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From AOL To Rise Of The Rest: Web1.0 Pioneer Steve Case

On Pragmatic Optimism

One of our most popular episodes was the conversation between Auren and Web 1.0 OG Steve Case. Steve was CEO of AOL during its meteoric rise from 1991 to 2003. He’s also the chairman and CEO of Revolution, which has invested over $1 billion in startups, and the author of several books, including Rise of the Rest and The Third Wave. The conversation is a great refresher of what came before and how the lessons learned by Steve will allow us to navigate the future.


"Revolutions sometimes happen in evolutionary ways."

"Partnerships are critical, engaging on policy is important, and patience and perseverance is critical."

Early Days of the Internet

When AOL started in 1985, internet usage was minimal, with only 3% of people online for about an hour a week. It took nearly a decade for widespread adoption to occur, a period Case described as a "slog" where they fought to stay alive and convince people of the value of being connected. Early challenges included convincing PC manufacturers to build in modems and persuading communications companies to build larger, lower-cost networks. The shift from hourly pricing to flat-rate monthly pricing in the late 1980s and early 1990s helped accelerate internet adoption. Case noted that it wasn't until the mid-1990s that the internet really began to take off, highlighting the patience required in the tech industry.

The Power of Community

From the outset, Case believed the "killer app" of the internet would be connecting people. This belief was validated as community and communication-related services consistently accounted for over 50% of AOL's usage. AOL's focus on community features was both a strategic choice and a necessity due to limited initial funding. The company's early emphasis on instant messaging and chat rooms laid the groundwork for future social media platforms. Case recounted how AOL's strategy of partnering with PC manufacturers to launch services helped them gain traction in the early days when resources were scarce.

The Three Waves of the Internet

Case described three waves of internet development: getting people online in the 1980s-1990s, building apps and services on top of the internet in the 2000s-2010s, and the current phase where the internet meets the real world. He argued that this third wave required a different approach, emphasizing partnerships, engagement with policy and regulation, and patience. This new era involved integrating the internet into crucial sectors like healthcare, education, and agriculture, necessitating a more collaborative approach with existing institutions and regulatory bodies.

the craziest predictions for AI don’t sound so wild stacked up against how fast the internet actually scaled 

AI and the Future of Innovation.

While bullish on AI, Case noted that its development might take time to reach its full potential, similar to the internet's evolution. He predicted significant disruption in healthcare over the next 10-20 years, though he cautioned that change in such complex industries often occurred more slowly than anticipated. Case emphasized the importance of partnering with incumbents and navigating policy changes to unlock new opportunities in various sectors. He also highlighted the need for a long-term perspective in innovation, citing examples like autonomous vehicles where progress had been slower than initially predicted due to technological and regulatory challenges.

Rise of the Rest

Democratizing Innovation: For over a decade, Case had been advocating for investment in startups outside of traditional tech hubs like Silicon Valley and New York. His "Rise of the Rest" initiative aimed to level the playing field for entrepreneurs across the country. Progress had been made, with more breakout companies emerging in different cities, challenging the notion that innovation could only thrive in a few coastal hubs. The pandemic had accelerated the dispersion of talent and capital, with remote work enabling a more distributed innovation ecosystem. Case saw this as both an investment opportunity and a way to bridge the divided country by creating more jobs in diverse locations. He emphasized the importance of stopping the "brain drain" from middle America and encouraging a "boomerang" effect of talent returning to their hometowns.

Optimistic Pragmatism.

Steve Case's journey from AOL co-founder to champion of distributed innovation offered valuable lessons for entrepreneurs and policymakers. His emphasis on partnerships, policy engagement, and perseverance provided a roadmap for navigating the complexities of the modern tech landscape. As we entered the "third wave" of the internet, Case's insights suggested that success would come not just from disruptive ideas, but from the ability to build alliances and navigate complex systems to bring those ideas to fruition. His optimistic yet pragmatic approach to innovation served as an inspiration for the next generation of entrepreneurs looking to make a lasting impact on the world.

The full transcript of the podcast can be found below:

Auren Hoffman (00:00.718)

Hello, fellow data nerds. My guest today is Steve Case. Steve was the CEO of AOL from 1991 to 2003. He's also the chairman and CEO of revolution, which has invested over $1 billion in startups and is the author of several books, including rise of the rest and the third wave. Steve, welcome to World of DaaS.

Steve Case (00:04.187)

Ready, rock.

Steve Case (00:24.507)

Great to be with you, Auren.

Auren Hoffman (00:25.262)

I'm real excited. Now you've been heavily involved with the internet really since before it was even a thing. Like it was back in the day, it was like illegal for consumers to access the internet when AOL was first formed. And in the early nineties, even only I think like 3 % or so of the country was online. As someone who's thought deeply about this for over 40 years, what's kind of surprised you most about the evolution of the internet?

Steve Case (00:48.987)

Well, you're right. When we got started in 1985, it was just 3 % online. I think at the time, those 3 % were using the internet on average one hour a week. So it was pretty early days, not just in terms of people using it, but the amount of time they used it. Some of it was because a lot of the online services at the time comp you serve and some others often were $10 an hour. So people were on as little as they could possibly be to get their, whatever they wanted done. And at the time, nobody knew about...

Auren Hoffman (00:57.742)

Oh wow.

