Steve Case, co-founder of America Online, investment firm Revolution, and its affiliate seed stage affiliate Rise of the restthere’s a new book called Rise of the Rest: How Entrepreneurs in Surprising Places Are Building the New American Dream. In it, Case argues that Covid is a time of “global shaking” for entrepreneurship, and that power will never be as strong as it once was in cities like San Francisco, New York and New York. Boston.
Today we talked earlier with Case about the book; we also chatted with him about coastal investor sentiment, whether he harbors any political aspirations and the status of his relationship with the Ohio Senate candidate JD Vance, who worked closely with Case at one point (they appeared together at TechCrunch Disrupt events in 2018).
Case also talked about some of the bets he, perhaps surprising to skeptics, have made since he started investing around the country. He related suggested that a key piece of advice he tries to convey when talking to founders is the art of storytelling itself. (A powerful story can go a long way, especially when you’re out of sight of some of the most powerful investors in the country.)
More from our conversation follows. These excerpts have been edited for length and clarity. (You can hear a longer conversation here.)
TC: You’ve been on a mission since 2014 to bring more attention to founders across the country, traveling 11,000 miles across 33 cities. With Covid gone, are you back on track now or have you finished that chapter?
SC: It [that national tour] stemming from several efforts over 10 years ago; I was asked by President Obama to chair an initiative called the Startup America Partnership. And that brings me to focus on entrepreneurship in this region and this imbalance that we talked about before about how 75% of venture capital [were] only go to three states. And the more cities we visit, the more cities we want to visit. Obviously we had to stop when the pandemic hit and we haven’t restarted on actual tours yet. But we are spending a lot of time traveling around the country. The Rise of the Rest team, which now number about a dozen, has visited dozens of cities in the past six months.
Chris Olsen of Drive Capital in Columbus, Ohio told us a few weeks ago that while his firm has laid the groundwork for more venture capitalists to come to the area, the opposite has happened with Covid. , that they were retreat back to the coast. Are you seeing the same thing?
[I think] while some people may live in a more difficult environment and focus more on their existing investments, I believe we have reached the peak of the pandemic and that will lead to accelerate capital flows to more cities and more entrepreneurs in those cities.
Most people in most parts of the country, if they want to be part of the innovation economy, they feel they have to leave where they are to go to the coast. That started to slow down over the past five years and increased in the number of people displaced during the pandemic, [which] ultimately became a snowballing moment for society, and also for so many families. They have re-evaluated how they want to live and work and where they want to live and work, and that will likely lead to a long-term dynamic.
Where did Rise of the Rest invest the most dollars?
Through our travels we’ve made 200 investments in 100 different cities, so it’s pretty broad. And we’re seeing momentum in a lot of cities. Indianapolis is an example of a city where most people don’t really know what’s going on there [and one of the reasons is a] hit company there, ExactTarget. It has been acquired [in 2013] by Salesforce for $2.5 billion and at the time, had 1,000 employees. Salesforce currently has 2,000 employees in Annapolis, and [it’s] Salesforce’s second-largest office outside of San Francisco, and that company’s founder and many of its original employees started the new company.
We’re also interested in places like Richmond, Virginia; we supported a company called TemperPack focus on sustainable packaging. They actually started in New York City but decided to move to Richmond to build their manufacturing capabilities, and they went on to raise $140 million in a round led by Goldman Sachs. We supported [online farmland investment company] AcreTrader The founder, Carter Malloy, of San Francisco, decided to move to Arkansas to be closer to where the farmers lived. We invested in Chattanooga in a company called Cargo waves which is focused on building the Bloomberg data platform for the trucking and logistics industries.
Have you found a way out yet?
One of our seed companies, [Kentucky-based] AppHarvest, to the community about a year ago [via a SPAC]. About a year ago, another company based in the DC area, Financial attention public for the last time [via SPAC]. There is another company out of Kansas City called Backlotcars that has buying with a rather important exit company.
I think we’ve seen [the portfolio] there are seven unicorns so far, so it really bodes well for what’s happening in these places.
How does one partner with you?
For the Rise of the Rest fund, we have invested with over 300 different venture capitalists in the region. They lead the rounds [and] they take their place on the board, because of the speed at which the investment we are making. We play more of a role in connecting these entrepreneurs and connecting these investors to essentially build a Rise of the Rest network.
Do you fund these ventures as a limited partner?
We did some of that early on, but since we’ve co-invested with over 300 of them now, we’ve received a lot of requests to be investors in those funds and We decided to back off on that because we wanted to build the widest network possible.
At the same time that people are moving back to their home cities or other more affordable places, the political landscape is changing in significant ways that some will no doubt find uncomfortable. . The abortion bans are very divisive.
Historically, cities have been competing to get companies to move. Now they are competing to get people moving. And everyone will have a different set of criteria that they prioritize. Maybe they moved because of family or cost of living reasons or because of their industry expertise in the area you want to build, or [it could tie to] lifestyle choices like biking or skiing. For some states, taxes make it more attractive.
I think people are going to get involved in some of these social issues, including the recent Dobbs ruling, and take a step back, and I think the people who make this decision – whether it’s local leaders the local community and the state or others in the community, even the media – should think and perceive [of this issue]. I think we want to avoid hyperpartisanship in the country. We have enough problems to divide the country; We want to avoid a kind of entrepreneurial culture war.
As someone who has run an international business and is perhaps pressured into politics herself, do you think companies should take a stance on social issues?
I think every CEO has to decide, and some [of that] depends on the issues they want to consider and which issues they consider most important to their key stakeholders, whether that be their employees, their customers or others. But [some of why people move to certain places will tie] what mayors and governors and politicians do. But some of it will also be what entrepreneurs and CEOs of large companies decide to do.
I’m curious about your relationship with JD Vance. From the very beginning, he managed the Rise of the Rest fund. What is your current relationship with him and what do you think of some of the positions he has taken?
JD joined us maybe four or five years ago, right after he debuted with Hillbilly Elegy book. Part of the reason for that is that his wife Usha will be working on the Supreme Court as a clerk there for a year in Washington, DC, and we are headquartered in Washington, DC. So he actually helped launch the first Rise of the Rest fund. But after being in DC for a year, they decided to move to Ohio, and he went on to take on another role maybe six months or so but in the end he decided he wanted to start his own foundation, which he worked in Cincinnati.
I haven’t spoken to him since he announced last year that he was running for the Senate and I don’t support that campaign. Honestly, I was surprised by some of the things he said, which were his own admission, that didn’t match up with some of the positions he took a few years ago.
Do friend Have any ambition to become a politician? You have something your beloved CEO will give you
I appreciate you saying that, but part of the reason I think I’ve had policy success, including a decade ago, was working on the JOBS Act – the Start Our Business Act – and more recently, some of the work around downtown is because I’m not political. As we travel around, we invite Democrats and Republicans to join us on the bus and everything we’re doing is trying to create innovation, create entrepreneurship. , entrepreneurship and job creation becomes a nonpartisan issue.