuring out how to deal with eBay, Visa, and Mastercard, all of which, he says, were trying to kill the payments startup. His training as an antitrust lawyer helped in figuring out PayPal's competitive strategy—but PayPal didn't fight primarily in the courts. It fought by getting eBay's own users on its side.

The advice is generally applicable to startups looking to build a business on a bigger company's platform, as PayPal did by offering credit-card payments on eBay's auctions site.

An audience member asked if startups should band together to contest a company's capricious or unfair manipulation of a platform on which they're building businesses. Rabois said he didn't think that would work.

Instead, you have to fight by perfecting your product.

"You have to build a product that real users love—not just use, but love," said Rabois. "And you've got to figure out a way to get it in enough of their hands so they truly can't live without it. Because then when the platform wants to change things, you have real people that are animated. And if those people are animated, they can go to the media, they can go to their congressmen. That's what you have to have to protect yourself. Anything you do tactically isn't going to help you. It's got to be scaled, and it's got to be true love.... Focus on that."

The Public Route

Rabois is also on the board of two public companies, Yelp and Xoom. Yelp has seen a nice runup in its stock recently, and shares of Xoom, an international money-transfer service, are up from their IPO price even after a 59% first-day pop.

That goes against conventional wisdom in Silicon Valley these days—that companies should delay going public as long as possible, and avoid the public markets if possible. (Evernote CEO Phil Libin, for example, has talked about his reluctance to take his company public.)

Rabois said there were "two schools of thought"—entrepreneurs who are "deferring" IPOs, and entrepreneurs "who welcome it."

"If you're building an enduring company, one that will last, say, 50 years, it is almost certain that the way you're going to do that is by becoming a publicly traded company," Rabois told me. "If your ambition in life is to transform the world through your product technology, and to continue to do that every generation, year after year, year after year, through different management, through different CEOs, a public company is a very good format to do that."

Rabois also noted that going public gives companies a currency for acquisitions.

"It also means something to the public," he said. "It's actually a safer place to do business. And I think consumers react that way. I think LinkedIn going public was incredibly successful as a marketing campaign for the company. More people became aware of it and filled out profiles."

Rabois said we should expect to see more IPOs in September and October of this year.

That's just some of the ground we covered in our 45-minute chat. Here's a highlights clip and a complete video of our talk.