Steve Case on a New Era of Entrepreneurship

CHRISTIANE AMANPOUR, HOST: And our next guest is also devoted to creating a more equal America. In his case, though business innovation. Entrepreneur Steve Case has traveled across the country to promote start-ups away from traditional investor cities. It’s all in his new book, “Rise of the Rest” based on the nationwide tour of the same name. And he tells Walter Isaacson why he is optimistic about America’s future.

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WALTER ISAACSON, HOST: Thank you, Christiane. And Steve Case, welcome back to the show.

STEVE CASE, AUTHOR, “RISE OF THE REST” AND AOL CO-FOUNDER: Always great to be with you, Walter.

ISAACSON: You are here talking, I think, in 2018 about “The Rise of the Rest” bus tour you were doing. You even came down here to New Orleans, put on a Mardi Gras costume. And you heard pitch contests from entrepreneurs around the country. Trying to make sure there were startups that weren’t just in Silicon Valley. Tell me what has changed since then now that we have had the pandemic and all the different things that have happened.

CASE: Well, it is — we’re doing this work for about a decade now. Trying to really understand what’s happening all across the country. Celebrate entrepreneurship all across the country. Try to get more venture capital investing in start-ups all across the country. And the reason that’s important is that most of the new jobs in this country were created by new companies, not by small business, not by big business, but by new businesses companies under five years. So, we need to be backing new businesses everywhere, that means backing entrepreneurs everywhere. And that led us to starting to hit the road and — with our “The Rise of the Rest” tour. The first one was eight years ago. You mentioned we were in New Orleans, I guess, five or six years ago. And we’ve now done dozens of these city visits. We have investments now in over 100 different U.S. cities. And it’s really remarkable. The momentum that was building around start-ups and the development of dozens of start-ups cities. There’s too much attention focused, I think, on Silicon Valley, not enough on the rest of the country. And in terms of that, what’s happened recently, the pandemic has been a tipping point. It clearly has led to a dispersion of talent. Some people leaving the coast to go to other parts of the country which is helpful to these rise — rest cities. It has led to a dispersion of venture capital. Those coastal investors are starting to look at some of these other opportunities. So, it really bodes well for this next chapter of American innovation. I think it will be less about a few places like Silicon Valley, and much more dispersed which I think will be great for those entrepreneurs, great for those cities, and really great for the country as well.

ISAACSON: What competitive advantage do heartland cities have sometimes over coastal cities?

CASE: Well, there are some basic ones, cost of living or cost of operating a company. In most of these cities, it’s quite a bit less than some of the big superstar cities like San Francisco or New York. So, the answer is raising money. Often that money goes two or three times further in terms of their ability to hire people and investing growing the company. So, there are some aspects like that. There are also some considerations people have around lifestyle issue, there’s family issues. There are reasons people want to be in another city. But perhaps the most important — and this is what is starting to really develop and why I profile so many companies in the book. There are cities that really advantage those companies in terms of their location. I will just give you a couple of examples. There’s a company in Chattanooga, Tennessee called FreightWaves that developed a platform. Kind of like a Bloomberg data platform for the trucking and logistics industry. I didn’t know they still were there with our “Rise of the Rest” bus but most of the big trucking companies in America are headquartered in Chattanooga. So, if you’re building a platform for the trucking industry, that’s the best place in the country to be. Not Silicon Valley, Chattanooga. Another example is there’s an entrepreneur, Carter Malloy, who was actually in San Francisco working for a hedge fund when he came up with the idea for a company called AcreTrader which is kind of a platform to invest in farmland. And he said, were — if I’m going to get farmers to put their farms on our platform, I need to build up trust. And a better way to do that is to not be in San Francisco. So, he moved to Fayetteville, Arkansas — Northwest Arkansas. Launched that company and it is scaling quite significantly. It was better for him to be an Arkansas, not California for that company. There are more and more examples of that that I profile in the book which I think bodes well for this next 10 or 20 years. As capital starts flowing, as talents starts dispersing, and you’re building on the industry expertise. So, the domain expertise, it’s so important in some of these industries of the future, that’s going to advantage the “Rise of the Rest” cities. More companies will start and scale. More jobs will be created. More economic growth will be move — driven forward. And that will help those communities. And as I said before, it really helped the country.

ISAACSON: I was struck by the fact that less than one percent of venture capital goes to black start-ups. What can you do to take on that really a shocking number?

