Producers’ Pick | Steve Case

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Visit ibm.com forward slash cloud to learn more. I think it's a hard time to fundraise as a founder, and I think it's also a hard time to think about how to keep your employees happy and healthy. I joke that the best thing you can do as an early entrepreneur is move back in with your parents.

One, because that keeps expenses low, and two, because it's highly motivating for you to get your business off the ground so you can move out. Those are some of the entrepreneurs speaking up and speaking out about the hurdles that they've had and some advice that they give. Steve Case is co-founder of AOL and the American Online Revolution and New York Times bestselling author. His latest book that's out now this week, The Rise of the Rest, How Entrepreneurs in Surprising Places Are Building the New American Dream. Steve, welcome. Good to be back with you, Brian. Yeah, great to see you in person doing the book, The Rise of the Rest.

Not only is that a great title, what's the name of the program that really drove you? Yeah, for the last decade we've been traveling around the country trying to understand what's happening in different parts of the country. We did bus tours to see cities like Pittsburgh and Nashville and Minneapolis and Phoenix and Dallas and Des Moines, all over the country, just trying to see what's happening because there's so much focus these days on the tech sector and so much of focus on just places like Silicon Valley.

Innovation is happening all across the economy. It's happening all across the country, but there's not much focus on those entrepreneurs, not much focus on those cities, and that's why I wrote the book. It's a pretty optimistic view of what's happening in America that's not really getting reported on because there's so much focus on the media, on the big cities, and even on the investors, the venture capital. Seventy-five percent of the venture capital in the last decade has gone to just three states, California, New York, and Massachusetts.

Seventy-five percent. And so other states, whether it be big states like Texas or Illinois or Florida or even somewhat smaller states like Minnesota or Ohio, others, they get very little venture capital. As a result, the entrepreneurs there get very little opportunity to start companies, and as a result, those communities don't get a lot of job creation. So we have to create more jobs in more places, and the best way to do that, in my opinion, is to back more new companies, therefore backing the entrepreneurs, and that's why I wrote the book. So you brought the money and investment to them rather than making them come to New York, Los Angeles, or Washington, D.C. Yeah. There has been, for the last several decades, kind of a brain drain in parts of the country where people who want to be part of the tech sector, the startup economy, generally felt they had to leave where they were because there wasn't much focus on startups there, and that led people to typically go to the coast, often to Silicon Valley. What we're trying to do is slow the brain drain of people leaving for better opportunities and create a boomerang of people returning because there are unbelievable opportunities in these cities as they build up their startup communities, as there is more capital there to back those entrepreneurs, as they see more jobs being created there. So I think it has a broader societal impact, and we also figured if we were able to prove that investing in entrepreneurs in these places can generate top-tier returns for investors, that will lead other investors on the coast to start paying attention to the entrepreneurs in the middle of the country. And that is now starting to happen. The pandemic actually has been helpful in that, frankly.

It's sort of a little bit of a tipping point in terms of its salary. Because we couldn't travel. You know, the Mr. Mr. Innovator who was, I'm going to go to New York City, I'm going to go refine my dream.

No, we're not allowed to, and there's nothing happening there anyway. So then all of a sudden, maybe we've got to stay here and do it. Well, two things happen. One is the investors in places like Silicon Valley, because of the pandemic, suddenly, instead of having in-person meetings with entrepreneurs, had Zoom meetings with entrepreneurs, and they realized that when I have a Zoom meeting with an entrepreneur, it doesn't really matter if that entrepreneur is a mile away or a thousand miles away. That opened up the eyes of a lot of investors to the fact there are great entrepreneurs building companies everywhere. The other thing that happened is some people in those places, whether it be here in New York or San Francisco or other places, during the early part of the pandemic said, you know what, rather than stay here, I think I'm going to move somewhere else.

