Reigniting the Entrepreneurial Spirit

and more. And he's got a new book out. The book is called Rise of the Rest, How entrepreneurs in surprising places are building the new American dream. Where pleased to have Steve with us this afternoon the Bloomberg Interactive Broker Studio. Steve, It's good to see you. You know, I was commenting to Carol a little earlier that I said, you know, every time I've interviewed you, basically from ten

to twenty twenty, you were on a bush. And this is the this is the second time I've gotten to interview you where you haven't actually been on a bus. This book is about the bus tour. Yeah, it really doesn't mean being a better part of a decade traveling around the country trying to see what's happening in terms of innovation entrepreneurship in different parts of the country, meeting hundreds of entrepreneurs, visiting dozens of cities, now making investments

in about a hundred cities. I was just so fascinated about what I saw and so frankly encouraged by what I saw. I said, I have to tell the story. I have to share these stories. And that's what led me to write the book, trying to really kind of help people understand what's happening, not just in a few places like Silicon Valley, but all over the country, which I think boats well for the next phase of innovation

in this country. What are we missing by ignoring what's going on in the heart of the country, Steve Well A bunch of things. First of all, some of the biggest industries up for grabs in this next way, what I called the Internet third wave, like healthcare, some of the expertise you need, some of the partnerships you need are in the middle country. Mayo Clinic in Minnesota is important,

Cleveland Clinic and Ohio is important. M Danders in Texas is important also for some industries, like the trucking and logistics industry, getting people who understand that business and are in those communities are important. Of the stories I talked about in Chattanooga is his company called Freight Waves kind of does Bloomberg for trucking and logistics. Well, guess what

I didn't know. Still, we visited with our bus. But uh, some of the biggest trucking companies in America are based in Chattanooga, So it actually better place to be for that business than than New York City or another one acre trader in northwest Arkansas and Fayetteville. The founder actually was working a head fund in San Francisco, decided to move to Arkansas because his business called is basically a platform to invest in farmland, and you need to get

farmers to put their farms on the platform. Well, he thought it'd be better to be closer to the farmers and therefore in Arkansas. So a lot of these stories that that I think surprised people. It certainly surprised me, and I think people reading the book will will be equally surprised by how many things are happening in how many different places, most of which he's never visited. It's not just the eastern West. You know what's funny, Steve is.

Twenty four hours ago, Andrew Ginther, the mayor of Columbus, Ohio, was sitting in the seat that you're sitting in right now, and he was basically saying the same thing, and he talked about the acceleration of what happened been during the pandemic and the way that people moved away from the coast to other parts of the country because they were able to work remotely. You've been doing this and looking at this for what the better part of a decade at this point, Um, How did the pandemic change the

way that people thought about geographies when it came to innovation. Well, you're right, it was bubbling for most of the last decade. Every year, every time we did another tour, we would see more progress in more places. But the pandemic was

a tipping point. It really was sort of when people took a step back and said where do I want to live and how do I want to live, and how do I want to work and kind of remote work, hybrid work, things like that led to some people decided to move someplace else and instead of just being in San Francisco, just being in New York or just being in Boston, which have been the historical, you know, kind

of tech hubs. A lot of people moved to other parts of the country, and attracting that talent is critical to fuel those start up communities. Interestingly, over the last several decades, we've seen a brain train in this country. Most people in Silicon Valley over people in Selicon Valley are from someplace else. They didn't grow up there, that they didn't go to school there from someplace else. Uh, they went there because that's where the opportunity was, that's

where the capital was. And I we're seeing a slow slowing of that brain drain of people leaving in different parts of the country and a little bit of a boomerang of people returning. In Columbus is a great example, a lot of moment in there. I feel like too, what we think about what's going on in the middle the country. I feel like that when I travel or re travel and we get to something other beyond the East and West coast, like we just get a different

point of view, a different perspective. We talk about stress, the importance of diversity of in terms of ideas. How have you come across that totally entrepreneur at the core, see a problem they think should get solved, and start a company to solve that problem. And you're only gonna see problems based on your experience, and that will include where you're living, in the communities that you're interacting with.

