Several startups in real estate tech have been receiving eye-popping sums of money from venture capitalists in recent years, but huge funding rounds like the kind issued by wealthy SoftBank Vision Fund can lead to problems, according to Opendoor co-founder and tech entrepreneur Keith Rabois, who made the comments in an interview with journalist Kara Swisher on her Recode Decode podcast.

Rabois’ comments come just months after Opendoor itself received $400 million in funding from the Vision Fund. However, he said he thought the Vision Fund’s big investments “created a crutch for other companies that really don’t have an economic model that’s working, and it’s created a bank account that people can tap into and not have to solve their business problems.”

The SoftBank Vision Fund has made a number of other real estate investments, including as the lead backer of several rounds into Compass.

Rabois also said in the interview that Opendoor is doing “phenomenally well” and will be operating in 30 cities by the end of 2019, up from 18 at present. Opendoor has previously said it plans to be operating in 50 markets by 2020.

Rabois’ skepticism of accepting treasure chests from SoftBank stems from his belief that “scarcity to capital is a good thing, that desperation breeds innovation, and that you need constraints to actually execute well and innovate,” he added in the interview. “If someone gives you this pile of money, I think it creates a lot of excuses and soft thinking.”

To some extent, this is what happened to the social app Slide, he said, where Rabois served as the startup’s executive vice president of strategy and business development.

Rabois is a member of the so-called “PayPal mafia,” veterans of the online payments company that have since gone on to found or fund numerous tech companies, “self-styled survival-of-the-fittest free-marketers commit[ed] to a strategy of collective risk and mutual support,” as one author put it. The clique — which also includes tech billionaires Peter Thiel, Elon Musk, Reid Hoffman and Yelp CEO Max Levchin — has recently turned its attention to disrupting real estate.

Rabois, either personally or through the venture capital firm where he is a partner, Khosla Ventures, is leading the charge as a backer of Opendoor, Roofstock and Bungalow. Khosla Ventures may sometimes compete with the Vision Fund for startup investments.

In all, Khosla has invested in 10 different companies focused on “real estate innovation,” Rabois said during the interview.

But while Khosla typically focuses on early-stage startup financing, SoftBank injects vast sums of money into startups. And Rabois doesn’t think that is such a good idea.

“[I ] think the mentality of throwing money at companies and making them successful just doesn’t work,” he said. “I’ve never seen real examples of just, you take money and you crown a winner.”

Huge funding is “not the panacea, and it’s certainly not the keys to the kingdom,” he added.

Rabois also addressed concerns that have arisen over the ethics of accepting funding from the Vision Fund in light of the killing of journalist Jamal Khashoggi by Saudi operatives last year. The Vision Fund is financed in large part by Saudi Arabia’s sovereign wealth fund.

Rabois expressed surprise that Americans hadn’t “paid more attention to the evils of Saudi Arabia” prior to Khashoggi’s murder, noting that the kingdom has executed Jews and gay people (Rabois is openly gay).

He said that the U.S. government’s traditionally close relationship with Saudi Arabia has been a “marriage of convenience,” but “that doesn’t mean that Silicon Valley should be participating in this.”

Rabois said he expected startups to continue accepting cash sourced from Saudi Arabia in the near term as the economy softens, but probably will steer clear of such cash in the long term.

Many entrepreneurs are debating the ethics of taking such money. “Some have been hesitant,” he said.

Opendoor and Compass initially declined to comment on the Saudi-generated controversy around SoftBank in the wake of Khashoggi’s murder.

Later, Compass CEO Robert Reffkin broke the silence, saying “SoftBank has been a great partner to us and we look forward to continuing to grow with them,” but also said he was disturbed about Khashoggi’s killing.

And Opendoor co-founder J.D. Ross also later commented publicly on the matter when asked about Opendoor’s SoftBank funding, saying that while Khashoggi’s murder was “incredibly barbaric,” the topics of “capital” and “human rights” are separate.

It remains to be seen whether either startup will tap the Vision Fund for additional fuel.

Rabois left open this possibility for Opendoor, saying that, while huge funding can hurt many startups, “there are some companies, very selective few, where they have an engine that is polished and ready to rev, and you’re just giving gasoline to an engine that works really well.”

Email Teke Wiggin.

Editor’s note: This story has been updated to correct that Opendoor plans to be in 50 markets by 2020, not 2010. 

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