Either I'm moving home or I'm moving to some other place, because if I'm going to work remotely, actually somewhere else, I'd rather live. And a lot of those people decided to stay there. And now you're starting to see some of those people move into the startup economies in those cities. So I think this bodes well for what can happen over the next decade, that we have to figure out ways to create more opportunity for more people in more places. We can't just back a few people in places like California and not entrepreneurs all across the country.

And what did you find? Because you do have this credibility as one of the most successful entrepreneurs ever, and you really have more responsibility for creating the Internet than maybe anybody else on the planet, and you know that. And you did it at a very young age. You did not have any connections. Born in Hawaii, you weren't born with a bunch of your uncles and aunts who were CEOs of major corporations. So your life story sells this program.

Yeah, no, my life story. Growing up in Hawaii at the time, actually, Hawaii wasn't a state. It became a state on my first birthday, and Hawaii was kind of out of it.

We'd even get television programs a week later because satellite technology hadn't developed. So it just felt a little bit out of it. I went to college in Massachusetts, and I worked in Ohio, then I worked in Kansas, then I moved to Virginia, and that's really where we started AOL 37 years ago. And it was kind of a lonely place outside of Washington, D.C. It wasn't a startup city. There wasn't a lot of venture capital. There weren't a lot of people focused on startups. And I think that experience of starting a company and struggling a little bit to get people to pay attention, to get investors to believe in what we were doing, I think is part of the reason I feel this empathy, this passion to support the next generation of entrepreneurs and do it in cities all across the country. So with our Rise to the Rest fund now, we've invested in 200 companies in 100 different cities all across the nation.

There's some amazing companies. There's one in Chattanooga, Tennessee, called Freightways has built this data platform, kind of like a Bloomberg for the trucking industry. I didn't know this until we were there on our bus, but some of the biggest trucking companies in America are in Chattanooga, so of course that's a great place to be. Well, just to back up, you drove around on your bus.

You painted the bus. Yeah, no, we said we're going to hit the road eight years ago. We said we're going to hit the road, see America, and we've done a number of these tours. And when we go to these different cities, we really spend a lot of time, six months really, before we get there trying to understand what's happening. When we're there, we try to connect other people in the community, inspire them to focus more on entrepreneurs. And we have pitch competitions where we invest in at least one. Almost like Shark Tank without the cameras.

Yeah, exactly. But to bring the community together to support their startups and bring the nation together to understand that there are interesting things happening in different parts of the country and all the action, not just in the big cities like New York, Boston, San Francisco. And who invested in your fund that allowed you to invest in others?

Well, it's an amazing group. We have about 35 of some of the most prominent individuals in the country, entrepreneurs like Jeff Bezos and Howard Schultz and Tory Burch and Sarah Blakely. Private equity investors like Henry Kravis and David Rubenstein, hedge fund people like Ray Dalio, venture capital investors like John Doerr, Jim Breyer. Some families like the Koch family and the Walton family, the Pritzker family.

So we really tried to reach out and say, join us on this mission. There are great entrepreneurs everywhere. There are creating companies everywhere. There are creating jobs everywhere. There are creating opportunities everywhere. And we think by backing them with investment capital, we can help them scale and they'll be more successful, will generate great returns, and will also have a positive impact on those communities, particularly by creating jobs in a lot of places that have been struggling. Because the innovation economy has often kind of left them behind. You mentioned the company in Chattanooga.

Do you have some other companies? Oh, it doesn't. That's why I wrote the book. After spending a decade doing this, I was so excited by the stories we were hearing from the companies, from the cities. I said, most people don't know what's going on here.

I have to write this book and share this with the world. But I will give you a few other examples. In eastern Kentucky, there's an entrepreneur, Jonathan Webb, who grew up there but then moved to the coast and decided to move back to start a company focused on farming called AppHarvest. And he built now what's the largest indoor greenhouse in the country.