And a great example in the book as an Indianapolis, there's a mom and the suburb of Indianapolis that the number of years ago was concerned about water quality. This is after the Flint, Michigan water crisis. Funts not that far from from where she was. He said, I'm kind of worried that, you know, maybe my kids are drinking unsaved water. So she called the water utility, so I

want to get my water tested. They said, we don't do that for consumers, and if you we could make an exception, but it costs you like three or four thousand dollars. You thought that was crazy. So she started a company called One Tent Water to test people's water, initially as just for consumers. Now she's actually selling that capability to cities, including San Francisco, to test their water.

She would not have had that experience unless she happened to be there and happened to bump into that problem. And that's again this you know, the dozens of the stories in the book are people like that. They just saw something and said I'm gonna do something about it, and they did it from where they were. They didn't feel like because they weren't in one of the startup pubs, they couldn't really take a shot. Tim and knows, I'm

obsessed with shark take right now. And it does have that quality of what you guys have done, You've done competition, and it just amazes meets people like that, either something happens to a family member, just something in their walk of life, and they're just like, we can figure out a solution to this, and there it goes. And one of my favorite examples is in Chicago, Er k Lefkowski

started a company called Tempest. And the reason he started that was about seven years ago his wife was diagnosed with breast cancer and they talked a lot of people different hospitals and kept getting different opinions. So, as you know, wife's life was hanging in the balance and different people were saying you should do different things. He said, well,

this is kind of a data problem. You need to be more precise and what exactly is going on with her situation and therefore what would be the best possible therapy to help her. And that company now has gone to hire more than a thousand people out of data sciences coming out of University Illinois, rates billion dollars. It's a really great company and it would would not never have happened if Eric didn't have a life that was struggling with with this disease and was getting differing opinions.

So this really is the story of entrepreneurship. It just partly to write the book is the stories for too long has been limited to a few places in Silicon Valley, Mark Zuckerberg, Elon Musk. There's a celebrated tech entrepreneur. They should be celebrated, but we need to also celebrate the entrepreneur all over the country that also are doing things in new ways. I mean, how about about your story starting a O. Well, you didn't start that in New

York or San Francisco. Yeah, we were outside of Washingt d C. In northern Virginia. It was it was not by any stretch of startup pub There's no venture capital there as hard to get people from big companies to join the little little startup company. So it was a struggle. I think that helps inform my thinking around the rise to rest and maybe passion to make it easier for the next generation of entrepreneurs wherever they are in the

in the country. But for the first decade it was it was a struggle and a couple of times we almost didn't make it. Finally we we broke through, and obviously it end up being a successful company. But many, many entrepreneurs in many parts of the country would never take that first step to start a company, or if they did, they wouldn't real able to raise the capital to to make it, you know, go of it, or

wouldn't be able to hire the talent. We've got to change that, otherwise we're gonna have a even more divided country and probably run the risk of losing what it's now a global battle around innovation entrepreneurship UF seats at the table where you can help change that. I mean, what is it that needs to be changed. Is it something to do with incentives from the government in is it something that the private sector needs to do and wake up? I mean, what is it that needs to

change that? There's more acknowledgement, most maybe resources going to this. Mostly I think the private sector. There are some things the government has done and and and then some other things government should do. Government. Decade ago I worked on the Jobs Act, legalized crowd funding, which helped to create some opportunities to raise capital. Just this summer, the Legislation of Hips and Science Act included UH funding of about ten billion dollars for regional hubs, which will help support

the Rise of the Rest. So there are some things that happen at a national level, you know, the local and state level that I think are important, but ultimately it's it's the people standing up saying I'm gonna create a company. There's some something I want to do, some problem I want to solve them and create a company, and then getting investors to back that company. One encouraging data point, and we got this data the last year

from a partnership Rise arrested with Pitchbook. In the last decade, fourteen hundred new venture capital firms were started in the Rise of the Rest cities, meaning outside of San Francists, outside of New York, outside of Boston. That bodes well for this next chapter because having some of that local capital is really helpful to these entrepreneurs. Why is that happening. Are people just acknowledging what's going on in some of these hubs, or it's hard to compete on the coasts