Steve Case (01:17.275)

online services, the internet, nobody really cared about them. Most people when we were starting didn't think it was ever gonna amount to much. So it's been an interesting journey over the last four decades. One of the surprises is frankly, it took so long for people to embrace it. It was really a decade from the time we got started, sort of 85 to 95. It was a slog and we were really trying to fight to stay alive, fight to get people to see the value of being connected.

fight to get PC manufacturers to build modems in because at the time they thought it was not something most people would be interested in. So you have to buy a peripheral device, a modem to get connected, get the communications companies to build bigger networks at lower cost. There were a bunch of battles we had to fight in that first decade, but mostly it was because people didn't think that most people would ever see the value of being online. It seems crazy now in retrospect, but in the 80s and most of the 90s, that was the case. So...

took longer to get going, longer to get traction, longer to get kind of takeoff velocity than I would have expected. But what's obviously what's happened since has been quite phenomenal. And particularly, I hate to say it, but during the pandemic, it was interesting that after all these years trying to get people to take it seriously, suddenly the whole world was operating on the internet and wouldn't have been able to move forward without access to the internet and so forth. So it's been a great journey.

Auren Hoffman (02:42.83)

I remember in the early 90s, being in college and everyone used the internet back then because it was free to access. Maybe the main competitor to the college was American Online at the time. American Online's I think still charged per hour, which for a college kid, it would be extremely expensive, especially for a lot of us who were spending.

somewhere between five and six hours a day on the internet, we wouldn't have been able to afford it. So at some point, we move from a time -based thing to a monthly fee, all you can eat. When did that start to shift for most consumers?

Steve Case (03:25.243)

Well, there's two parts of that. As you said in the intro, when we got started, consumers and businesses were not able to access the internet. It was still only non -commercial use. So if you were on an educational campus or a government institution agency or something, you had access to the internet. But if you're a consumer at home or a business, you didn't have access to the internet. So for the first few years, we and others had to almost create our own parallel universe, which is it was called online services back then.

Auren Hoffman (03:34.062)

Right, good point, yeah.

Steve Case (03:53.787)

And it was 89 .90, I think, when Congress passed the legislation to commercialize the internet. And it was a few more years before we were able to move from hourly pricing to essentially flat rate monthly pricing because the new network architectures had shifted to allow that to be possible. And people made, including us, made very significant investments in expanding the infrastructure. And not surprisingly, that also...

is when things started accelerating. There's some combination of being able to get the services to be easier to use, it's more accessible, more useful in terms of what people could do, more fun, so there was more reasons to do it, but also more affordable. So moving away from the meter ticking towards flat rate monthly pricing.

Auren Hoffman (04:36.91)

And, and in some ways, like the key killer app was, was, was, and still really is communication, right?

Steve Case (04:47.259)

Now for us it was for two reasons. One is we did believe when we got started, again 1985, that the killer app of the internet was gonna be people, connecting people in different ways, both people you already knew, ways to stay connected, friends, family, et cetera, as well as people you didn't know, but maybe would like to know because you had some shared interest in a particular topic. So we believe that content obviously is gonna be important, commerce obviously is gonna be important, but community was gonna be most important. And we placed a...

a big bet on that. And the whole time I was involved with AOL, from the time we started until the time we merged with Time Warner, I stepped aside as CEO, which was 16, 17 years. The people -related services, the communications community -related services were always more than half of our usage. So it really became kind of front and center. And so some of that was a belief that the community would be important. Obviously, what we're seeing now with Facebook and Snapchat and X and other things is sort of

different versions of ways to connect people. So that dynamic still is true today. The other reason we did it though is when we got started with AOL, it was really hard to raise venture capital back then. There were only a few firms and most people didn't think our little dinky firm outside of Washington DC in Tyson's Corn Virginia was ever going to amount to much. So we only raised a million dollars in our first round of financing to launch our first service.

And by comparison, some big companies, IBM and Sears for a little while, CBS launched a venture that competed with us called Prodigy and they committed $1 billion to launch Prodigy. So $1 million versus $1 billion was what we knew was not going to be a fair fight. We knew we didn't have the budget to go acquire rights to content or other things. So that was another reason to focus on community. It was essentially, it was building the software to enable that connectivity. We didn't have to pay anything for.

Auren Hoffman (06:21.966)

Wow, okay.

Steve Case (06:41.371)

for content, so that helped us get going. Then down the road, we did end up partnering a lot of companies, a lot of media companies, a lot of communications companies, and partnerships became a key reason why we grew and were successful. But those early days, because we were scrappy and didn't have a lot of money, we had to focus on building an easier interface and figure out ways to drive down the pricing in terms of some of the negotiations with the communications company, but also...

focus on the community features because we believe that was, as I said, the killer app, but we also knew that that was the most efficient way to get into the market.

Auren Hoffman (07:14.124)

When do you go from this kind of like broader idea of community to the AOL instant messenger, the aim, because that seems to me like when I think of AOL, at least in like the nineties, that was like the killer app was literally just being able to instant message people.