And it uses 90 percent less water, so it's good for the environment. And the nice thing about where they're located outside of Lexington is 70 percent of the U.S. population is within a 24-hour drive, so it's actually easy to get the fruits and vegetables to different markets. And as you know, that area which is known as kind of Appalachia, coal country, has struggled for the last several decades.

A lot of the industries they relied on were in decline. Jonathan, through AppHarvest, now created 500 jobs in an area that most people didn't really think had that same possibility. Or in Richmond, Virginia, there's a company we back called TemperPak that's working on sustainable packaging. They've grown quite significantly.

I have hundreds of employees now, just raised a big round led by Goldman Sachs, over $100 million. And they actually started in New York City, but when they were starting to build their manufacturing plant for this packaging, they decided to move the whole company to Richmond, Virginia. So that's another example. There's also a story outside of Indianapolis, a suburb of Indianapolis. There was a mom who had some experience in the tech sector, and this was after the Flint water crisis. She was kind of concerned, like, maybe my kids, their water isn't safe. And so she called the water company and said, I want to get my water tested.

And they said, we don't do that for individual people. And then she called somebody else and said, we'll do that, but it'll cost you thousands of dollars to do that. And she said, well, this is crazy, and started a company called 120 Water to initially offer families the ability to have their water tested. Now she's selling that capability to cities, including cities like San Francisco. So as somebody who saw a problem, this is what entrepreneurs do so well.

They see a problem, and then they do something about it. And they do something about it by starting a company. The news here is, you don't have to just be in certain places like California to start a company. You can start a company anywhere. So if you're out there and you have some idea, hopefully this book will give you a roadmap to take that from idea to reality and attract the capital you need, attract the team you need, attract the attention you need. What do you have to see in order to get your company to invest in theirs? Well, first of all, we partner now with over 300 regional investment firms.

So we work with them because we're trying to do this all across the country. So a lot of the opportunities come from those investors that say... Did you find it... Sorry for this naive question. I have the rich business background.

You do. Do you find there are the investment firms in these smaller areas in the Northern Virginias of the world, in Kansas, and you come in to help the investment firm find the entrepreneur? Well, it's changing. And it's a great question because a decade ago, generally in most parts of the country, there wasn't much of this capital. I mentioned even my own experience in Northern Virginia when we were starting America Online, there wasn't venture capital.

But that's changing. Over the last decade, 1,400 new investment firms focused on startups have been launched all across the country in what we call these rise of the rest cities, which means outside of San Francisco, outside of New York, outside of Boston, outside of the big tech hubs. So now there is more money there for those early investments, seed investments, and so forth than there was before. So the entrepreneurs there, they have an idea, have more of a capability of raising the capital to scale it. They don't have to move to a place like California to do that.

They can stay where they are, start where they are, and figure out ways to tap into the startup community that exists in dozens and dozens of cities. And we profiled them in this book. Are you tapping innovation or are you hoping to inspire entrepreneurs to innovate because you understand fundamentally that's what made our country great?

People that had that can-do attitude to make a difference in why not me? Did you worry on some level that we were losing that? And do you feel that part of your mission is to uncover that and reignite that?

Yeah, absolutely. I actually start the book. The first chapter of the book talks about America about to celebrate its 250th anniversary. And you remember selling the 200th anniversary in 1976. I was at the 200th anniversary. I'm now the chair of the Smithsonian Institution.

And so in Washington we have 19 museums and we're working on the planning for the 250th, which is four years from now. And that's how I kick off the book, reminding people that 250 years ago America itself was a startup. It was a fragile country that almost failed. That everybody wanted to fail. Most people around the world thought it was a joke.

Just as many people look at startups and think, you know, that's not going to work. Most people did not think America was going to work. America worked.

Why? Well, in part because the entrepreneurs kind of led the way 200 years ago with the agricultural revolution, then led the way 100 years ago with the industrial revolution, and more recently led the way with the technology revolution. And that's why I went from this fledgling startup nation to the leader of the free world, because we have the leading economy, because we've been the most innovative nation. But we are seeing kind of a globalization of innovation. If you look at venture capital data 25 years ago, over 90 percent of venture capital globally was invested in the United States.