CASE: Yes, it’s very troubling and sobering. I talked a lot about the 75 percent going to three States in, sort of, place base. But if you look at the people, it’s even more troubling. As you say, black Americans are 13 percent of our population. Black founders get less than one percent of venture capital. Latino, over 18 percent of our population. A Latino founder get less than two percent of venture capital. Women are 50 percent of our population. Female founders get less than 10 percent of venture capital. So, if you look at the data, it does matter where you live and it does matter what you look like. If you have an idea, if you have a shot at building a company, a shot at raising that venture capital. Really, a shot of the American dream. And so, we’re trying to level the playing field, not just in terms of place, but also in terms of people. I have a whole chapter in the book on diversity and partitive (ph). How do we make sure we’re reaching out. We’re being more inclusive as we think about innovation. And that’s one of the things that we do as you saw when we were in New Orleans with our “Rise of the Rest” bus tour. We’re very intentional about making sure that the people pitching on stage are reflective of the diversity of the community that we are in. As a result, more than 40 percent of our investments now are diverse founders. So we’re making some progress, but there’s still a lot of work to be done.

ISAACSON: One of the major changes happening in the economy now is a feeling that globalization and the outsourcing of everything and putting supply chains all the way from Malaysia to Indonesia to Vietnam to the United States turned out to be very problematic. Relying on China and Taiwan for our batteries and our chips turned out to be problematic. And now there’s a sense with the Chips Act and other things that we should onshore some of these things, we should bring manufacturing back to America. Do you think as you go around that even manufacturing and things like that could return to the United States?

CASE: Absolutely. It’s already happening. It’s been building over the last decade and I think it will accelerate because of the pandemic for exactly the reasons you mentioned that in a more difficult global world where our relationship with countries like China is hard to predict, we can’t be reliant on others to produce some of the basic goods. We saw that in the early days of the pandemic when there was such a challenge in terms of getting some of the basic medical supplies that we needed. That was a wake up call that led more people to say, we need to have supply chains that are closer to where we are. We’ve also seen the importance of semiconductors. We’re way too reliant on Taiwan and everybody knows the situation there in terms of the relationship between China and Taiwan, which is why we need to bring semiconductors back here. We need to control our destiny, and that means having more things built in in America. It also helps because we’re creating more jobs and more parts of America. And in some ways it’s kind of an odd dynamic, but some of the automation that’s happening, including robotic technology, that’s made it easier to manufacture in this country, more cost effectively, yes, it doesn’t have the same number of jobs, but it does allow you to do things that you couldn’t do maybe 10 or 20 years ago. I was just touring last month, the Rivian plant in Normal, Illinois, highly automated, but they have 5,000 employees there and they didn’t have that level of employment in that Normal, Illinois area until Rivian came. So yes, there’s a lot of automation, yes, the way cars are now being built, or in their case trucks, is different from the way cars were being built half a century ago. But Rivian launching in that area of Illinois has really been a catalyst in terms of job creation there and we’re seeing that now all across the country.

ISAACSON: A lot of the move you’ve been encouraging and talking about away from just focusing on Silicon Valley and the San Francisco Bay area, focusing on the northeast Atlantic coast means that companies are moving to places like Texas, Florida, and other red states, and suddenly that’s getting wrapped up into politics with abortion and everything else. Do you think either founders or heads of company are going to have to look at the politics of states or is that something they can ignore?

CASE: No, different people have different views on that, but I think a lot of entrepreneurs won’t take that into consideration as they’re deciding where to scale their company. Some of it will be looking for the domain expertise that may power that innovation in a particular industry or partnerships in the healthcare sector or the food and agriculture sector that might really accelerate their growth. That will be one factor. Some will look at the cost of living, cost of operations benefits. Some will look at some of the lifestyle amenities, some will look at some of the tax rates. But I do think a lot of people will look at some of these social issues and including abortion that may be a factor that both entrepreneurs deciding where to start and scale take into account as well as people who are thinking and moving to states that might give them a pause depending on what their policies are. So hopefully the policy makers and states who are trying to figure this out, recognize there is that aspect to it. There could be some unintended consequences to some of the policies that are being considered.

ISAACSON: I’ve known you for 40 years, but never known your politics. You’ve worked for Democrats, you’ve worked for Republicans, you’ve been involved as advisor in almost every administration for the past 30, 40 years, it seems. But tell me, you just said earlier that this could help knit us together, help get rid of some of the poison in our divisive politics. Explain how.

CASE: I don’t wanna overplay this because obviously our politics are complicated and multifaceted and there’s many, many things swirling around. But one piece of it is this idea that I mentioned before, that there are a lot of people in the country that do feel left out and left behind. The innovation economy has left them behind, the things that we celebrate in Silicon Valley they feel disconnected from, they don’t see any benefits to their family, to their community of those companies scaling. And part of that is because of this notion that entrepreneurs are just on the coast, or at least the investors are only backing entrepreneurs on the coast. And if we can launch and scale more new companies that are creating more new jobs and more communities all across the country, I think it does create more of a sense of hope and possibility. A great example, last week I was in Detroit. It was actually the first stop of our first bus tour eight years ago. At the time Detroit was struggling, the year before we were there actually, the city of Detroit went bankrupt. But now it’s happening in downtown Detroit. It’s vibrant. There’s dozens of startups that are scaling there. The buildings that were empty are now, you know, full and there’s a sense of hope and possibility in a city that has struggled for half a century. It’s because of the startups, because of the entrepreneurs and it’s because of the investors backing those entrepreneurs in places like Detroit. So we just need to get more of those investors who are sitting in New York, sitting in San Francisco to be looking at opportunities all across the country. I think they’ll find the investment returns are comparable to what they could get on backing the entrepreneurs in places like Silicon Valley. But we also can have this positive catalytic impact on these communities and hopefully on the country.