for a bunch of factors. But but the core is people recognize this next phase of innovation is going to be a little different than some of the cities around the country that weren't really part of the innovation eCOM in the last you know, a couple of decades, are well positioned and therefore there's great opportunities to back those companies, and investors want to capitalize on that, so that that's the main factor. It also helps that we're starting to

see some real breakout successes. Company like mail Chimp was acquired in land A last year for twelve billion dollars. Through many there's there are a lot of these companding companies that are starting to scale around the country to go public or be acquired pretty pretty significant evaluations, which lead the investors say, huh, maybe maybe I should be paying more attention to some of these other places. Somebody

out there is making a lot of money. Maybe I should do a little less and have a little more diversification. I have all my eggs in the Silicon Valley basket, have other investments around the country. Are wealth funds in general? Like Tim and I talked to so many different wealth managers and I feel like so much of their investments

is looking for kind of some of these startups. Does that help fuel the momentum that's going on where it might be too pricey for them to get in on some of the deals that are typically led by some of the coastal firms, if you will, Is that part of it? I think it could be part of it. But a lot of the capital UH is still invested in funds and as a directly in companies, So getting more funds started in more places I think is is

the best solution as a company's scale. Some of the investors in those funds also look for co investment opportunities in some of those companies, and we're starting to see more of that. But anything we can do to get more capital in the hands, the more entrepreneurs, and more places I think is supportive of this overall rise of the rest effort will also help in these communities create more jobs and an opportunity which also at least in a small way well could help United very divided country.

Part of that divide, not all of it, but part of that is this opportunity gap where some people are doing well and a lot of people feel left out and left behind. How do we give those people more of a shot at the American dream. It's funny that you say that because we're talking with the author of a new book ATHLETs about the Proud Boys and just how they're predominantly white men in the United States were

just so angry and feel like that they've been left behind. UH. And you look at some of the statistics, and when we talk about wealth creation, we know that there have been a lot of individuals left behind. And it goes back to even the core thesis of the Rise of the Rest book. If if seventy five percent venture capital goes to three states, which is what's happened over the last decade, UH, and a lot of other states are

including big ones Texas, Florida, Illinois, Michigan. These are one or two percent um, then there's fewer new companies started, fewer new jobs being created. And some of the disruption on the coast place like Silicon Valley is actually because of automation productivity is actually destroying jobs in many of these communities. That's inevitable. It's gonna happen because of a new innovation. Hundred years ago of us worked on farms.

Now it's two percent. That's because technology allowed you grow more food with fewer people, which is a good thing if you're trying to efficiently feed the world. The difference, though, is we followed that by backing new companies that created new jobs. And that's what we've missed out on, and that's what we have to address, and that's why I

wrote the book. Hopefully that will lead more people to be inspired to start companies, more investors inspired to back those companies, more mayors and governors uh and focused on supporting those companies, and you'll see these startup pubs not just in one or two cities, but in dozens of cities.

That's really what I think will happen. So, Steve, let's say a recent graduate or somebody in college right now is listening to this interview, and for years, recent college graduates have been told to you know, go west, go east, go to the big cities. That's where the opportunity is. Give us the top three places where you think this college graduate should consider to move. Well, I'm reluctant to pick cities because it's a little bit like asking who's

your favorite child. Now be forty three, a hundred different cities we've invested in the course, we're championing all of them. But I think that's the simple answer. Depends what they want to do. It depends what industry they want to disrupt. But rather than presume they have to go someplace else, maybe they can stay where they are. We've seen the data in the last few years. It's been encouraging that graduates from say Carnegie Mellon, which a great university in Pittsburgh.

A decade ago, most went to the coast. Now more are staying in Pittsburgh. We're also seeing that in an University of Michigan is also a great university. Many great universities around the country. So rather than presume once you graduate you have to leave, the opportunity is better somewhere else. The grass is greener somewhere else. Look at your own backyard. Chances are there are things happening that you can be

part of that doesn't require you. If you choose to move, you know, so be it, but don't presume you have to move. That's what's changed in the last decade. I think anybody reading this book would would see that that's

really happening everywhere. Well, in reading your book and just looking over it, it's you had said, it's not just about great ideas, and I'm just wondering, what is it as you travel around the country and travel through the heartline, what is it that says okay, that has potential, or

