Steve Case: America must 'double down on entrepreneurs' (Q&A)

The AOL co-founder is on a mission to keep skilled entrepreneurs in the United States and to help fuel startups in cities far from Silicon Valley.

Paul Sloan Former Editor
Paul Sloan is editor in chief of CNET News. Before joining CNET, he had been a San Francisco-based correspondent for Fortune magazine, an editor at large for Business 2.0 magazine, and a senior producer for CNN. When his fingers aren't on a keyboard, they're usually on a guitar. Email him here.
Paul Sloan
6 min read
Steve Case at this year's Techonomy confab. Asa Mathat/Techonomy

Steve Case, who made his vast fortune as the co-founder of America Online, wants to help America's startup scene flourish. Not the scene in Silicon Valley, but in all the pockets between there and the East Coast -- what he calls the "rise of the rest." Cities like Cleveland, Memphis and Detroit. Through his Washington, D.C-based firm, Revolution, Case has invested in about 25 non-Valley startups, including LivingSocial and the now-public Zipcar.

That mission plays into his big cause at the moment, pushing to reform America's high-skilled immigration system so that the country keeps and attracts the best tech workers and entrepreneurs. It's the key component of the bipartisan Startup Act 2.0, which Case helped get introduced last spring but which has made little progress.

With the election behind us, Case hopes Washington will at last tackle this issue. I caught up with Case to discuss this topic and more. Here's an edited version of our conversation.

Is Obama's victory good for your initiatives, for getting Startup Act 2.0 addressed?
Case: The hope was to quickly follow the passing of the JOBS Act [about six months ago] with Startup Act 2.0. But obviously, when you're moving closer to November, things kind of get bogged down.Now that the election is completed, I think it will get more traction. Now is the time to build the momentum and take the steps we need, particularly around high-skilled immigration.

Is global competition why this is so important?
Case: The reason the United States has the leading economy in the world is the work of entrepreneurs, who built not just companies but entire industries that propelled the United States from being a startup to being the leading economy in the world. That didn't happen by accident. We need to recognize that and double down on entrepreneurs, because other nations are figuring this out.

They're moving quite aggressively to put policies in place around immigration to attract talent; around incentives to attract capital; around a regulatory environment to make it easy for people to start and scale their companies; around research to help fuel more innovation. Other countries are stepping up their game and we need to step up our game with real urgency. This is not just a macro global competitive issue, although that's important. It's also an urgent issue around jobs and the economy now.

Steve Case (second from left) with senators introducing Startup Act 2.0 in May. The bill has not yet had a House or a Senate hearing. Office of Senator Chris Coons

When do you expect the Act to get some attention?
Case:The media focus is on the fiscal cliff issue, so that gets most of the oxygen in the room. I've been trying to put down a marker in this lame-duck session so when the new Congress starts in January this is a priority. This is critically important. There is a hope that Startup Act 2.0 will move pretty quickly on its own, but some components are tied to some other issues.

Such as?
Case: High-skilled immigration. That issue will get a lot of attention early next year with the broader debate around immigration policy. There are a variety of different paths to get to the promised land. But the promised land is making sure that we build on the steps that were taken around capital and the JOBS Act and also take steps around talent and regulation and commercialization.

How much pushback is there?
Case:There is generally not pushback on the idea of winning the global battle for talent and trying to attract and keep some of the best and brightest entrepreneurs and engineers. There's general agreement on that. There's some debate on the specific provisions. There's different bills that have been introduced that try to deal with it in different ways.

It can be dealt with in a narrow way focused on the Startup Act or some of the STEM bills that have been introduced. Or it can be dealt with in the broader context of comprehensive reform. My view is if there is a way to come together around broader immigration reform quickly, that would be great. But if that doesn't happen, then we shouldn't delay the issue because every year -- and again it will happen in May and June next year - 40,000 to 50,000 people will be graduating with Ph.D.s and masters' degrees, and half or so will end up having to leave. Some of those people will go back to their countries and start companies that could end up being the next Googles or Facebooks.

Were you an Obama supporter?
Case: I was not a public supporter for anybody. Part of what I've tried to do is be bipartisan and really focus more on bringing people together, and try to find the common ground. ... I concluded the best way to do that was to focus on the policy and not on the politics.

Let's talk about Revolution, which is your main job.
Case: We just launched a Revolution Growth fund, a $450 million fund we raised late last year, and we continue to make investments. We've made investments in a variety of sectors last few years--education, health care, transportation.

How are your investments doing?
Case: Up until we set up that fund, this was private investment vehicle. I was the single investor. We only institutionalized Revolution over the last year or so with outside capital. There are a lot of firms in your neck of the woods [in San Francisco], but not as many firms that have this digital and disruptive focus on the East Coast. D.C. is s vibrant market. New York is growing like crazy. We think there are lot of interesting, innovative, entrepreneurial companies all over the country, even though most of the capital is focused a few areas, like Silicon Valley. We think there'll be a regional growth of entrepreneurship, and part of our strategy is to help drive that.

So you won't talk about LivingSocial, which landed a big investment from Amazon, or how others have done for you?
Case: It's a private company. Obviously, it doesn't make sense to talk about that. But it's been a great investment of us.

What's your view on the climate for startups now?
Case: There's a little bit of have-and-have-nots, kind of two-Americas view here. Startups actually are down 23 percent over the last five years. There are fewer new companies being started. Part of the reason for the JOBs Act and the Startup Act, and part of the reason of the Startup America Partnership, which I chair, is to try to reverse that trend.

That just doesn't seem the case, considering how cheap it's become to start an Internet company and all the two- and three-person startups popping up.
Case: You may not see it. But If you travel around the county, that's the reality and there's a whole host of reasons -- some relate to access to capital, which is why crowd-funding has become important. Some venture firms that existed in some regions 10 years ago don't exist now. So it's much harder for most entrepreneurs in most regions to get the capital that people take for granted in Silicon Valley and other places. There really is a disconnect there. There are fewer startups and fewer people in each startup.

That's why, in terms of entrepreneurship in America, as other global competitors step up their efforts, we need to step up our efforts. The last five years or so, we've been going in reverse. One example: Accel Partners, which backed Facebook. A decade ago all their investments were in Silicon Valley. Now they have more folks in China.

And so your hope is to find the next Facebook in, say, Cleveland?
Case: Our focus is on some of these regions that are underserved. There are a lot of fish in the Silicon Valley pond, but there are also a lot of people out here with fishing poles chasing those fish. In some of these other regions, the ponds are smaller, there are fewer fish, but there also are not a lot of people fishing. We think there's an imbalance, and we're trying to fix that. Both by a policy standpoint with things like crowd-funding, and what we're tying to do with the development regional ecosystems through the Startup America Partnership that we've launched in 30 different regions. Then, also in terms of putting our money where our mouth is in terms of Revolution kinds of investments.