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CHRISTIANE AMANPOUR: Silicon Valley is the place to be for tech startups, of course, but that success has also helped cause brain drain from the heartland. Tech entrepreneur Steve Case, best known for co-founding AOL and of course that disastrous merger with Time Warner is hoping to change all of that. Together with JD Vance, author of the best-selling memoir “Hillybilly Elegy,” Case has launched Rise of the Rest Seed Fund, an initiative hoping to jump start economic opportunities beyond the coastal hubs and he sat down with our Walter Isaacson who is also on the board of that fund to discuss it.
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WALTER ISAACSON: Steve Case, thank you for joining us.
STEVE CASE, CEO, REVOLUTION: Great to be with you.
ISAACSON: Hey, tell me about the Rise of the Rest Fund and your bus tours. Why are you doing that?
CASE: Well, we’re doing it because we want a level the playing field, so everybody everywhere in the country has a real shot at the American dream. We, entrepreneurs create companies that create jobs and obviously do a lot of innovative things. But last year, 75% of the venture capital in this country went to just three states — California, New York, Massachusetts. The other 47 states fight over the other 25%. So we’re trying to get venture capitalists to pay attention to what’s happening with entrepreneurs in Ohio and Pennsylvania and Wisconsin, and other places, not just what’s happening on the coast places like California and New York.
ISAACSON: So you’re shining the spotlight on towns and communities and cities that are having a sort of rise of entrepreneurship, but don’t have the venture capital yet to get them started?
CASE: Correct, and don’t even have people understanding what’s happening. Most of the places we visited so far in the last several years, we visited 38 cities, 10,000 miles all across the country. There are interesting things happening in each of these cities. Most people don’t know about it, and most of the investors aren’t paying any attention to it. We’re just trying to change that paradigm and we really think some of the breakout companies of the future are not just going to come from Silicon Valley but are going to come from of these cities in the middle of the country.
ISAACSON: Why? I mean, you talk about it in the third wave of your book that there is a third wave, that isn’t engineer driven.
CASE: The third wave is the next logical step of the internet. Obviously, the first wave is getting everybody online, getting American. The second wave has been building apps, software services on top of the internet, things like Facebook and Google. The third wave is really integrating the internet and changing things like healthcare and our food systems and other things are going to require partnerships and also going to require more domain expertise. If you want to revolutionize healthcare, you kind of have to understand a little bit about how hospitals work and how doctors think. If you want to revolutionize farming with ag tech, having some sense of that culture of farming makes sense.
CASE: So, I think ag tech innovation will happen not just on the coast, but in places like St. Louis where Monsanto is headquartered or Louisville or Lincoln, Nebraska where there’s great expertise around farming and ag tech. And so we really believe the entrepreneurs are there, the talent is there, the creativity is there. The money is not there, and as you know, there’s a growing divide in this country that really is a divide and part based on opportunity. And so, if we’re going to — and startups create most of the jobs, not the small businesses, not the big businesses, but the young high-growth startups that we were going to create jobs in different communities and have more people feel optimistic about the future. We have to back entrepreneurs everywhere and they will have more the domain expertise because they’re closer to what’s happening. For example, a couple of months ago when we were in Chattanooga, the winner of the our Rise of the Rest pitch competition was a company called Freight Waves, it’s kind of doing a Bloomberg data system for the trucking industry.
ISAACSON: Which is sort of based in Chattanooga.
CASE: I didn’t know that but some of the big trucking companies are in Chattanooga. So if you start a company there to serve the trucking industry, you’ll have more expertise about what the needs are and more customers and more partners there if you’re in Chattanooga as opposed to if you’re in New York City or Boston or San Francisco. We’re seeing that all over the country. That’s where we think this next wave of great entrepreneurs building great companies will be.
ISAACSON: I love the fact that you picked Chattanooga. It’s one of my favorite cities. One of the things I don’t quite understand is how suddenly the past ten years Chattanooga has blossomed as an entrepreneurial startup. What makes a city like Chattanooga blossom where other cities might not?
CASE: It’s a mix of things, I’d say it’s growing quite remarkably, but it’s there’s still a lot to be done. There’s still relatively — it would be like Tennessee, I think last year the whole state, not just Chattanooga was was less than 1% of venture capital. Ohio, less than 1%. Wisconsin less than 1%. Pennsylvania less than 1%. So we are making some progress in some of these cities but there’s still a lot of work to do. Chattanooga specifically, the business community has really rallied around the startups. The mayor and others have really put a priority on the startups. The university has done a better job of keeping talent. We’ve seen an enormous brain drain over the last half century where people going to some of the great universities in our country then left those places to go to the coast because the money was in the coast, the opportunity was on the coast. How do you slow the brain drain? How do you create a boomerang of talent, people wanting to come back? And we’re starting to see that happen in Chattanooga and other Rise of the Rest cities.
