20VC AOL Founder, Steve Case on Why The Best Venture Investments of The Next 10 Years Will Likely Not Be In The Valley, Why The CEO Must Be The Shock Absorber For Company Morale and Why Vision Without Execution is Hallucination

In this episode of "20 Minutes VC," host Harry Stebbings interviews Steve Case, the influential tech pioneer and chairman and CEO of Revolution, a venture firm focused on supporting startups beyond Silicon Valley. Case recounts his journey from co-founding America Online (AOL) to becoming a champion for entrepreneurship nationwide. He shares insights on the evolution of the internet in three waves and emphasizes the importance of perseverance, partnerships, and policy in the emerging third wave. Case also discusses his "Rise of the Rest" initiative, which aims to distribute venture capital more evenly across the United States, highlighting the untapped potential and arbitrage opportunities in cities outside the traditional tech hubs. The conversation touches on the challenges of transitioning from an operator to an investor, the significance of maintaining a balanced perspective as a CEO, and the future of innovation beyond Silicon Valley.

• Harry Stebbings introduces Steve Case, chairman and CEO of Revolution.
• Revolution is a venture firm with a mission to be the premier firm outside of Silicon Valley.
• Steve Case is an accomplished entrepreneur, co-founder of America Online (AOL).
• AOL was the first Internet company to go public and delivered a significant return to shareholders.
• Steve Case led the largest merger in business history with AOL and Time Warner.
• Steve was named a presidential ambassador for global entrepreneurship in 2014.
• He has been instrumental in shaping government policy and passing the JOBS Act.
• Steve is also chairman of the Case Foundation, investing in organizations and partnerships.

"And we've been lucky enough to have some of the most foundational individuals from the world of venture and entrepreneurship on the show before. And that is most definitely the case today as I'm so thrilled and proud to welcome Steve Case, chairman and CEO, Revolution, the venture firm, with the mission to establish themselves as the premier venture firm outside of Silicon Valley."

This quote is Harry Stebbings introducing Steve Case, highlighting his significant role in the venture capital and entrepreneurial world, and setting the stage for the conversation about his background and insights.

• Steve Case shares his journey into the tech world, which began four decades ago.
• He co-founded AOL in 1985 when the Internet was in its infancy, with only 3% of people online for about an hour a week.
• After leaving AOL, Steve began investing and backing entrepreneurs.
• Revolution has three groups: Rise of the Rest fund (early-stage seed group), Revolution Ventures (Series A/B group), and Revolution Growth (later-stage growth team).
• Steve's evolution from an entrepreneur to an investor involved mentoring and backing other entrepreneurs.

"I started my career four decades ago and I was interested in the idea of the Internet. And after a few missteps, I ended up co founding american online AOL in 1985."

Steve Case recounts his early interest in the Internet and the founding of AOL, emphasizing the pioneering role he played in the tech industry.

• Steve Case discusses the transition from being an entrepreneur to becoming an investor.
• He considered starting another company but was more intrigued by working with various entrepreneurs.
• The transition involved moving from an operator role, where he was directly involved, to an investor role, where he takes a more advisory position.
• The best venture investors help in key areas while allowing entrepreneurs to run their companies.

"But the transition from being an entrepreneur, being an operator, kind of being the quarterback, kind of calling the plays and running the plays, to being an investor where you're, I guess, kind of one of the owners in the skybox, occasionally kind of weighing in with different perspectives, but really not involved day to day."

This quote explains the change in roles from an active entrepreneur to a more passive investor, highlighting the difference in involvement and control.

• Steve Case experienced boom and bust cycles as both an operator and an investor.
• He believes history and perspective help understand market cycles and the reality that market conditions can change.
• Steve witnessed the rise of AOL and the dot-com bubble burst, as well as the financial crisis of 2008.
• These experiences have taught him that broader market dynamics can affect investments beyond one's control.

"I think history and perspective gives you a little bit more of an understanding that the trees don't always grow to the sky and there are market cycles and different dynamics kind of kick in."

Steve reflects on the importance of understanding market cycles and the impact of external factors on investments, indicating a cautious approach to investing based on experience.

• Markets and company valuations fluctuate, with both upward and downward trends.
• Investors may choose to withdraw funds when valuations are perceived as high.
• Market downturns can create opportunities for new companies and investments.
• Steve Case emphasizes that great opportunities exist regardless of market cycles.
• Identifying and investing in breakout entrepreneurs is a priority over timing the market.
• Revolution Growth looks to invest in companies with potential for significant growth and global impact.

