>Leadership>Waves of Change

The numbers behind the distribution of venture capital—which is designed to fuel rapid growth in a company—are staggering, but not for the reasons you’d think. In reality, the data shows that 75% of venture capital goes to companies in just three states: California, New York, and Massachusetts. Even worse, 90% of venture capital goes to men, and less than 1% goes to African American entrepreneurs.

Steve Case, Chairman and CEO of Revolution, Co-Founder of AOL, and author of the best-selling book, The Third Wave: An Entrepreneur’s Vision of the Future, has seen the data for himself. And now, with Rise of the Rest®, his initiative to empower entrepreneurs in emerging startup ecosystems across the country, he’s on a mission to level the playing field.

Let’s talk about Rise of the Rest® and what makes the initiative, and fund, unique.

Rise of the Rest® started four years ago. I was looking to shine a spotlight on cities around the country that were emerging as strong startup ecosystems but were still, somehow, largely under the radar. Since then, we’ve done six bus tours, visited thirty-three cities and traveled 8,000 miles. We recently announced our seventh tour coming this May. It’s been amazing to see the momentum in all of these cities, but when you talk to investors on the coasts, they’re still generally not aware of what’s happening outside of the most popular geographies for investment. We launched the Rise of the Rest® Seed fund at Revolution and were able to get a number of the most prominent entrepreneurs, executives, and investors in the country to join us. We’re partnering with regional investors in most cases, trying to take these cities to the next level and spread capital and jobs across the country.

Why do you think this hasn’t been done before? Why has investment been traditionally proximity-based?

I think there are a few factors. We started AOL in 1985 in the Washington, DC area, and in that first wave of the Internet—trying to educate people on the idea of the Internet, creating the foundational technologies—investment was fairly distributed across regions. AOL was in DC, Hayes was in Atlanta, Dell was in Austin, and Sprint was in Kansas City. It was really during the second wave—when it became more about writing software and apps on top of the Internet—when Silicon Valley became dominant. But I think the third wave—where certain expertise and partnership are going to be important—is when things will really change. A lot of experts and potential partners for the third-wave industries — like healthcare and food and agriculture—are located in the middle of the country.

But there’s also a little bit of a laziness happening with some venture capitalists. In Silicon Valley, investors have so many entrepreneurs in their own backyard, they often don’t go to the trouble of getting on a plane to visit entrepreneurs in other places. Last year, 75% of venture capital went to three states, and that certainly doesn’t reflect the distribution of great entrepreneurs and great ideas. The Salt Lake City/Provo area is a great example. There are currently around eight multi-billion-dollar enterprise software companies in that region, but when I go around talking about startups in Salt Lake City, most people look at me like ‘What are you talking about?’ We’re just trying to get the word out and celebrate these entrepreneurs, to champion these cities, to get more venture capitalists on the coasts to pay attention to what’s happening in the middle of the country.

One of the concepts you introduce in your book, The Third Wave, is “impact investing,” which focuses on investing in companies that aren’t just based on profits, but on social change. How can entrepreneurs and investors find a balance?

There are a lot of people on Wall Street that still subscribe to the Milton Friedman view from a half-century ago that says companies should focus exclusively on maximizing profits, and anything else is a distraction. But the emerging view that we’re seeing more and more hints that this old view may present a false trade-off.

There are a growing number of companies who are fueling their growth with purpose, and in the long run, maximizing profits with that purpose. A good example is Shinola in Detroit (Revolution is an investor in Shinola). They hire unemployed autoworkers and retrain them to make watches. Part of the reason people buy Shinola products with pride is because they love that story about job creation, which results in the company being able to sell more watches at a higher price. With Warby Parker, people like the glasses and the value of the product, but also know that when they buy a pair, they’re giving a pair to someone who can’t afford them. It’s a trend that’s gaining ground and momentum, and we think that within the next decade, there will be more of these companies who really merge profit and purpose, who focus on impact as a core part of their strategy, instead of as an afterthought.

As you travel the country, what are the big business trends you’re getting pitched your way?