Now it's under 50 percent. So many other countries, obviously China being the one, but there are many other countries are trying to lead in the technologies of the future, the industry of the future. So we need to double down on our entrepreneurs, but we have to do that everywhere. We can't just keep backing the people just in places like Silicon Valley or Boston. We have to be backing the people all across the country.

And that's why I wrote the book. I do want to inspire the next generation of entrepreneurs. I do want to inspire people in those communities to support those entrepreneurs. And I do believe if we are more inclusive in reaching these places that often have been left behind in the last 10 or 20 years in terms of capital and innovation, then that will maximize the likelihood America continues to lead and also could help unify a divided country by closing, at least in part, this opportunity gap where a lot of people kind of feel left out, left behind.

How do we create the jobs for them so they can be part of the future? Absolutely. Steve Case, our guest, when we come back, this question, China has taken away the profit motive. They've also squelched a lot of individualism. Will that hurt their innovation in the future? To me, the answer is yes. We'll see what Steve Case says as he comes back and continues to talk about his brand new book, The Rise of the Rest.

Back in a moment. Expanding your knowledge base. It's the Brian Kilmeade Show.

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This is the Brian Kilmeade Show. Steve Case is with us. He's co-founder of America Online, of course, Revolution, and New York Times bestselling author. His latest book is The Rise of the Rest, how entrepreneurs in surprising places are building the new American dream.

Steve, you're so multifaceted. First off, as we come up on our 250th anniversary of our country, are you getting concerned that the average American doesn't appreciate how special, while not being perfect, this country is? Yeah, I think there's a lot of focus on the challenges, the problems, kind of what's not going right, which I think is understandable.

We need some of that. I mean, you need more of the focus on the things that really are the reasons that America are special and unique, and that's part of why, again, I wrote the book on Rise of the Rest, because part of that story is the entrepreneurs that have helped build the country and the new entrepreneurs now in these Rise of the Rest cities that are kind of building the next chapter of the American story and doing it by innovating in healthcare and food and financial services and transportation and doing it all across the country. So there are a lot of great things about this country that sometimes we forget, and hopefully this book will... There's a lot of bad stuff out there in terms of inflation and Ukraine and all this other stuff, which I don't want to make light of.

Obviously, there are issues, but the book is meant to be an optimistic view of the future of America. Right, and if you think about our founding fathers, they were multifaceted. George Washington wasn't just a general. Thomas Jefferson wasn't just the first Secretary of State. I mean, they were multifaceted. They had to learn to do everything.

And Benjamin Franklin, great inventor, great entrepreneur, as well as being a great patriot. When you had so much success early, is that a difficult challenge in retrospect, when you have all the success and you still have two-thirds of your life straight ahead? Was that something that needed to... Did you have to take time to wrap your head around? Yeah, a little bit, although I would say my own story was a story of struggle for more than a decade before AOL was successful. But how old were you when that... We started the company when I was 25, but it was probably not until I was 35 that things really took off. I remember we went public. It was the first Internet company to go public.

It was 1992, so 30 years ago. And when we went public, we raised $10 million in our IPO. We only had 200,000 customers. The value of the company was like $70 million. And really, nobody knew or cared about AOL, knew or cared about the Internet. It was viewed as sort of this fringy hobbyist thing that would never be mainstream. And a decade later, it was one of the most valuable companies in the world with tens of millions of customers. But as a result, I think that struggle was helpful to me. It was not an overnight success. And now you pass it on.

The rise of the rest. Go pick it up and be inspired how entrepreneurs in surprising places are building the new American dream. Thanks, Steve. Thanks, Brian. You've got mail. Put the power of over 100 meteorologists and the worldwide resources of Fox in your hands with the Fox Weather Podcast.

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