Steve Case knows that plenty of great ideas start outside Silicon Valley.
We all know that entrepreneurs flock to Silicon Valley, New York, and Massachusetts to take advantage of the potential for serious funding. While the streets of Manhattan aren’t necessarily paved in gold, startups don’t typically flourish outside of these specific, coastal areas. As a result, many potential entrepreneurs leave their hometowns because of a lack of opportunity.
For years, Steve Case’s investment firm, Revolution, has been trying to correct that imbalance. The company travels the United States, seeking entrepreneurs outside of the established tech hubs. They host pitch competitions, mentor founders to finetune pitches, and provide funding for the most exciting ideas.
Case recently sat down with Katie to talk about Revolution’s mission: to reshape communities by providing the type of real funding that creates jobs. He also tells some pretty inspirational founder stories in his new book The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream.
Katie Couric: For people who may not be familiar with your national road trip, what was it, and what were you setting out to do?
Steve Case: We called it Rise of the Rest. We started doing a bus tour. It was designed to showcase great entrepreneurs building breakthrough companies in cities that don’t get much attention. Most of the media focus on the tech entrepreneurs in places like Silicon Valley, and we wanted to really learn what was happening in cities all across the country.
As we did more of these tours and visited more cities, I was so struck by the stories. I said, “I have to write a book to share these stories with other people because I think they’re remarkable.”
75 percent of venture capital funds go to these so-called tech hubs: Silicon Valley, Massachusetts, and New York. That leaves the rest of the country fighting over the remaining 25 percent of funding. How problematic is that for entrepreneurs who don’t live in those regions or states?
It’s very hard. That’s why we started — we’re trying to level the playing field so entrepreneurs everywhere can have a shot at starting a company. Here’s one encouraging thing: In the last decade since we got started, 1400 new regional venture capital firms have launched. For entrepreneurs in Ohio, Iowa, or Minnesota, getting some of that local capital to get started is super important.
The country is divided for many reasons, but one reason is an opportunity gap. Some people in some places are doing really well and jobs are being created. But a lot of places are struggling, so people feel left out and left behind. We are trying to address that and encourage entrepreneurs and investors to look beyond places like California, New York, and Massachusetts.
What were some of the most interesting and exciting ideas that you learned about and were able to fund?
The book profiles over 40 of them. There was a mom in suburban Indianapolis, Megan Glover, who was worried about water quality. This was after the Flint water crisis. She was worried that her kids were drinking water that could be unhealthy. So she called the water company and said, “I want to get my water tested.” They said, “We don’t really do that for people.” She called another company and they said, “We’ll do that but it will cost you thousands of dollars.” So she started a company in Indianapolis called 120WaterAudit that could test water conveniently and affordably. It’s about 50 dollars for anybody who wants to do that.
Another example is in eastern Kentucky, right outside of Lexington. An entrepreneur, Jonathan Webb, started a company called App Harvest. It’s focused on healthier agriculture. They’ve built the largest indoor farm in the country. 70 percent of the US population is a 24-hour drive from their location, so it’s easy to get fruits and vegetables to market. They use 90 percent less water so it’s better for the climate. He’s created 500 jobs in an area — coal country, in Appalachia — that has been kind of left behind.
There’s also an example of two women — Lori Coulter and Reshma Chattaram Chamberlin — who were working in the fashion industry in New York. Both moved to St. Louis and ended up running into each other. They decided to start a swimsuit company since a lot of women struggle to find a bathing suit that fits. So they started a company called Summersalt focused on e-commerce in St. Louis. They made $100 million dollars in sales, just about five years after getting started.
Eric Lefkofsky started Tempus when his wife, Liz, was diagnosed with breast cancer. Eric was shocked by how much the treatment recommendations differed, so he started this company. Now, they have over a thousand employees, a headquarters in Chicago, and have expanded from cancer to other diseases. He’s revolutionizing healthcare. He did it because he saw a problem in his own family and said, “I’m going to do something about it.”
Have you witnessed the transformation of cities and towns across the country as a result of these companies and entrepreneurs?
In a lot of places, people assume that if they’re losing manufacturing jobs, there’s nothing they can do about it. They get frustrated and some of the younger people decide to leave because they need to go where the opportunity is. That leads many young people to go to places like Silicon Valley; the grass is greener there. But if they see a company like App Harvest, they might say, “Maybe we can turn this around and change the narrative. Maybe we can launch new companies that can create new jobs.”
It isn’t just about startups or entrepreneurs. It’s about renewing those communities and creating a sense of hope and opportunity. If we do that in enough communities, I think we can change the trajectory of innovation in America. We have to level the playing field and give everybody an opportunity at pursuing the American dream.
You kind of did a mini Shark Tank in many of these cities, where you invited people to come in and share their ideas. How important is it for these companies to get an infusion of cash?
When we go to a city, our team spends six months in advance understanding what’s happening there. We reach out and say, “We’re coming to town and one part of that is a pitch competition.” Generally, in each city we get a 100 or so companies applying to pitch. We pick the best ten, then we invest in at least one idea. We help coach these companies on their pitches. Whether they end up winning or not, they have more visibility in their community and that leads to other opportunities or other funding, and gives them more confidence as well.
When we launched the seed fund, we reached out to some of the most prominent people in the country who are associated with innovation. We spoke to entrepreneurs like Sarah Blakely, Tory Burch, Jeff Bezos, and Howard Schultz. We spoke to investors like Henry Kravis, David Rubenstein, and Jim Breyer. We said, “You’re a great group of people. Join us on this mission.”
We’re grateful that so many people decided to join us in this effort. When we go to these cities, It’s not just me showing up and saying, “I’ll invest in your company.” It’s some of the most respected entrepreneurs and investors in the country saying, “We believe in you. We believe in your city.”
Less than 10 percent of venture capitalist money goes to female founders and less than 1 percent goes to Black founders.
That’s correct. The issue of leveling the playing field is not just about place. Women are 50 percent of the population, but female founders get less than 10 percent of that money. Black Americans are 13 percent of our population but they get less than 1 percent of venture capital. I’m proud that this is a great, entrepreneurial nation, but it does matter where you live and what you look like. We’re focused on that every time we go to a city. We’re very intentional about making sure we have a diverse mix of founders pitching. More than 40 percent of the companies we’ve backed so far — at 200 companies in total — are either female-founded or have founders of color. It’s still not what it should be, but it’s a lot better than you see in other venture firms.