ISAACSON: One of the people who ran your fund, one of your funds in Ohio was JD Vance. Now he has gotten very much into politics. Tell me, in some ways you knew him pretty well, how’s he changed and is getting into politics a good thing when you’re trying to do stuff like this?

CASE: Well, not a good thing for me, as you know, I’ve tried to stay out of politics for several decades and focus on policy and work in a bipartisan way on policy, particularly related to innovation and entrepreneurship, job creation. 10 years ago I worked on the JOBS Act, more recently co-chairing the National Advisory Council Innovation Entrepreneurship. So for me, I think I can be more effective staying in my lane, focusing on something I know a little bit about and I’m passionate about and doing it in a very bipartisan, you know, kind of way. JD Vance did work with us when he was in DC for a little over a year and then moved to Ohio and continued to work for another six months or so, and then decided to leave and launch his own venture fund in Ohio three or four years ago. So I’ve not talked to him since he announced his candidacy. I have been surprised by some of the things he said, which by his own admission are quite different from things he said a few years ago and I guess that’s part of the game of politics.

ISAACSON: You work very closely with Ron Klain at Revolution Media, your company. Now he’s Chief of Staff to President Biden. To what extent do you think the Biden administration is close enough and gets business, especially entrepreneurial business? And what advice, if you could pull Ron Klain aside again, what do you say to him?

CASE: Yeah, Ron’s a great guy who was a co-founder of my investment firm, Revolution, when we started in 2005. Obviously he is now serving the country working for President Biden, is the chief of staff. I think when the administration first started, they were focused on a lot of things. Obviously the pandemic was front and center, probably didn’t focus as much on business, didn’t engage as much with business as some would’ve liked. That’s changed I think in the last three to six months. And even some of the legislation that has passed Congress has been helpful in terms of driving innovation, including the Inflation Reduction Act, which has a significant investment in climate technologies which will help boost that whole sector. And also what was in the CHIPS and Science Act, they authorized about 10 billion to fund regional hubs. You know, that would be helpful to this rise of the rest effort and people don’t fully appreciate it. But as you know, places like Silicon Valley didn’t happen by accident. Some of that was government funding of semiconductor research a half a century ago. Similarly in Austin, that was driven in part by government funding. So having the government boost the innovation that’s happening in different cities, build on the great research universities in so many cities and invest in establishing these regional hubs are helpful. So I think the recent evidence in terms of the administration is there is more focus on business and particularly focused on innovation, entrepreneurship startups. President Biden was just in Columbus, Ohio a few weeks ago to talk about what’s happening there with Intel, which helped launch Silicon Valley, now trying to launch what they call the Silicon heartland in Ohio. So I think we’re making progress.

ISAACSON: One of the things from your book that gives me optimism is the same thing that happens when I travel around. You get worried about the national discourse in politics and you see a Chattanooga or you see a Columbus or you see places that are enlivened again. Tell me what gives you optimism about America in the future?

CASE: It’s building right now. It’s these entrepreneurs who are now dreaming big dreams about better, better ways to, you know, help us live our lives, better ways to, you know, reimagine some of the most important aspects of our lives. How we stay healthy, how we learn, what we eat, how we move around, how we invest. These are all you know, playing out now and it’s not just happening on the coast, it’s happening all across the, you know, the country. And I’ve had the privilege of, over the last decade, traveling to dozens and dozens of cities backing entrepreneurs in over a hundred cities. And, I’m really struck by what’s happening there. Every city I go to, I’m amazed by what’s going on. And that story’s not being told. People in the communities I visit often don’t know what’s happening. Certainly people around the country don’t know what’s happening. And that’s why I wrote the book. This is a story that needed to be told. This felt to me like this is a book that needed to be written so people understand what’s happening. And if we continue to back these entrepreneurs, we invest more of that venture capital in these entrepreneurs, in these different different cities. I think it really will unleash a wave of innovation, a wave of job creation that really will strengthen these communities and also strengthen our nation. So I feel great about the progress we’ve made over the last decade. I think the next decade is when the rest really will rise and innovation really will disperse. And that’s the best way I think, to make sure America remains the most innovative entrepreneurial nation in the world. We need more shots on goal, which is backing more people in more places, not just some people in some places.

ISAACSON: Steve Case, thank you so much for joining us.

CASE: Thank you.