We’re seeing more diversity in the industries now being disrupted. The first wave was a disruption of communication. The second wave was largely media and entertainment. In this new wave, we’ll start to see an impact on some of the fundamental aspects of our lives and some of the biggest sectors of the economy. We’re seeing healthcare activity in Baltimore, for example, and a lot happening around ag-tech in places like St. Louis and Louisville.

“We’re seeing more diversity in the industries now being disrupted. The first wave was a disruption of communication. The second wave was largely media and entertainment. In this new wave, we’ll start to see an impact on some of the fundamental aspects of our lives and some of the biggest sectors of the economy”


Your career has been epic by any measure. How do you measure success for yourself at this stage?

It’s about having an impact and galvanizing a broader coalition to influence change. Things like Rise of the Rest® and leveling the playing field, so every entrepreneur has a real shot at the American Dream, are important to me. But I’ve also learned over the years that having an idea is, in some ways, the easy part. There’s a Thomas Edison quote from over a hundred years ago, ‘vision without execution is just hallucination.’ I’ve found that’s the case in all the things that we’re doing. It comes down to getting the right people focused on the right priorities, on trying to leverage the platform and resources that I have to try and make a difference and to do that alongside other people, with a focus on putting points on the board.

When you have an idea, how do you go about convincing a team to join you and spent the next 10 years of their life on that problem?

Entrepreneurship, at its core, is about two things: The first is pattern recognition. Seeing patterns emerge, connecting the dots in interesting new ways that other people haven’t before, which then leads to the ideas you want to pursue.

The second is realizing that entrepreneurship is a team sport—it’s not really about you, it’s about the team you build. You need to find people that share your excitement about that idea and, in general, share the perspective you have, and then you take that idea and run with it, give it life.

When I started in the internet industry 35 years ago, hardly anyone believed in the promise of the Internet. It seems crazy now, but you had a lot of people asking ‘why would you want to type messages to other people?’ But there were pioneers—people intrigued and passionate about that idea—who decided to join up with us at AOL to take our little idea and make it into a big company.

Each time we do a new Rise of the Rest® tour, there are new companies that want to join in, more people that want to be a part of it. That’s how we met up with JD Vance. You find people who can be accelerators and help the initiative get moving faster than it might have otherwise. You want to find people who won’t just play a part but will also help drive the idea, who can take the idea and animate it, give it life.

What’s the ideal relationship between a CEO and investor?

I think it depends on the stage of the company. In the early stages of a company, it’s not as much about the money as the relationships investors can create, the insights investors have from their experiences, and the potential partnerships they can forge. It’s a variety of different dynamics, but at its core, it’s how the investor helps take the business that exists today, works with the entrepreneur to find a few ways they can uniquely add value, and helps the CEO scale the business in a way that might have otherwise be impossible. I believe that partnership and policy are going to be much more important here in this next wave, especially in these newly disrupted sectors. This next wave isn’t as much about building or marketing products, but key partnerships that can accelerate the business and navigate the treacherous policy challenges that more businesses will be facing.

So, success in technology is growing to become less about technology?

The coding, the technology, the software is always going to be at the epicenter and be important, but in some respects, in this next wave, it becomes table stakes. Having the right software that helps provide precision medicine for cancer patients, for example, is important, of course. But if you’re not able to marry that with partnerships with doctors, hospitals, and health plans, and navigate the policy and regulatory issues, it doesn’t matter. You need great software to create a great business, but it’s no longer sufficient on its own. There are other things that need to be part of a bigger strategy and execution to be successful.

What books are you reading right now?

Of course, I read Hillbilly Elegy (by JD Vance.) I just started reading a book by Andrew Keen called How to Fix the Future, which talks about some of the upcoming themes of innovation and technologists being more respectful of the role of policy makers and regulators. I’m also reading Daniel Pink’s new book When: The Scientific Secrets of Perfect Timing.

What’s next for you?

It’s really about continuing to build Revolution, with our Growth and Ventures funds and extend the Rise of the Rest® effort to reach more entrepreneurs in more cities and create a network, to accelerate the flow of capital to these other places. Venture capital, which is designed to be the fuel for companies to grow rapidly, isn’t evenly distributed. What we’re trying to do is fix that, and become a catalyst to level the playing field.