Steve Case is the co-founder, CEO, and chairman of Revolution, an investment firm that partners with entrepreneurs to build "built-to-last" businesses; and co-founder of AOL.
When Katie Couric sat down with Steve Case at the Aspen Ideas Festival, she started with a sobering question about the state of rural towns across America: “young people are fleeing, old people are dying, and immigrants are coming. Is there a common thread you’ve seen in the cities you’ve visited?”
Case, who runs the venture capital firm Rise of the Rest that invests in startups in these middle American cities, responded, “a lot of people feel that they’ve been left behind. I’d argue that they have been.”
A co-founder of AOL, Case is no stranger to startup culture or job creation. He started Rise of the Rest, with Hillbilly Elegy author J. D. Vance, in order to address a serious problem with American startup culture.
“All the net job creation in the country was coming from startups: not from small business not from big business — just high growth startup businesses. Yet we’re only backing entrepreneurs in a few places: 75 percent of venture capital (VC) went to three states California, New York, and Massachusetts.” California alone gets 50 percent of that. States like Ohio get less than 1 percent.
“Given [startups’] connection with job creation, it’s no surprise that people are fleeing these areas.”
The massive transformation of the US and global economies, with industrial and agricultural markets making way for technology-driven economies, has left large swaths of the country without growth. But Case is optimistic about our ability to adapt. “There is no question that technology will disrupt industries and destroy jobs. That has always has been the case and always will be. That’s not up for debate. What’s up for debate is will we come up with new ideas and create new industries and do that in a more inclusive way.”
“I recognize it might be different this time — there is reason to be concerned with the pace of this change. However, I’m reminded when I started AOL in 1985, only three percent of people were online in the country, and those three percent were online only one hour a week.”
“The good old days,” Couric added, to audience laugher.
But his point resonated: change and progress is inevitable, even if it starts out as a long shot. “We’ve been through these transitions before. It’s worth remember that just 250 years ago America itself was a start up, it was just an idea, and frankly a pretty fragile idea.”
Rise of the Rest goes on tour, stopping at American cities that have been overlooked by the Silicon Valley venture capitalists. They stop at five cities in five days, hosting a pitch competition — which he called a “friendlier Shark Tank” — at each stop. “Usually 100 companies apply to pitch and we’ll pick 8 or 9 to be on stage and a local judging panel pick a winner and we’ll invest in the winner.”
They have done 70 of these tours, in 38 cities, going over 10,000 miles by bus. The seed fund makes investments under $1 million, deliberately partnering with regional venture capitalists to create more local, long term investments and regional VC networks.
Case made clear that this wasn’t a social impact fund: these companies have gone on to be remarkably successful. “It is, however, mission driven. You can generate great returns while also having great impact.”
A key part of the success of the companies lies with local expertise and insight, and their ability to “build upon the legacy of their cities.”
“Pittsburg is pretty good at making things; this was the steel capital that powered the whole industrial revolution. Today there is a lot of innovation around robotics. St Louis and Omaha are pretty good at farming things. They have some of the most interesting ag tech companies,” said Case.
“I don’t think that insight would come from an entrepreneur sitting in an office in Manhattan or Palo Alto.”
And time is of the essence, Case warned. These communities are struggling and we need to do more to help revitalize them. “Fifty years ago if you wanted to lift up a community you got the artists to move in, like Soho in NY, but now the trick is to get the entrepreneurs to move in… Slow the brain drain. Create a reason to stay and a reason to come back.”
Case recognizes the challenges: “There is high degree of skepticism: are you really going to help create a breakout multi-billion dollar company in Des Moines, Iowa, or Pittsburg? But it is the same skepticism I saw 35 years ago with the internet. They thought I was crazy; they thought this internet thing was a fringy hobby.”
The data around place-based venture capital is certainly troubling, with three quarters of all funding going to just three states. But the data on minority venture capital is far worse. Less than 10 percent of VC funding went to women; less than one percent went to African Americans.
Rise of the Rest takes these disparities seriously. 25 percent of their pitch competitors are women and people of color — “Well above the national average,” Case pointed out.
Couric broke in, “Can’t it get a little better than that?” she said with a smile.
“It can," Case responded, laughing, “We’re a great entrepreneurial nation, but the reality is, it does matter where you live, it does matter what you look like. We have to level this playing field and be more inclusive.”
The views and opinions of the speakers in the podcast do not necessarily reflect those of the Aspen Institute.
Written by Hadley Stack, Public Programs intern at the Aspen Institute