Steve Case, the co-founder of America Online, the investment firm Revolution, and its seed-stage arm offshoot Rise of the resthas a new book out called Rise of the Rest: How Entrepreneurs Are Building the New American Dream in Surprising Places. In it, Case argues that Covid was a ‘shake the globe’ moment for entrepreneurship, and that power will never again reside as it once did in cities like San Francisco and New York and Boston.
We spoke to Case about the book earlier today; we also spoke with him about the mindset of coastal investors, whether he harbors political ambitions, and the status of his relationship with Ohio Senate nominee JD Vance, who at one point worked closely with Case (they appeared together on our londonbusinessblog.com Disrupt- event in 2018).
Case also talked about some of his bets, which, perhaps to the surprise of skeptics, have exploded since he started investing across the country. He suggested that an important piece of advice he tries to give when speaking with founders is the art of storytelling itself. (A powerful story can go a long way, especially if you’re out of sight of some of the most powerful investors in the country.)
More follows from our conversation. These excerpts have been edited for length and clarity. (You can hear the longer conversation here.)
TC: You’ve been on a mission dating back to 2014 to bring more attention to founders across the country, traveling approximately 11,000 miles through 33 cities. Now that Covid is disappearing, are you back on the road now or have you booked that chapter?
SC: It is [that national tour] came from an effort just over 10 years ago; I was asked by President Obama to chair an initiative called Startup America Partnership. And that made me focus on regional entrepreneurship and this imbalance that we talked about earlier in terms of how 75% of venture capital dollars [were] going to only three states. And the more we visited cities, the more cities we wanted to visit. Of course we had to stop when the pandemic hit and we haven’t restarted physical tours yet. But we spend a lot of time traveling around the country. The Rise of the Rest team, which now numbers about a dozen people, 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 company had laid the groundwork for more VCs to come to the area, the opposite happened after Covid, they retreated to the coasts. Do you see the same?
[I think] while some may settle into a more difficult environment and focus more on their existing investments, I believe we are reaching a tipping point during the pandemic, and that will result in an acceleration of more capital flows to more cities and more entrepreneurs in those cities.
Most people in most parts of the country, if they wanted to be a part of the innovation economy, they felt like they had to leave where they were to get to the coast. That started to slow down over the past five years and increase in terms of people moving during the pandemic, [which] ended up being kind of a shake-the-snow-globe moment for society, and for many families too. They’ve reconsidered a little bit about how they want to live and work and where they want to live and work, and that will probably result in a permanent, dynamic.
Where has Rise of the Rest invested the most dollars?
We’ve made 200 investments in 100 different cities through our rides, so it’s pretty broad. And we’re seeing momentum in many, many cities. Indianapolis is an example of a city that most people don’t really know what’s going on there [and one of the reasons is a] tentpole company out there, ExactTarget. It has been acquired [in 2013] by Salesforce for $2.5 billion and had 1,000 employees at the time. Salesforce now has 2000 employees in Annapolis, and [it’s] the second-largest Salesforce office outside of San Francisco, and that company’s founder and many of that company’s early employees have continued to start new businesses.
We’ve also seen interest in places like Richmond, Virginia; we supported a company called TemperPack that focuses on sustainable packaging. They actually started out in New York City, but decided to move to Richmond to expand their manufacturing capacity, raising $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 get as close to the farmers as possible. We have invested in Chattanooga in a company called Goods waves which is focused on building a Bloomberg data platform for the trucking and logistics industry.
Have you had exits?
One of our seed companies, [Kentucky-based] AppHarvest, went public about a year ago [via a SPAC]. About a year ago, another company based in the DC area, Tax Note went public recently [via SPAC]. There was another Kansas City company called Backlotcars… acquired with a pretty significant exit company.
I think we’ve seen it [the portfolio] seven unicorns so far, so it bodes well for what’s happening in these places.
How does someone deal with you?
For the Rise of the Rest fund, we invested with over 300 different regional venture capitalists. They lead the rounds [and] they take the board seat because of the speed of the investments we made. 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 finance these ventures as a limited partner?
We did that early on, but because we’ve now co-financed with over 300 of them, we got a lot of requests to invest in those funds, and we decided to come back to that because we wanted to build the broadest network possible.
At the same time as people return to their hometowns or other more affordable places, 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 move businesses. Now they compete to get people moving. And everyone will have a different set of criteria that they prioritize. Perhaps they are moving for family reasons or for living costs, or because there is industry expertise in an area you want to build on, or [it could tie to] lifestyle choices such as cycling or skiing. In some states, taxes make it more attractive.
I think people will consider some of these social issues, including the recent Dobbs ruling, and step back, and I think people who are making these decisions – whether they’re local and state leaders or others in the community , even the media – must think and be aware [of this issue]. I think we want to avoid hyper-partisanship in the country. We have enough problems dividing the country; we want to avoid some kind of entrepreneurial culture war.
As someone who has run an international company and has probably been pressured into being political himself, do you think companies should take a stance on social issues?
I think every CEO should decide, and some [of that] depends on what matters they want to consider and which matters they consider most important for their most important supporters, whether it be their employees or their customers or others. But [some of why people move to certain places will tie] what the mayors and governors and politicians do. But part of it will also be what the entrepreneurs and the 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 from the beginning. What is your current relationship with him and what do you think of some of the positions he has held?
JD probably joined us four or five years ago, right after he came out with the… Hillbilly Elegy book. Part of the reason for that is that his wife Usha would serve a year on the Supreme Court as a clerk in Washington, DC, and our headquarters in Washington, DC. So he really 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 stayed in a role for another six months or so, but eventually decided he wanted to launch his own fund, which he did in Cincinnati.
I haven’t spoken to him since he announced he was running for the Senate last year and I didn’t support that campaign. Frankly, I am surprised by some of the things he has said, which, as he admits, are inconsistent with some of the positions he took a few years ago.
To do you ambitions to become a politician? You’ve got that beloved CEO thing in front of you
I appreciate you saying that, but part of the reason I think I’ve been successful in policy even a decade ago, working on the JOBS Act – the Jumpstart Our Business Startups Act – and more recently, part of the work around regional hubs is because I’m not political. As we travel around, we invite Democrats and Republicans to join us on the bus and all we do is try to make innovation, entrepreneurship, startups and job creation an unbiased issue.