that individual has potential, or that idea has potential. Well, some of it the ideas we're looking for are taking on some of the big aspects of our lives, big industries with a with a better way to do it, some some some new idea that is just a, you know, a better path forward. So that innovative idea is important. What's also important, though, is the team you assemble around the idea. Sometimes we celebrate the entrepreneur too much, and it's really a team sport. How do you get the

right team? So we look at who else is on their team, and we look at for at least early evidence at this at the early siege stage, that there's sort of this product market fit. There actually is some enthusiasm about that that that idea. So there's a mix of factors, but it starts with having a big idea, but then having the team and and and a strategy

to really capitalize on that idea. Give us an idea of um, I don't know something that you passed on in the process of this that has turned out to be really successful that you look back and say, I wish that was one we would have invested. Well, we've tasked on a lot of things, and not not just with rides. The rest. I'm not sure we want to do pitch competitions. There's about a hundred applicants in every city can end up pitching. We then invest in one.

Sometimes we go back and invest in somebody, somebody that didn't win. I'll give you one example in Atlanta, company called Hermius was sort of one of the runners up, but we were quite taken with it. And basically it's a company focused on building Mack five engines and then jet jet planes. The air Force is now a customers have gone to raise significant capital, including from some some

coastal investors. So even though we initially said no, and we turned around a month later and said we actually whoops, we want to get in, and so we did end

up investing in that company. You know. One of the things I mean, I love talking with it with individuals like yourself who are in the VC space or in the investment space, and and just looking at kind of what are the trends and ideas that I don't know whether it's five years from now, ten years from now, or twenty years where you make the investment today and it's to be a big part of the world. How

should we be thinking about that? What kind of catches your interest when you think about I think it is the most important aspects of our lives, which I think I think I wrote the book previous book, the Third Wave. It talked about the first wave getting everybody online. The second wave was soft on top of the Internet. The third wave was going to be the Internet meeting the

real world. That's the phase we're now in. So are talked about head things like healthcare of food and agriculture, transportation, financial services, a lot of different things that that are being reimagined. So that's the first place to focus. And then recognize that some of the partners you need, some the expertise you need is not on the coast it is in these different parts of the country and either start there or or or move there to really capitalize

on that expertise. There's a lot of examples of people deciding to move. One actually, if somebody who started in New York City a company called temper back weed backed. It's focused on sustainable packaging style foams terrible for the environment, but people have to keep stuff cold, whether it's food companies or farmer companies. They created a better packaging, uh, and they moved to Richmond, Virginia to launch that company.

And just a few months ago Goldman Sachs led a hundred forty million dollar around to that company in Richmond, Virginia. So that's an example of looking for a better way and then saying even though they were in New York or the Acre Trader founder was in San Francisco, saying, is that the best place for me to launch that company?

And more and more situations we're finding that's not the right answer, and entrepreneurs are going to other places too, and that's why the rise of the rest is accelerating. One word I didn't hear come out of your mouth yet has been crypto, and the reason I thought of it is because you talked about the first wave in the second wave, and I think a lot of people might hear that and think, okay, well, Web one, a

oll Web two applications. On top of that, access to the Internet, Facebook, Phase three, Wave three, Web three, crypto, in the metaverse. It's interesting that you define that third wave as being something that's real, something that's physical, where the Internet actually meets the real world, not necessarily us

being transformed into this sort of virtual world. Yeah. And I think there are a lot of interesting bubbling in Web three, which has become a rather large and very basket of things running from you know, crypto, bitcoin, blockchain, n f t S, metaverse, a lot of different things. Uh. Some of those will end up scaling and being pretty significant. Others will end up not having the attraction that people thought,

which is always the case when there's there's new technologies. Uh. And I can relate particularly the metaverse point, because we launched the first graphical uh kind of multiplayer game, kind of a metaverse, a virtual world over thirty years ago in partnership with Lucasfilm thirty five years ago. It's called Lucasfilm's Habitat was for common or sixty four computers and three bod motives and basically are walking around living in

