Steve Case, the cofounder of America Online, the investment firm Revolution, and its offshoot seed-stage arm Rise of the Rest, has a new book out called Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream. 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 earlier today with Case about the book; we also chatted with him about the mentality of coastal investors, whether he harbors any political aspirations, and the status of his relationship with Ohio Senate candidate J.D. Vance, who worked closely with Case at one point (they appeared together at our TechCrunch Disrupt event in 2018).
Case also talked up a number of his bets, which have, perhaps to the surprise of skeptics, taken off since he began investing across the country. He relatedly suggested that one major piece of advice that he tries to impart when speaking with founders is the art of storytelling itself. (A powerful narrative can go a long way, particularly when you’re out of the sightline 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 hear the longer conversation here.)
TC: You’ve been on a mission dating back to 2014 to bring more attention to founders around the country, traveling something like 11,000 miles across 33 cities. With Covid fading away, are you back on the road now or have you bookended that chapter?
SC: It [that national tour] came out of some effort a little over 10 years ago; I was asked by President Obama to chair an initiative called Startup America Partnership. And that got me focused on regional entrepreneurship and this imbalance that we’ve talked about before in terms of how 75% of venture capital dollars [were] going to just three states. And the more we visited cities, the more cities we wanted to visit. We did obviously have to stop when the pandemic hit and we have not yet restarted in terms of physical tours. But we are spending a lot of time traveling around the country. The Rise of the Rest team, which is now about a dozen people, has visited dozens of cities over the last six months.
Chris Olsen of Drive Capital in Columbus, Ohio told us a few weeks ago that though his firm had laid the groundwork for more VCs to come to the area, the opposite happened post Covid, that they’ve retreated back to the coasts. Are you seeing the same thing?
[I think] while some may hunker down in a more difficult environment and focus more on their existing investments, I do believe we hit a tipping point during the pandemic, and that will result in an acceleration of more capital flowing to more cities and more entrepreneurs in those cities.
Most people in most parts of the country, if they wanted to be part of the innovation economy, they felt they had to leave where they were to go to the coast. That started slowing over the last five years and picked up in terms of people relocating during the pandemic, [which] ended up being kind of a shake-the-snow-globe moment for society, and also for a lot of families. They kind of reassessed how they want to live and work and where they want to live and work, and that likely will result in a permanent, dynamic.
Where has Rise of the Rest invested the most dollars?
We have made 200 investments in 100 different cities, so it’s fairly 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 happening there [and one of the reasons is a] tentpole company that’s there, ExactTarget. It was acquired [in 2013] by Salesforce for $2.5 billion and, at the time, had 1,000 employees. Now Salesforce has 2,000 employees in Indianapolis, and [it’s] the second-largest Salesforce office outside of San Francisco, and the founder of that company and many of the early employees of that company have gone on to start new companies.
We also have seen interest in places like Richmond, Virginia; we backed a company called TemperPack that focuses on sustainable packaging. They actually started in New York City but decided to move to Richmond to build out their manufacturing capabilities, and they’ve gone on to raise $140 million in a round led by Goldman Sachs. We backed [online farmland investment company] AcreTrader whose founder, Carter Malloy, was in San Francisco and decided to move to Arkansas to get the close to where the farmers are. We invested in Chattanooga in a company called Freightwaves that’s focused on building a Bloomberg data platform for the trucking and logistics industry.
Have you had any exits?
One of our seed companies, [Kentucky-based] AppHarvest, went public about a year ago [via a SPAC]. In July, another company based in the D.C. area, FiscalNote went public [via SPAC]. There’s another company out of Kansas City called Backlotcars that was acquired with a pretty significant exit .
I think we’ve seen [the portfolio] get to seven unicorns so far, so it really bodes well for what’s happening in these places.
How does one go into business with you?
For the Rise of the Rest fund, we’ve invested with over 300 different regional venture capitalists. They lead the rounds [and] they take the board seat, because of the velocity of investments we were making. We play more of a role of connecting these entrepreneurs and connecting these investors to build essentially a Rise of the Rest network.
Do you fund these venture firms as a limited partner?
We did some of that early on, but because we’ve co-invested now with over 300 of them, we were getting a lot of requests to be investors in those funds, and we decided to back off on that because we wanted to build the broadest possible network.
At the very same time that people are moving back to their home towns 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 were competing to get companies to move. Now they’re competing to get people to move. And everybody will have a different set of criteria that they prioritize. Maybe they move for family reasons, or cost of living reasons, or because there’s industry expertise in an area that you want to build on, or [it could tie to] lifestyle choices like biking or skiing. With some states, taxes make it more attractive.
I do think people will factor in some of these social issues, including the recent Dobbs ruling, and take a step back, and I think people making these decisions– whether it be local and state leaders or others in the community, even the media — should be thinking about and being aware [of this issue]. I think we want to avoid hyper partisanship in the country. We have enough issues that divide the country; we want to avoid a sort of entrepreneurial culture war.
As someone who has run an international business and probably been under pressure yourself to be political, do you think companies should take a stance on social issues?
I think every CEO has to decide, and some [of that] depends on which issues they want to weigh in on and which issues they think are most important to their key constituents, whether it be their employees or their customers or others. But [some of why people move to certain places will tie] to what the mayors and governors and politicians do. But some of it also will 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 at the outset. What is your current relationship with him and what do you think of some of the positions that he has taken?
JD joined us probably four or five years ago, right after he came out with the Hillbilly Elegy book. Part of the reason for that is his wife Usha was going to be working in the Supreme Court as a clerk there for a year in Washington, DC, and we’re headquartered in Washington, DC. So he really helped launch the first Rise of the Rest fund. But after they were in DC for a year, they decided to move to Ohio, and he continued in the role for another maybe six months or so but ultimately decided he wanted to launch his own fund, which he did in Cincinnati.
I have not talked to him since he announced last year that he was running for Senate and I’ve not supported that campaign. Frankly, I’ve been surprised by some of the things he has said, which are, by his own admission, inconsistent with some of the positions he took several years ago.
Do you have any ambitions to become a politician? You have that beloved CEO thing going for you.
I appreciate you saying that, but part of the reason I think I’ve been successful on policy, including even a decade ago, working on the JOBS Act — the Jumpstart Our Business Startups Act — and more recently, some of the work around regional hubs is because I’m not political. When we’re traveling around, we invite Democrats and Republicans to join us on the bus and everything we’re doing is trying to make innovation, make entrepreneurship, make startups, and make job creation a nonpartisan issue.