ISAACSON: You know that’s a wonderful phrase you just used about boomerang, generation boomerang people. People who return to home. That notion of returning home seems to be catching on and one of the leaders of that is your partner, JD Vance, who wrote “Hillbilly Elegy,” but that notion of okay, in this very troubled times we’re facing today, maybe we should all go home and tend to our own gardens a little bit. He goes back to Columbus and you helped do a Rise of the Rest from there, right?
CASE: Yes, I think JD is an example in your experience, too that people who have pursued their dreams, pursued their career and it’s taken them to various places, but sometimes there’s a longing to come home and sometimes, a desire to raise a family where you grew up or maybe where you went to school, but the opportunity hasn’t been there in the last several decades, and that’s what we’re trying to change. JD, I think, obviously “Hillbilly” was a huge success. He was a venture capitalist in Silicon Valley and he wrote that book which sort of defined the problem that many people have in many parts of the country, feeling kind of left out, feeling left behind, scared about the future and decided he wanted to be part of the solution. And so he joined us at Revolution and is the managing partner of Rise of the Rest because he wanted to kind of be part of that. And as part of that, he wanted to move back home to Ohio.
ISAACSON: And so he goes back to Columbus. And Columbus is now flourishing. Not just because JD moved back, but it’s become one of the great entrepreneurial cities. Only less than a hundred miles away is Dayton, and it’s not coming back. Why does a city — what makes the difference? Why does a Columbus come back and Dayton is still struggling?
CASE: It’s a very interesting question. We’ve seen this in other cities. Dayton lost half of its population last half century. Detroit lost half of its population. Detroit a hundred years ago was kind of like Silicon Valley. It was the most innovative city in the country, but it kind of lost its entrepreneurial mojo, lost its way. It’s fighting its way back but it kind of lost a lot of ground. The difference between a city typically like Dayton and a city like Columbus is the ability to attract the talent and attract the capital. It’s been more difficult in Dayton to keep the people who want to be part of the innovation economy. People are more likely to be in Columbus. They’re trying to change that and some of the most innovative even computer companies like NCR were based in Dayton, so it has a tradition of being an innovative city. A lot of people left there and there is not yet that sense that it’s time to come back. There is progress in Dayton. There’s reason to be optimistic about it, but they dug a big hole and basically, everybody kind of — not everybody, but a lot of people felt like they had to leave to pursue opportunity elsewhere.
ISAACSON: But you look at Chattanooga, Columbus, I’d even say New Orleans, Austin, Texas, what are the ingredients, if you had to say, here are five ingredients you have to have if you want to be rising with the rest.
CASE: It starts with talent. And so how do you slow that brain drain, people leaving? How do you become a magnet for talent? A boomerang for talent? Capital is very important, which is why we launched this fund to partner with regional venture capitalists. We’re trying to help these regional venture capitalists raise more capital so they can back more companies. A connection to where there’s intellectual properties. Universities for example, provide that connection to partnerships with big companies in those cities and provides that. And sort of a sense of possibility, almost a fearlessness in terms of the culture. There are a lot of communities around the country. They are kind of cautious kind of risk averse. And if you’re going to be innovating, this is one of the great things about Silicon Valley. It has a sense that anything is possible. There is a fearlessness to that city. How do we create more of that in more parts of the country?
ISAACSON: So you’d put a billboard in some of these cities that just says be fearless.
CASE: Be fearless and believe in yourself. Believe in your community. I remember when we were in Memphis recently, part of the reason people are trying to rally there, there’s obviously great companies, big companies like FedEx that are headquartered there, but their startup community was not as developed as they wanted. We kind of said, well, we can only believe in Memphis if you believe in Memphis and people in Memphis, the business leaders, the government leaders, the university leaders aren’t rallying together to support the startups, why do you think people from other places will join you as part of this? Silicon Valley, a hundred years ago was fruit orchards. It wasn’t growing startups, it was growing fruit. But it had the connection to commit to Revolution, and obviously Stanford and other universities there and that’s where venture capital got started. And so, it went from basically being an agriculture valley to being Silicon Valley. And so how do we create that dynamic in other places? Not trying to replicate Silicon Valley but take some of the principles around innovation and that fearless spirit and backing the entrepreneurs and not just focusing on what might go wrong, but also focusing on what might go right.
ISAACSON: Let’s get specific about some of the successes you think you’ve had. I know down in New Orleans, one of the companies we invested in was Ready Responders.
CASE: Ready Responders is a good example instead of having to go to an emergency room, they’ll come to you, which is more convenient and also a cost effective way to deal with the health care system.