I totally know what they don't know. But but the point is that things like the metaverse are evolutions of things that were started earlier, which is again always the way it is. So I think there's some really interesting things bubbling in that space. I think that is a real focused now on what are the things that really are going to scale and how do you simplify some of these A lot of people are confused by the

varied options. So when it comes to something like the metaverse, is it that we really don't quite know what it is. So it's hard to really make maybe a smart calculation or thought in terms of the impact on a longer term. Well, there's a mix of thing. Some of the use cases so far they've gotten traction or obviously in the gaming space, and that can be pretty compelling. We're also seeing I'm the chair of the Smithsonian, my wife Jane and chairs

and National Geographic Society. There's something tomorrow from that g O and the Case Impact Network tomorrow on Bloomberg Radio. And uh so we we are, we are, you know, we there are some things there that are are helpful as well. And there have been also some office applications trying to create virtual meetings that are much more compelling,

much more immersive than than Zoom has been. So there are a lot of things that are interesting that are bubbling, but and the technology is advancing, you know, pretty pretty significantly, but I think a lot of people still feel there's a little more work to do to have those breakout, you know, killer applications and the technologies that allow you to participate in these virtual worlds without sometimes getting motion sick.

For example. Yeah, exactly, we're talking to you on a day where the S and P five you know, hit a new low, back at levels last seen in November, down close for the year. Give us the macro view when you look out of the landscape and what you're seeing right now as far as opportunity and are you concerned in an environment like this now? I was more concerned a year ago and valuation struck me as at

unsustainable levels. We actually our revolution growth funds slowed the pace of new investments and accelerate the pace of essentially monetizing similar existing best when we just thought after a thirteen year bowl market, things were a little bit out of hand, So I'm not surprised by the at least personally by the reset. The dynamic that I've seen now play out several times is when there is an economic some economic pressure, big companies tend to move from offense

to defense. They look for cost cuts. Often the first things to get cut are some of their long term innovation projects. What that then means is instead of those big companies investing in those new companies, startups can basically have more kind of of an opportunity to challenge some of the incumbents. So I think this could lead to

a flourishing of entrepreneurship and a lot of different different sectors. Uh, We're just trying to make sure those are that's done in a much more inclusive way, so rise the rest cities and companies really are the ones that can get access to capital and can can challenge those those those

big incumbents we're talking with, Steve Case. When you talk about flourishing, I also do think about geopolitical and you know the war in Ukraine and how we're thinking how we have to speed up the move to alternative energy ultimately because Europe in particularly just getting crushed. How do you think about it and how that it impacts maybe where you want to invest, particularly climate change energy, which

are going through some major disruptions right now. Climate is is is shifted over the last couple of decades from being a problem to solve to being an opportunity to seize. Everybody Now not everybody, almost everybody acknowledges there's a real threat there. But rather than just tell people what they shouldn't do, what's happened in the last few years is a lot of entrepreneurs have launched new companies to really deal with it in a much more significant kind of way.

So there's a acceleration of investment and what we call climate tech. Uh that will accelerate further because some of the legislation that passed Congress just in the last few months, particularly the built into this Inflation Reduction Act. They are or A with some funding around climate as well as some of the funding and the CHIPS Act around Regional hubs. Those I think both opportunities for an acceleration of more investment in innovative solutions to deal with the climate challenge.

And some of the companies I mentioned, like temper Pack, are angles on that that are really trying to create a more sustainable future. So I think it's it's there's now a rush for both entrepreci to start companies and investors to back companies because they realize this is one of the great industries of the future. Twenty seconds. What

should we ask your wife? What we asked Gene. Uh, She just came off of retreat in Africa with the National Geographic Board and Botswana, the first time I think the Board had ever done a retreat in a hundred thirty five year old organization, so she might have some thoughts on that. And also, you launched about a year ago the Case Impact Network and a newsletter which I'm sure she'll talk about this trying to inform particularly young

millennial investors about things that might they might be fine helpful. Well, looking forward to that, and we were still looking forward to sitting down with you. So thank you so much for such an in depth conversation. Maybe we can get the two of you at some point. All right, let's do it. Steve Case, of course, co founder of America Online, chairman CEO of Revolution, his new book Rise at the Rest, How entrepreneurs in surprising places are building the new American Dream this is Bloomberg,