Steve Case (07:29.787)

Well, it's a couple of answers that first the first service we launched in the fall of 1985 included instant messaging. That was one of the features that we launched back then. But our strategy back then, again, it goes back to not only not having much money, so we needed to figure out ways to be scrappy and enter the market is our strategy is to partner with the PC manufacturers, particularly ones focused on the home computer.

and work with them to launch services. Our first service was actually something in partnership with Commodore 64 computer called Q -Link. Then we did something in partnership with RadioShack at the time, Tandy, a parent company, was a big major supplier of computers. We created something with them for their computers called PC -Link.

and we created something with IBM called Promenade, and then we've created something with Apple called Appling Personal Edition. So the first four or five years, it was basically these private label services in partnership with each of those companies, because they would then market it. We didn't have to spend money on marketing. They'd take the lead on marketing. And so in about five years into it, we decided to combine all those services into what then became America Online. And after a while, people started calling it AOL. So instead of having separate kind of

services, almost like white label services, we had one integrated service. And all the while, the community features, including instant messaging, and then when we added buddy lists and things like that, they were front and center. And then a few years later, in, I don't remember the year, but maybe mid 90s, that's when we decided to unbundle the instant messaging service and launched AIM, AOL Instant Messenger, which was free to everybody, whether you were a subscriber of AOL or not.

Auren Hoffman (09:10.67)

And part of that unbuttoning was also just to like increase the brand awareness as well. Yeah.

Steve Case (09:15.963)

And distribution, we wanted to create a lot of reasons for people to subscribe to AOL. We positioned it then as sort of the internet and a whole lot more. You had full access to the internet, pretty high speed, some of the things we're doing with compression, as well as a whole suite of services, content, community, et cetera, that were exclusive and unique to AOL. But we also realized, even though at the time about half of all the internet users in America were AOL subscribers at our peak, there's another half that were not, and we wanted to reach them as well. So we launched...

services like AIM to do that. We also acquired and managed a bunch of other brands, MapQuest and others that were kind of provided more broadly on the internet. It evolved from AOL itself to AOL Plus, a couple of dozen other brands, Netscape, Spinner, a bunch of other things that we ended up acquiring as well as a of things we incubated and launched.

Auren Hoffman (10:05.966)

Now in 2016, you wrote a book called the third wave, which I think is influenced a lot by the Alvin Toffler book of the same name. And it's kind of outlining your vision for the next phase of the development of the internet. Like where, where have we in the last eight years, like how has that played out based on that? And where do you think we're going from here?

Steve Case (10:27.545)

First of all, the Topler book, The Third Wave, was really a big deal for me when I was in college in the late 70s, 79, 80, I think it was. I read his book, The Third Wave, which I was really kind of fascinated by. He basically was saying, again, it's hard to believe because this is over four decades ago, but he was saying that we'd started with the agriculture revolution and then we saw the industrial revolution and then we're going to have this digital information revolution. And this is obviously the internet and all the things we've seen since then.

So that's what got me interested in being part of the internet and helping take that idea of the internet and make it real. So when I decided to write a book, I borrowed that title because I started the book with my story of reading his book and then getting to know him over the years and he passed away. But thankfully, I was able to read my version of the third wave before he did pass away. So that was sort of the backstory on the third wave and Alvin Toppler. My three ways were focused on the internet.

And I really, the first wave I was saying was getting America online, getting the world online, going from that world where 3 % of people are connected to getting everybody connected and all the things that had to happen in terms of building the on ramps, the servers, the modems, all the things that get people connected. That was really the first wave and it was really more of that 80s and 90s. And I was part of that, but obviously dozens of other companies were part of that. That then set the table for the second wave.

which since all that infrastructure was now built and everybody was connected, you didn't have to worry about that. So essentially, as you well know, is building apps and services on top of the internet and Google and Facebook, all these things, essentially we're running that play. So we can take for granted that people are.

Auren Hoffman (12:05.868)

In fact, we, we, in some ways we got lucky, right? Cause in maybe 99, you know, late nineties, we had a bit of a bubble. So we almost overbuilt. Um, and so then we had a lot of opportunities to take advantage of it in the, in the, in the first decade of the two thousands.

Steve Case (12:15.161)

Talk talk.

Steve Case (12:21.499)

Yeah, first of all, it went from nobody being connected to everybody being connected. One data point I remember, it took us, we went public in 1992. We'd been at it for seven years. It was the first internet company to go public and we raised a whopping $10 million in our IPO and the value of the company that day was $70 million. The other number I remember is after seven years, we had less than 200 ,000 customers. And seven years later, we had like 25 million customers.

Auren Hoffman (12:24.908)


Auren Hoffman (12:38.158)


Steve Case (12:46.619)

So it was a slog in that first phase and then things started taking off. So the adoption of the Internet obviously accelerated. As you said, the investment in infrastructure, broadband, other things accelerated. So once that first wave was complete, the second wave was launched. And obviously a number of things happened there that were basically software apps riding on top of the Internet. And the combination of that mobile and smartphones and app stores and so forth, obviously has been critical. So now we're in the third wave. I wrote about almost a decade ago.

And to me, that's when the internet meets the real world. And you start taking on big sectors of the economy, important aspects of our lives, you know, health care, food, agriculture, education, financial services, transportation, you name it. And I felt that that was going to be a different dynamic. And some of the lessons learned the first way were partnerships were critical, engaging on policy was critical, patience and perseverance was critical.

I thought would be critical again in this third wave. And we're seeing that, that most of the successful companies in this third wave and sectors like healthcare do need partnerships. You can't go it alone. They do need to engage in policy because most of these are regulated industries and you do need to be patient because I learned the hard way that revolution sometimes happen in evolutionary ways. And these are not overnight.

successes, often our tenure in the making overnight successes as we had with AOL. And you see that now with many, many companies in this third wave. So since I wrote, started writing about that almost a decade ago, we're now kind of in the middle of that and you're seeing the dynamics kick in where entrepreneurs, venture capitalists and so forth that often would avoid some of these industries because they were hard to break into, complicated, kind of regulated things like that. That's where a lot of the momentum and action is.