When you see the other side of that, you realize it kind of goes both ways, I think gives you, hopefully can strike the right balance, still leaning in the future, still kind of bringing an optimistic mindset.

This quote reflects the understanding that markets are cyclical, and a balanced, optimistic approach can help navigate these fluctuations.

So I don't really look at the market cycles, particularly when we're looking at making new investments.

Steve Case indicates that his investment decisions are not primarily driven by market cycles but by the potential of the entrepreneurs and their ideas.

• Revolution Growth's approach is similar to early venture capital practices.
• Early venture capitalists were often former entrepreneurs who invested both money and time into new ventures.
• Revolution Growth seeks to support entrepreneurs in scaling their startups into significant companies.
• The firm's investment strategy involves hands-on involvement and leveraging previous entrepreneurial experience.

Well, I should say it depends on, as I mentioned before, the revolution has sort of these three different groups that are investing at different stages with different teams and our mindset, and our approach is a little bit different with each of them.

Steve Case explains that Revolution has different investment focus areas, each with a unique approach and team composition.

But you also want to spend time with the people, the entrepreneurs that you really believe in and do whatever you can to be helpful to them as they take these startups and try to turn them into speed ups and then turn them into what hopefully are kind of the iconic Fortune 500 companies of tomorrow.

This quote highlights Revolution Growth's commitment to actively supporting entrepreneurs beyond financial investment, aiming to help them scale and succeed.

• The abundance of venture capital can inflate company valuations, particularly in startup hubs.
• Steve Case observes a disparity in valuations between companies in popular hubs versus other areas.
• Revolution Growth's "Rise of the Rest" initiative focuses on investing in startups outside traditional hubs.
• There is an arbitrage opportunity due to the undervaluation of companies in less recognized areas.

Well, I think it varies a lot depending on where you're investing.

Steve Case acknowledges that price sensitivity is not uniform and is influenced by the geographic location of the investment.

And most of the rest of the country, the similarly situated startups, are a little bit undervalued.

This quote points out that startups in less popular regions may be undervalued compared to their counterparts in hubs like Silicon Valley, presenting investment opportunities.

• Traveling across the country has provided Steve Case with a positive outlook on innovation in the United States.
• Entrepreneurs face challenges such as raising capital and attracting talent outside of well-known startup hubs.
• The "third wave" of the Internet involves integrating technology into various industries, where domain expertise is crucial.

Well, first of all, it gives you a very optimistic view around innovation and around the United States that there really are great entrepreneurs everywhere.

Steve Case expresses optimism about the pervasive spirit of innovation and the presence of talented entrepreneurs across the United States.

But there's no question they're great entrepreneurs that are doing super innovative things.

This quote reinforces the idea that despite geographical challenges, there are innovative and driven entrepreneurs throughout the country.

Third wave is really integrating the Internet in much more seamless ways throughout our lives.

Steve Case refers to the "third wave" of the Internet as a period where technology becomes deeply integrated into key industries, emphasizing the importance of industry-specific knowledge and partnerships.

• Partnerships with sector players are crucial for market adoption and traction.
• Proximity to centers of excellence in healthcare, like the Cleveland Clinic or Johns Hopkins, can benefit entrepreneurs.
• More capital and success stories in "rise to rest" cities can create a network effect, attracting more people and investment.
• The brain drain from smaller cities to places like Silicon Valley can be countered by creating opportunities elsewhere.

"It's also going to be around how you partner with some of the players in those sectors and get traction and market adoption through some of those partnerships."

This quote emphasizes the significance of forming strategic partnerships to gain market traction, which is especially relevant for startups in industries like healthcare.

• Steve Case highlights the issue of brain drain, where talent leaves their hometowns for perceived opportunities in tech hubs.
• He emphasizes the potential for "rise to rest" cities to become new centers of opportunity.
• Creating an environment of collaboration, possibility, and fearlessness is essential for these cities to thrive.

"The reason that's important is in the United States... it's been a real brain drain, where some of the best and brightest people, growing up all across the country, end up leaving, moving away, because the opportunity is elsewhere."

Steve Case points out the problem of brain drain and the importance of creating opportunities in smaller cities to retain and attract talent.

