Steve Case: Future innovation is outside of Silicon Valley
AOL founder Steve Case's investment firm Revolution has logged 6,000 miles to visit 26 cities in "fly-over" country between the booming coastal states. These cities—like Omaha, Minneapolis, Des Moines and Detroit— also happen to be home to a lot of Trump voters who feel left behind by today's economy.
Last week, Case announced he hired Hillbilly Elegy author J.D. Vance to focus on seed investments in midwestern startups for Revolution. This week, Case is bringing entrepreneurs from underserved regions to a Washington summit to make the case for more investment there and also to show policymakers the job-creating potential in these untapped markets. Here are excerpts from our chat.
What's been your biggest takeaway from the "Rise of the Rest" bus tour?
We've seen momentum in each of the communities — more focus on startups, more recognition of the role startups play in creating jobs. But there's not really a cohesive network that links the people who are trying to take the lead in driving the next stage of the startup community. It's still hard for most of the entrepreneurs in these cities to raise capital. So educating investors, whether it be venture capitalists or institutional investors, about the opportunities emerging in these cities is part of what we need to do. Some of that is building the network including regional venture funds that are starting to pop up around the country.
How long will it take to redirect the money to these underserved areas?
Because so much capital goes to so few places —78 percent of venture capital went to just three states last year —California, New York and Massachusetts — and because so little capital goes to these Rise of the Rest cities, it doesn't take much of a shift in dollars to potentially make a significant impact in those communities because they're starting at such a small base. I think that can and will happen in the next five years, but I think over the next decade we do need to continue to build these regions so we do have a more dispersed and inclusive innovation economy.
What is your message to the Trump administration?
I think part of the reason President Trump is President Trump is because of this dynamic where a lot of these people in these communities feel like they've been left behind, so I think getting more focus on creating more jobs in these Rise of the Rest cities is right in line with what I would imagine their priorities would be.
We can't bring back the jobs we lost and, for the most part, we have to create new jobs. I recognize the likely disruption of jobs because of AI, automation, robotics and driverless cars and so forth, but I'm reminded that 200 years ago over 90% of us worked on farms. New technologies came out and now less than 2% of us work on farms, but we thankfully came up with new acts. We just need to make sure we continue to identify interesting people doing interesting things in interesting places. Some of those will end up surprising us in being the next breakthrough companies and the next great industries.
But we're only going to find that if we have a more evenly dispersed innovation economy. I doubt we will get there if we continue to put all our eggs in the California, New York and Massachusetts baskets. They're great baskets, but we need a more diverse mix of views thinking about agriculture, health care, education and energy and financial services and government services. It's not just places like Silicon Valley, which tend to focus more on software.
What is your advice to tech industry when it comes to working with Trump?
I'm definitely in the camp of it's better to engage, better to be in the room, better to try to influence minds and influence policy than to sit on the sidelines. If we don't have that, we're going to end up with policies that are likely are not going to do what we need to see to make sure we remain the most innovative, entrepreneurial nation.
What are the skills of the future?
When we talk about innovation and entrepreneurship, it's not just about the coding, it's not just about the software. It's not just about the tech industry. Tech is an enabler to disrupt big sectors of the economy and it's going to take a mix of skill sets to be successful and it's going to take a mix of perspectives.
I'm betting that some of those insights around this next generations of farming will come from St. Louis or Louisville or Lincoln who have a long culture of farming; why some of the best insights around healthcare will come from places like Baltimore or Cleveland or Rochester who have strong health care expertise. I'm not surprised at all that Uber has bet its future in terms of driverless car operation not in Silicon Valley but in Pittsburgh because of its strength of talent there.
What should Silicon Valley companies be doing to move into some of these untapped markets?
You're starting to see companies realize that when they look for innovators they should look more broadly, and when you invest in them or acquire them they should let them continue to grow in those places. When Salesforce acquired ExactTarget, it had a little under 1,000 employees in Indianapolis, and now three years later they're coming up on 2,000 employees.... Whether that's the message for venture capitalists looking to back startups or big companies looking to acquire successful companies, that's a way for them to help level the playing field.