Auren Hoffman (14:33.262)

You talk a lot about how like there's these incumbents and they partner with disruptors. Like what are some good examples of that over the last decade?

Steve Case (14:42.651)

Well, certainly in the, particularly the second wave and you and your audience, there are a lot of companies that really were trying to be full stack providers that were really disrupting everything kind of soup to nuts. And that's worked in a number of different sectors. But if in sectors like healthcare, that's not going to work. Nobody's going to create an end solution. You've got to figure out ways to connect what you're doing with other people. If you have innovation in healthcare software, for example.

Good for you, but that's where the table stakes to get in the game. You gotta get nurses and doctors to use it and hospitals to integrate it and health plans to pay for it and regulators to allow it. And that's really where the big value is being created. One example of company we backed probably seven or eight years ago in Chicago called Tempus that's doing a lot of things. We're using AI around healthcare initially around oncology, but now it's shifted.

They've established partnerships with most of the leading national cancer institute hospital, and about 70 % of the data from all those hospitals adjusted by Tempus. They've established partnerships with some of the big pharma companies. And so they built interesting technology, but it was the partnerships they formed that really were the way they were creating most of the value and navigating the policy world is where they also created a lot of value. But there are many other examples in other sectors as well where...

where the incumbents need to partner with the disruptors because they don't have the agility, don't have some of the innovative ideas, but the disruptors also need to partner with the incumbents in a way that we didn't see really in the second wave.

Auren Hoffman (16:10.862)

And is that because like a lot of these, these incumbents are in an area of the economy where there may have been a bit more regulatory capture and it'd be very hard to like get rid of those incumbents or.

Steve Case (16:22.491)

Well, there's some of that for sure. But also, again, it depends on the sector, but continuing with the healthcare as an analogy, you're not going to start a company that provides every facet of healthcare. It's a very complicated industry. It's one sixth of our economy and there's multiple kind of facets to it. And so trying to, some people are trying to do certain aspects, certain slices of that. But I think some of the big winners like a Tempest are going to figure out ways to co -opt.

you know, some of the incumbents and figure out ways to work together. And part of the reason I'm passionate about this, I know some people don't believe in that. Some people just think disruptors should disrupt and ignore the incumbents and eventually try to unseat the incumbents. But I know for a fact that we never would have survived at AOL if we didn't have a strategy of partnerships. We had something like 300 partnerships at our peak. And so we look for ways to work with.

with other companies look for ways to make it in their interest to make us successful to help them be more successful. So I bring to this that bias as well as an understanding, partly because I've now lived in Washington DC for four decades, that policy is important. A lot of entrepreneurs don't want to hear that. And I get that. They do worry about regulatory capture. They do worry that regulations slow innovation down.

And obviously there is that aspect to it because regulations usually are in place because some problem happened before and people say we don't want that problem to happen again. That sometimes does lead to things that are out of date and need to be changed. But I think the big innovation in the next 10 or 20 years will have more of a mindset around partnership and more of a mindset around engaging on policy and the big winners will understand that and rather than run from that, run to it and embrace it.

Auren Hoffman (18:00.974)

There's been this debate amongst a lot of folks where some people say, okay, there's been a ton of innovation over the last 40 years. And some people say, yeah, but that innovation really is just in bits. And we haven't really seen that anywhere else outside of the bits because of a whole bunch of different factors. Where do you fall down on that debate?

Steve Case (18:21.115)

No, both are true. We have seen a lot of innovation for sure, but it goes back to the way I framed the way I think about the third way when the internet meets the real world. And, you know, these are big industries, important aspects of our lives, and they take time to really kind of reimagine and make the plays. A lot of them require systems integration, like healthcare, to really get traction. So it's amazing to me, having been doing this for now for...

for decades and starting at that early stage that we talked about when the internet really was more of an idea than a reality. It's amazing to see all the progress we've made. But I really do believe next 10, 20, 30 years, we're going to continue to be surprised by the level of innovation. But it does require a different mindset in terms of dealing with real world industries and having to embrace policy, embrace partnerships as part of that.

Auren Hoffman (19:13.006)

So we had the big internet wave, let's say, in the 90s. Then we had the next version of that, which is the cloud wave in the early 2000s. Then we had the mobile wave with the next version of that, let's say, 10 years later. And of course, during that time, we also had a lot of hype cycles that didn't pan out. Where do you think AI fits on these cycles?

Steve Case (19:42.203)

Well, I'm bullish on AI. It's sort of interesting because the AI and the Internet started about the same time. They're both 50, 60 years old. They're not actually particularly new ideas. But some of these things just take a while to really get traction. And as you know, and to all your listeners know, we've been using AI on many of our apps for many years, even if nobody said that's what was part of Netflix or part of Spotify or part of many other apps.

So it's really when chat GPT had this overnight success, a hundred million users in a month or so, that suddenly people woke up to what's happening with kind of these new AI platforms. And that's created a lot of excitement and created a lot of investment. But I think some of it is these broad platforms, which are getting a lot of attention and obviously huge levels of investment. But I think it's going to tie in in this next phase.

with AI and specific industries where, again, the partnership aspect is going to be important. So I think it is a big deal. I think it's comparable to the Internet. Time will tell. Maybe the Internet was a little bigger than AI. I know a lot of people think AI will be bigger than the Internet, but it's in that realm or in the realm of mobile or some of the other things you mentioned. So I think it's a big deal. There were some things that we all tend to get into a little bit of hypishness, as you mentioned, and jargon -ishness sometimes around Web 3 or

Metaverse or other kinds of things and I think AI is much more important than those are more akin to what the internet has been.