• Entrepreneurs in less recognized cities need to be persistent to achieve success.
• Steve Case shares his own experience with AOL, emphasizing the importance of perseverance.
• He suggests that true revolutions often happen through a slow, evolutionary process rather than being instantaneous.

"But far more often it's a slog and it's a decade before you kind of really break through."

Steve Case reflects on the long and challenging journey to success, underscoring the need for persistence in entrepreneurship.

• Steve Case stresses the importance of having conviction in the vision and a shared passion within the team.
• He discusses maintaining an even-keeled personality and acting as a "shock absorber" to balance the highs and lows within the company.
• Leaders should remind their teams of the long-term vision during difficult times.

"When everybody was talking about how great they were, remind them that super competitive market and remind them that some of it might have just been locked."

This quote illustrates Steve Case's approach to leadership, where he emphasizes the need to maintain a balanced perspective and to keep the team grounded and focused on the long-term goals.

• The CEO should be the principal evangelist and storyteller, inspiring belief in the company's vision.
• Building and evolving the team is crucial, as entrepreneurship is a team sport.
• Vision must be complemented by execution, which relies on the right people and team dynamics.

"Vision without execution is hallucination."

Steve Case quotes Thomas Edison to convey that a great vision is meaningless without the ability to execute it effectively, highlighting the importance of a capable team.

• Vision is crucial, but execution is emphasized as being even more important.
• Execution relies on people, priorities, and team dynamics.

"And so it's a reminder that vision is important, but execution is more important and that comes down to people and priorities and creating that team dynamic."

The quote underscores the idea that while having a vision sets the direction, the actual implementation of that vision is what truly matters, and it requires effective management of people and priorities.

• Alvin Toffler's "The Third Wave" is Steve Case's favorite book, which influenced his career path.
• Steve's own book also titled "The Third Wave" received comments from Toffler.
• "Be Fearless" by Jean Case is his current favorite, providing insights into movement building and success across various sectors.

"I'd say my favorite book has to be Alvin Toffler's 'The Third Wave', which I read 40 years ago when I was still in college, and that set me on the path which has really defined most of my life."

This quote reflects on how a single book, "The Third Wave" by Alvin Toffler, can significantly shape a person's professional journey and life philosophy.

• Listening is more important than talking when joining a board.
• Understanding the company's dynamics is key.
• Surgical intervention can be beneficial; knowing when to offer advice or when to wait is essential.

"Spend more time listening and talking and just trying to really understand the dynamics of the board, some of the challenges and opportunities of the company, and be more surgical in terms of ways you intervene."

Steve Case advises that new board members should prioritize understanding over intervening and be strategic about when and how they contribute to discussions.

• Steve Case suggests Silicon Valley should be less insular and more open to innovation from other regions.
• He emphasizes the importance of recognizing talent and opportunities nationwide and globally.

"I would say getting them on plane...Silicon Valley has gotten a little insular, sometimes a little cocky."

This quote expresses the need for Silicon Valley to be more inclusive and recognize the potential of companies and entrepreneurs outside its geographic boundaries.

• Steve's strength is his long-term perspective and belief in ideas and people.
• His weakness lies in day-to-day execution, which he mitigates by surrounding himself with skilled managers.

"I'd say probably my biggest strength is being able to take a long term view...I'd say my biggest weakness is more on the day to day execution side."

Steve Case acknowledges his ability to think strategically about the future while also recognizing his limitations in daily operational tasks, highlighting the importance of building a complementary team.

• The focus is on the "third wave" of the Internet, requiring a different mindset emphasizing partnerships, policy, and perseverance.
• Revolution aims to back entrepreneurs who understand the new playbook and invest in the "rise of the rest" strategy to support job creation nationwide.

"Well, I think it really goes back to the two themes we were talking about...the third wave of the Internet...and the second, it really ties into this rise of the rest."

Steve Case outlines his vision for the future, which includes supporting a new wave of innovation and investing in entrepreneurs across the United States to foster economic growth and job creation.

• Harry Stebbings expresses gratitude to Brad Feld for introducing Steve Case.
• Harry promotes Brex, the corporate card for startups, and Terminal, a service for building remote engineering teams.
• Cooley is highlighted as a global law firm specializing in startups and venture capital.

"I do again want to say a huge thank you to Brad Feld for the fantastic introduction, Steve, today."

Harry Stebbings thanks Brad Feld for connecting him with Steve Case, which made the insightful interview possible.