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UNIDENTIFIED MALE: So you can skip the waiting and high bills of the emergency room.
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CASE: There’s a company in Texas called SheerShare that is basically allowing people who are stylists, barbers, to basically rent out space and so they don’t have to necessarily affiliate with a particular salon. In Baltimore, we found a company called Catalyte, that’s taking a lot of people who didn’t know that coding might be something they’re good at. They give them a test. The people who pass that test go through a curriculum and get a much better paying job. There’s a UPS driver that was driving trucks because when he was growing up nobody said you might be good at coding and went through this program, has now doubled the amount of money he’s making because of a program like that. I do realize because I travel around a lot that most people in this country wake up in the morning anxious about the future, fearful about the future. They’re worried about the future. The disruption we celebrate in places like Silicon Valley, they view as a threat. They’re going to lose jobs because of that and that does happen. Disruption does result in job loss. Two centuries ago, 90% of us worked on farms and now, it’s less than 2% because of technology. Basically you can farm more land and grow more food with fewer people so there’s going to be that kind of job loss. The only question is can we offset the job loss with new jobs that we create in these new industries of the future. We can only do that if we’re backing entrepreneurs everywhere, not just in a few places on the coast.
ISAACSON: One of the things some of the cities that are successful have — Austin, Texas, Nashville, Tennessee, New Orleans, I would say as well is a creative economy, i.e. things — everything from music to food to theater, creativity. Is that part of the new mix, too, connecting creativity to the startup world?
CASE: No question. We’re seeing this also in terms of place. Half a century ago, if you wanted to revitalize a neighborhood, you tried to get the artist to move in. Soho here in New York, for example. Now you try to get the entrepreneurs to move in, and that starts revitalizing that neighborhood and then you start creating jobs and it kind of expands from that. But there’s no question that this ultimately is the battle for talent. As a country, we’re now in a global battle for talent. Each city within our country is battling for talent. How do you keep the best and brightest you have and how do you attract other people who want to be there and part of it is based on the opportunity, but some is based on the broader creative community and sense of possibility and sense of inclusiveness that these cities are trying to build.
ISAACSON: When you helped build AOL and you were the one that made it into a great company, it was based on a premise of community, of people who knew each other, bringing them together, and it wasn’t really about pushing out content. Do you think we’ve moved away from that wonderful model of social media bringing them to create community and now social media is dividing us?
CASE: I think there is some of that. I’m surprised and disappointed by it. I think that’s one of the unintended consequences of the internet. As you said, when we got started with AOL in 1985, only 3% of people were online, they’re only online an hour a week. We said we think the killer app of the internet is going to be people, community, what’s now called social media, so that really was the focus of AOL’s effort. I mean, more than half of our users, their traffic was always these community functions and we thought that was a way to bring people together. To be able to connect the people you already knew and wanted to stay closer to and also connect the people you didn’t yet know but maybe should because you have some kind of shared interest, and we have seen that dynamic kick in. At the same time, particularly in the last few years, it feels like social media has divided us. We were in our own little filter bubbles paying attention to only certain voices, not really understanding the other side of issues and it has had the impact of creating a more divisive kind of world which has had an impact in terms of politics. There’s no question there’s some downsides to it and one of them is the fact that social media in particular, and the diversity of voices which I think is a good thing also has this dynamic around fake news and not every voice is necessarily an accurate voice and a trusted voice, and so we have to figure out as we go forward how to strike the balance of creating that environment where every voice can be heard while at the same time having some distinction between what’s right and wrong.
ISAACSON: In the world of technology and in the world of Rise of the Rest and of entrepreneurship around this country and especially in Silicon Valley, women, people of color generally have been left out …
ISAACSON: … of getting venture funding and whatever. How bad is it and what can be done about it?
CASE: It’s really bad. I talked about how the venture capital money goes to a few states; 75% going to three states. It’s actually worse if you look at people. Last year, over 90% of venture capital went to men, less than 10% to women and less than 1% went to African-Americans. So this is a great entrepreneurial nation, we should be proud of it, but the data does suggest that it does matter where you live, it does matter what you look like, it does matter who you know whether you have an idea you can take it and build a company and really pursue the American dream, so we really need to be more inclusive. We really need to level the playing field and so everybody everywhere really has that shot. There’s a lot of work to be done on that front.
ISAACSON: Steve, thanks for joining us.
CASE: Thanks, Walter.
About This Episode EXPAND
Christiane Amanpour speaks with Justice Minister Rory Stewart and former British Labour Party Communications Dir. Alastair Campbell about Brexit; and Tena Clark about racial and political fault lines in the Deep South. Walter Isaacson speaks with Revolution CEO Steve Case, best known for co-founding AOL, about how to spread tech talent.LEARN MORE