Auren Hoffman (21:11.79)

Where do you think we'll see like the biggest disruption, the fastest?

Steve Case (21:19.195)

Well, I don't think some of the biggest disruption will happen the fastest. It goes back to my theory of these things taking a while. I think I mentioned it before, but I think the industry that most is in need of re -imagination and disruption for a whole host of reasons is healthcare. The way we deliver healthcare is just not great.

Auren Hoffman (21:24.11)

Okay, because it's too hard.

Steve Case (21:40.763)

The cost is high, the convenience is low, the outcomes aren't necessarily great and we as a nation don't really stack up all that well. The outcomes are better but the other aspects in terms of cost, convenience, things like that, others are doing better. So that's an area of massive innovation. It's not any one technology. It's a convergence obviously of many technologies. But that's one where I think you'll see just dramatic change in the next 10 or 20 years. But I don't think you'll see dramatic change in the next year or two. These are not.

Auren Hoffman (22:05.42)


Steve Case (22:06.651)

things where you suddenly somebody steps up and launches something and tada, you know, suddenly it's a whole new world.

Auren Hoffman (22:11.694)

It's hard to predict though. I remember even more than 10 years ago, a lot of radiologists were very worried that their job was going to be put out. All those people are still employed today. None of them have had to get completely retrained to do something very, very different. Maybe they have a little bit less monotony in their job or something like that, but they still do what they're doing. So...

disruption comes at a sometimes a slower pace than we think it will.

Steve Case (22:42.843)

Yes, and some of this, Thomas vehicles are a good example. Ten years ago, the conventional wisdom is it's going to happen overnight and both new companies would emerge. Big car companies would do it. Uber and others would do it. It's happening, but it's happening relatively slowly and part of the technology took longer to develop than people thought and in part because regulations in that case were kind of city by city regulations and some were more eager and others were more concerned than he does. Even consumer, you know,

Auren Hoffman (22:52.684)


Steve Case (23:12.635)

confidence and trust still needs some work. I think that's going to be more common in some of these new areas. It's going to require more, I know people want to hear this, but more patience and perseverance than maybe we've gotten used to in the last internet second wave when you did have a Mark Zuckerberg launch something in his dorm and a year or two later it was a global phenomenon. There'll occasionally be those situations, but because we're now shifting from

launching apps to launching broader based disruption innovation in really large industries that require partnerships and system level integration. I think in most cases it's going to take longer and be harder. A little bit more like my experience in those early days of the internet where I was frustrated that people didn't see the value of being connected. But now in retrospect I realize people actually.

We didn't do a good job of telling a story. It was too hard to use. It wasn't useful enough. It wasn't funny enough. It was way too expensive. And it just took us a decade to really break through and get to the point where every PC had a built -in modem, where the flat rate pricing was possible, where every content provider had a website, thousands of new companies launched in the process. And suddenly, it went from something nobody cared about to something people couldn't live without.

Auren Hoffman (24:35.02)

When I think of Steve Case in the last 10 years or so, I think of the rise of the rest. I think of your focus on really everywhere in the country except for New York and California, let's say. Still today, most of the venture capital goes to New York, California. It includes Seattle, most of the internet activity that happens. Maybe if you include Boston for biotech as well.

Right. Happens in the very, very small amount of concentrated things. Like, do you, do you see that changing marketably over the next 10 years?

Steve Case (25:12.027)

Yes, I hope so. And we've worked for over a decade on this. I first got into this 13, 14 years ago when I was asked to co -chair the National Advisory Council on Innovation and Entrepreneurship here in Washington. That led to launching an initiative at the White House with President Obama called Startup America. Got me traveling around the country and then worked on Jobs Council, helped pass some legislation called the Jobs Act 10, 11 years ago. And then we launched Rise of the Rest with bus tours about 10 years ago, then launched a venture fund maybe six years ago. We

made over 200 investments, 100 different cities with the idea that there are great entrepreneurs everywhere that do need capital, do need to be connected to other people in terms of networks, do need stronger, more supportive startup communities. And we have seen progress. When we started on this effort, people thought it was a little bit crazy, kind of like the early days of the internet, people thought it was a little bit crazy. Now people are more open to the idea that pandemic certainly accelerated the dispersion of talent, some dispersion of capital. You're starting to see more.

companies, breakout companies in different cities that become tentpole companies that then spin off other positive things over time. And even from a policy standpoint, there's now a real focus on this with the Chips and Science Act that's funding tech hubs that will be helpful as well. And I think it's important as an investor to see this as an opportunity, not just do what everybody else is doing, but doing something a little bit different. It's a little harder to identify these promising companies in these rise of the rest cities. But if you do,

valuation tend to be a little bit lower. And so there's an opportunity for great returns. But there's another part that drives me to do this, which is most of the new jobs come from new companies. And if those new companies are only in a few places, guess what? And they're disrupting jobs in other places. What's going to happen is that people in a few places like Silicon Valley are going to do really well. And a lot of people, a lot of their places, including the middle of the country, Ohio and Pennsylvania, Wisconsin, Michigan, places like that.

are going to feel left out and left behind. And that sort of started playing out in our politics. Some of what's happening in our politics now is exactly this divide over opportunity where a lot of people feel kind of left out of the innovation economy, disrespected. And so changing that dynamic and creating more jobs and retraining people for those jobs in more parts of the country is both an investment strategy, I think an innovation strategy for America to have a more dispersed innovation economy, but also a way to at least in part try to...

