Steve Case, the co-founder of America Online, the investment firm Revolution and its early-stage division The Rise of the Othersthere is a new book called The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream. In it, Case argues that Covid is the moment that “rocked the world” for entrepreneurship and that power will never again exist as it once did in cities like San Francisco, New York and Boston.
We spoke earlier today with Case about the book; we also spoke with him about the mentality of coastal investors, whether he harbors any political aspirations, and the state of his relationship with Ohio Senate candidate JD Vance, who worked closely with Case at one point (they appeared together in our TechCrunch Disrupt event in 2018).
Case also talked about a number of his bets, which, perhaps to the surprise of naysayers, have increased since he started investing across the country. He said one key piece of advice he tries to impart when speaking with founders is the art of storytelling itself. (A powerful narrative 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 listen to the longer conversation here.)
TC: You’ve been on a mission dating back to 2014 to bring more awareness to founders across the country, traveling about 11,000 miles through 33 cities. With Covid gone, are you back on the road now or have you written this chapter down?
SC: That [that national tour] stems from some effort a little over 10 years ago; I was asked by President Obama to chair an initiative called the Startup America Partnership. And that led me to focus on regional entrepreneurship and this imbalance that we talked about before in terms of how 75% of venture capital dollars [were] i only go to three states. And the more cities we visited, the more cities we wanted to visit. Obviously we had to stop when the pandemic hit and we still haven’t restarted in terms of physical tours. But we spend a lot of time traveling around the country. The Rise of the Rest team, now about a dozen strong, has visited dozens of cities over the past six months.
Chris Olson of Drive Capital in Columbus, Ohio told us a few weeks ago that while his firm laid the groundwork for more venture capitalists to come to the area, post-Covid the exact opposite has happened, that they retreated back to the shores. Do you see the same?
[I think] while some may hide in a tougher environment and focus more on their existing investments, I truly believe we have reached a tipping point during the pandemic and this will accelerate more capital flowing to more cities and more entrepreneurs in these cities.
Most people in most parts of the country felt that if they wanted to be part of the innovation economy, they had to leave where they had to go to the coast. This has started to slow over the past five years and has picked up in terms of people moving during the pandemic, [which] it ended up being a snow globe shaking moment for society and also for many families. They’ve kind of reassessed how they want to live and work and where they want to live and work, and that’s likely to lead to a permanent, dynamic.
Where does 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 many, many 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] tentpole company that’s out there, ExactTarget. It was acquired [in 2013] by Salesforce for $2.5 billion and had 1,000 employees at the time. Salesforce now has 2,000 employees in Annapolis and [it’s] the second largest Salesforce office outside of San Francisco, and the founder of that company and many of that company’s early employees have gone on to start new companies.
We’ve also seen interest in places like Richmond, Virginia; we supported a company called TemperPack which focuses on sustainable packaging. They actually started in New York, but decided to move to Richmond to build their manufacturing capabilities, and were able to raise $140 million in a round led by Goldman Sachs. We supported [online farmland investment company] AcreTrader whose founder, Carter Malloy, was in San Francisco, decided to move to Arkansas to be closer to where the farmers are. We invested in Chattanooga in a company called Cargo waves which is focused on building a Bloomberg data platform for the transportation and logistics industry.
Have you had exits?
One of our seed companies, [Kentucky-based] AppHarvest, became public domain about a year ago [via a SPAC]. About a year ago, another company based in the DC area, FiscalNote became public last [via SPAC]. There is another company out of Kansas City called Backlotcars acquired with a fairly substantial parent company.
I think we have seen [the portfolio] got to seven unicorns so far, so that really foreshadows what’s going on in these places.
How does one go about doing business with you?
For the Rise of the Rest Fund, we have invested with over 300 different regional venture capital investors. They lead the tours [and] they’re taking a seat on the board because of the speed of the investments we’ve been making. We play more of a role in connecting these entrepreneurs and investors to essentially build a Rise of the Rest network.
Are you funding these venture firms as a limited partner?
We did some of that in the beginning, but since we’ve already co-invested with over 300 of them, we were getting a lot of requests to be investors in those funds, and we decided to drop that because we wanted to cast the widest possible net.
At the same time, as people return to their hometowns or other more accessible locations, the political landscape is changing in dramatic ways that some are sure to find off-putting. Abortion bans are so divisive.
Historically, cities competed to get companies to relocate. Now they compete to get people moving. And everyone will have a different set of criteria that they prioritize. Perhaps they are relocating for family reasons or cost of living reasons, or because there is industry experience in an area you want to build on, or [it could tie to] lifestyle choices such as cycling or skiing. In some countries, taxes make it more attractive.
I think people are going to take some of these social issues, including the recent Dobbs decision, and take a step back, and I think the people who make these decisions — whether they’re local and state leaders or others in the community, even the media — you have to think and be aware [of this issue]. I think we want to avoid hyper-partisanship in the country. We have enough issues dividing the country; we want to avoid something like an entrepreneurial culture war.
As someone who has run an international business and has probably been under pressure to be political yourself, do you think companies should take a stand on social issues?
I think every CEO has to decide, and some [of that] it depends on which issues they want to weigh and which issues they think are most important to their key constituents, whether it’s their employees, customers or others. But [some of why people move to certain places will tie] of what mayors, governors and politicians do. But part of it will also be what the entrepreneurs and CEOs of the big companies decide to do.
I’m curious about your relationship with JD Vance. He managed the Rise of the Rest fund at the very beginning. What is your relationship with him now and what do you think of some of the positions he has taken?
JD joined us probably four or five years ago, right after he came out with Hillbilly Elegy A book. Part of the reason for that is that his wife, Usha, was going to clerk for the Supreme Court there for a year in Washington, DC, and we’re based in Washington, DC. So he really helped start the first Rise of the Rest Fund. But after being in DC for a year, they decided to move to Ohio, and he continued in that role for about six more months, but eventually decided he wanted to start his own fund, which he did in Cincinnati.
I have not spoken to him since he announced last year that he was running for the Senate, and I have not supported that campaign. Frankly, I was surprised by some of the things he said, which, by his own admission, contradicted some of the positions he held a few years ago.
Do it you do you have ambitions to become a politician? You have that favorite thing as a CEO
I appreciate you saying that, but part of the reason why I think I’ve been successful in terms of policy, including even a decade ago, working on the JOBS Act—the Start Up Our Business Act—and rather part of the work around the regional centers is because I am not a politician. When we travel around, we invite Democrats and Republicans to join us on the bus, and everything we do is trying to create innovation, entrepreneurship, startups, and make job creation a nonpartisan issue.