Steve Case (27:34.275)

a bridge of a very divided country. So it's important for lots of reasons. We have made progress, but there's still obviously a lot of work to do. But it's helpful that people like you decide to leave California and come to the Washington, D .C. area. And others like you did decide to do that at an accelerating pace over the last decade, particularly over the last few years. And some of the people that decided to move someplace temporarily during the pandemic.

Auren Hoffman (27:41.422)

It used to be.

Steve Case (28:00.699)

decided to stay there. Many continue to work remotely for the companies that they were working for. But many, once they're in those cities, see opportunities in those cities, either existing companies that are growing or new companies that are forming, and decide to stay in the city but switch to another company. That talent dispersion is ultimately the most important. I think capital follows the talent. And the other last point I'll make is over the last several decades, some of the best universities in our country are in the middle of the country.

Michigan and Ann Arbor, Carnegie Mellon, Pittsburgh, Ohio State, Columbus, you can name many, many others. But overwhelmingly, the graduates then left where they were to go to the coast because that was the land of opportunity. There wasn't a lot of things happening in their own backyard. Slowing the brain drain of people leaving and creating a boomerang of people returning will really drive the rise of the rest. And we've been encouraged by some of the early evidence of that.

Auren Hoffman (28:55.63)

One of the things that when these cities and governments were trying to encourage new jobs in the past, they would, you know, maybe give tax breaks something, or they would try to encourage, they would try to throw some money at it and give, or change the regulation a bit to get businesses to move there and stuff. But it seems like during the pandemic, people didn't move places because of those reasons.

maybe sometimes just like income tax that might've been a reason, but they moved because they wanted to be either closer to family or there was better schools for their kids or a better way of life, or they liked the restaurants. There could be a gazillion reasons. You can imagine other ways that these like Columbus, Ohio could be trying to attract talented people rather than just trying to get businesses to start there. Or you think like the businesses is the key.

Steve Case (29:52.187)

Well, I think the interesting dynamic is when we started talking about this 10 years ago, I spent a lot of time with mayors, a lot of time with governors, spoken at a lot of conferences. And at the time, exactly what you said was the case. Overwhelmingly, the economic development focus was getting a big company to move, either move headquarters or open a factory or customer service center or data center or something like that. It was about getting big companies to do something.

Auren Hoffman (30:12.652)


Steve Case (30:20.859)

And what started happening about five years ago and then accelerated during the pandemic is these mayors and governors were on to the fact that it was better to focus their time and attention and getting new companies to start. Some of which would fail, but some of which could be the big companies of tomorrow. And this really became a topic, I guess now four years ago when Amazon had this national search for the second headquarters and 230 cities applied to be the.

Auren Hoffman (30:42.286)


Steve Case (30:46.139)

second headquarters and it forced those cities to figure out what they're good at and what also some of their weaknesses were. And eventually they decided to do it in Northern Virginia not far from where we started AOL which is remarkable because when we started AOL there was no startups at all around here and no capital around here. So it just shows you the progress the DC region broadly has made. But interestingly a lot of those quote unquote losers said let's keep fighting and let's use what we did to put together our

Auren Hoffman (31:01.39)


Steve Case (31:14.829)

Amazon did and try to focus more on the next generation of companies try to launch something that maybe could be the next Amazon. And so that focus has really kind of gotten a lot more momentum in recent years. And that's one of the reasons I'm optimistic about what's going to happen the next 10, 15, 20 years around rise of the rest.

Auren Hoffman (31:33.006)

But even if they do become big, most of these companies don't employ that many people at headquarters. Most of Amazon employees are in various warehouses all across. They're already all across the US. But the number of people in Seattle is relatively small compared. We're not about creating millions of jobs necessarily. So like,

Or do you think it's like a trickle down? Do think that really helps these local economies?

Steve Case (32:01.083)

Well, yes and no, but -

Steve Case (32:08.283)

Well, when I first met Jeff Bezos, and he was just starting Amazon and pitching to be on AOL and was a book service, you know, they had like, I don't know, five or 10 employees and said, well, if they're successful, maybe they'll end up with 100, 200 something. Well, turned out, turned out it was a little bit bigger than that. And, and so you never know with these things. An example, I mentioned that company Tempus in Chicago, they now have over a thousand employees in Chicago. StockX, we backed in Detroit, they have over a thousand employees in.

Auren Hoffman (32:19.278)


Auren Hoffman (32:28.366)

Okay, that's a lot. Yeah.

Steve Case (32:33.979)

in Detroit. So there are jobs created by these companies in these different cities. But you're right. And as a company really scale, they start distributing their workforce. And that is going to accelerate in these next few years. And we saw a lot of it during the pandemic. But launching new companies that have the potential to grow. Even AOL, we started in Tyson's Corner, Virginia. We started with about 30 employees at our peak when we merged with.

Time Warner, we had 10 ,000 employees and the majority of them were in Northern Virginia. And some of those people then went on to start other companies or start other venture funds and you get that flywheel going. A great example is Indianapolis, this company, Exact Target, that started by Scott Dorsey and they eventually sold to Salesforce at the time they had a thousand employees and Salesforce doubled it. Salesforce now has 2 ,000 employees in Indianapolis, their second largest office outside of San Francisco.

Auren Hoffman (33:09.198)

Yeah, sure. Yeah.

Steve Case (33:23.899)

and Scott and a lot of the early exact target people gone on to start several dozen other companies focused on enterprise software in Indianapolis. And 10 years ago, you visited Indianapolis, most people would say nothing's happening. Well, it turns out a lot of things happening. And that's true with dozens of other cities as we've traveled around the country and made these investments.

Auren Hoffman (33:42.19)

In a world where remote work is increasing and more people can work from home, potentially multiple time zones away from the headquarters and just work from home in general, how do you think that changes how these cities should be looking to attract people? Should they be looking more for something that's more family oriented?

As you mentioned before, better restaurants. I don't like how, how do, how do we change that?

Steve Case (34:13.051)

Yeah. Well, a lot of these cities, different than Nashville, Denver, you can name dozens of them, are great cities with great lifestyle benefits and great entertainment benefits, great restaurant benefits, great places to raise families, lower cost of living than New York, San Francisco, Boston, and other things. So they've always had that. They just didn't have this innovation engine job engines, which is why people weren't there. And people didn't have the ability exactly to your point of being

Auren Hoffman (34:17.782)


Absolutely, yeah.

Auren Hoffman (34:29.206)


Steve Case (34:40.539)

remote worker for some other place. So it's a game changer in terms of how this plays out. And some of that is also true. One of the problems we have with the rise of rest cities is companies would get to a certain point and then sell out often too early. Exact Target, for example, almost sold to Salesforce several years earlier at less than one -tenth the price. They didn't end up happening and they ended up going public and then Salesforce bought them.

Auren Hoffman (35:03.586)


Steve Case (35:07.035)

And so selling too early is an issue. And part of the reason they sell too early, they don't have access to capital for that growth capital, that's starting to change. The other reason they sell early, they don't have access to the talent to grow it from 200 people to 2000 people to 20 ,000 people. Well, now some of that executive talent that has experience with hyper growth can be accessed remotely and maybe come to the headquarters once a month or every once in a while. So you're able to...

no matter where you decide to start your company, aggregate more people who want to be in that city, including getting some people to boomerang back to that city and also able to tap into talent wherever it might be for specialized skills that historically you weren't able to access, which then did lead to some premature exits.

Auren Hoffman (35:52.172)

Speaking of a non -California New York area, you and I both live in the DC area. You've been here a long time. You're kind of like the grandfather of tech in the DC area. What's so special about it? Why do you like it so much?

Steve Case (36:07.899)

Well, I first came here by accident. I had no plans to be in DC. I ended up moving to the area in Northern Virginia in 1983 to join a startup that a few months after I arrived failed. So that was a whoops and kind of a welcome to the NFL and welcome to the world of startup, where some things work, but a lot of things don't work. But thankfully, two of the people I...

met at that company, Jim Kinsey and Mark Serif and I decided to then start America Online a couple of years later in 1985. So the reason we started here was because we happened to be living here, because we happened to be working for something that just failed. We're like, okay, what do we do now? And it was hard to get going there, which is partly why I have this empathy for entrepreneurs and these fries with red cities. It was hard to raise the venture capital. None of it came from the Washington DC area. It was hard to hire people because nobody from these big established companies wanted to take the risk of,

of joining our little scrappy company. It was hard to get people to pay attention. What's changed in the last four decades and Amazon's decision to do their second headquarters here, I think is representative. It has developed as a, still work to do, but as a much stronger innovation corridor, much stronger around startups, much stronger around certain sectors, around cyber, defense tech, other kinds of things.

And as we move further into this era, we talked about earlier with the third wave, where policy and partnerships matter more, you know, a lot of those policies, not all, but a lot of those policies are going to be determined in Washington, D .C. and being close to that can give you a competitive advantage. And I saw that in the early days of AOL when we were trying to commercialize the Internet and do a bunch of other things, drive open access of.

of the internet, you know, having more of a voice because you have a kind of a home court advantage is helpful. So a lot of different industries happening here, including in sectors like hospitality, the biggest hotel company other than Airbnb in the world, Hilton and Marriott are both located here. Some of the largest defense companies are located here. You know, one of the most active venture capital investors in the country, maybe the number one investor in the country, Incutel, which spun out of...

Steve Case (38:10.765)

a government focusing on seeding companies that had technology that could be useful to government is headquartered here. So there's a lot of things. And the other thing I'd say beyond the technology world or even the business world, what I do think is interesting about the DC area, and I'm sure you've seen this, it's an interesting mix of people. It has a global kind of attraction. It's a magnet for young talent that wants to change the world, whether it be in politics or nonprofits or business.

It has things like the Smithsonian Institution, which I was involved in, including chairing for several years. So culturally, it's got some great, you know, great advantages. So it's really, it's not so much a one trick pony. It's that, East Silicon Valley a little too much about technology, maybe LA a little bit too much about entertainment, maybe New York a little too much about finance. While there is a political aspect to Washington, it's much more dispersed in terms of the community, the culture, the opportunity. I think that's appealing to people as well.

Auren Hoffman (39:08.494)

One of the, like I would say, both advantage and disadvantage of the culture in DC is it seems to be good at working on hard problems that take a lot of time and like good at kind of like the plotting. And it doesn't seem like as good as like getting places in a hurry. I don't know if you would agree with me or not.

Steve Case (39:09.379)

Thank you.

Steve Case (39:33.147)

That's fair. I guess that's fair. fair. And obviously the startup sector is in a hurry, but sometimes the startups in this region are tackling some of those industry, tackling some of those challenges that do require partnerships or changes to policy, things like that. So it does require more of the patient. But I think it's a fair observation that things move a little more slowly here than we would like. But ultimately, when the change happens, it can be pretty transformative. And also,

I think it's important to note when we talk about policy regulation, people generally are focused on the negative aspects of it in terms of slowing down innovation, regulatory capture, things like that you talked about, which for sure are there. The other aspect is a change in regulation, a change in policy can open up opportunity. When Congress passed legislation to commercialize the Internet, that created the Internet. So these things, when one of the companies we backed DraftKings, when the Supreme Court make a ruling that allowed states to allow gaming, that opened up a big opportunity.

to create a much larger company, much more valuable company. So it's not just dealing with the existing policies, existing regulations, it's seeing what changes might happen in the future that unlock opportunities. I think you'll see a lot more entrepreneurial focus, a lot more investor focus on those new opportunities, including the last couple of years. I mentioned Chips and Science Act, the bipartisan infrastructure bill, Inflation Reduction Act focused on climate tech has suddenly fueled...

a much more significant focus on those areas and investment in those areas because of a change in policy.

Auren Hoffman (41:00.75)

You are, I would say, extremely optimistic person. Is that like ingrained at birth or is that from experience? Like how does that, because I do think that like that Venn diagram of being like an optimistic person and a smart person is a kind of a rare overlap. Usually smart people are a little bit more pessimistic. And that where overlap usually means a great founder. So how did that happen with you?

Steve Case (41:29.723)

No, I think some of it just led to experience and like with the internet believing in the idea when I read that Alvin Topfoot book in my college dorm in 1979 and saying somehow that's going to happen. And it took me five years from that date to actually co -found America Online. It took another 10 years from that before the internet really took off. AOL really took off. So.

But I always believed it. There's times, to be honest, where one trail would survive. We had some tough times. We had to go through the layoffs a couple of times. So I was worried about our own survival. But I never really doubted that the internet would end up being a phenomenon, because this new medium, new industry kind of changed the world. So I think I've always had that, I guess, that optimistic view. When I launched Rise the rest 10 years ago, I actually thought it was a little bit like the early days of the internet, that when we...

Auren Hoffman (41:56.846)

Mm -hmm.

Steve Case (42:19.483)

We're talking about the internet, people were skeptical. When I started talking about rise, the rest of people were skeptical. Eventually the internet became mainstream and people embraced it. Now people are starting to see what's happening in different cities and embracing it. But I do think to have this kind of impact, to have any significant change, you've got to be optimistic. You've got to focus on what's possible. You got to figure out ways to build alliances and partnerships to get people on board with their companies that might partner with you or working on legislation like...

The jobs act required working with Republicans and Democrats in the House and Senate and getting them focused on the issue of why it was important to provide better ways for entrepreneurs to access to capital, allow things like crowdfunding, create an easier on -ramp for young companies to go public, things like that. It was more about selling the idea of America leading the charge in this next wave and maintaining its lead as the most innovative entrepreneur nation in the world, creating jobs, which is where most of the jobs do come from new companies under five years. They're selling them on that vision, which then got them

to be supportive of those ideas. I just found that optimism is the better way to go if you're trying to usher in a better reality and you need to do that in partnership with lots of other folks.

Auren Hoffman (43:28.814)

One way we're, and I'd love to get your thoughts that I see you as like maybe different than some of the other super well -known technology entrepreneurs is a lot of those, a lot of them are kind of like swashbuckling outsiders, break the glass kind of folks. You seem to operate extremely well, just as well on the inside as well.

working within the system. You mentioned multiple times building partnerships, doing BD deals, et cetera. And it just shows that there are many, many different ways to be successful. Would you agree with that assessment from me or would you disagree?

Steve Case (44:11.451)

I think there's probably some of that. I do think I said several times that partnerships are important, engaging in policy is important, and taking a long -term view and persevering is important. And again, it goes back to my experience, if we had tried to do AOL on our own, like a full stack solution with our $1 million of venture capital, we would have gone out of business in a minute and a half. It's survival, let alone success, required kind of partnerships and taking a...

Auren Hoffman (44:19.884)


Auren Hoffman (44:26.926)


Steve Case (44:36.027)

a long -term view and not being, you know, just recognizing that it's going to require some work and so forth. So I think that that mentality is important. I'm sure some of this is just age. I turned 65 when I started. I was more like 25, 26. I probably was a little bit more swashbuckling and think, think, think everything, think I'm smart and think everything can happen overnight. And so some of it is just lessons learned from over the years and.

Auren Hoffman (44:51.758)


Steve Case (45:02.139)

Hopefully it's a little bit of wisdom. And at the same time, I have great respect for any entrepreneurs trying to do anything. And if people are able to launch things that are overnight successes, obviously as an investor, love that. I just recognize that that's gonna be more the exception than the rule and taking the longer view, establishing the partnerships, working sometimes with those partnerships within the system, sometimes trying to influence policy regulations to make sure that...

disruptors are in advantage, not the incumbents. That's one of the battles I've been fighting recently. I testified at the Senate at the second AI forum that Senator Schumer hosted, and my message was we need to make sure as AI takes hold, it doesn't just lead to big tech getting bigger. We need to make sure we're opening this opportunity up to everybody and maybe require making sure the large platforms are open and also making sure open source is a real viable alternative, even though there are risks associated with it. So to me, it's all about

trying to kind of play a role in America's innovation economy, do what I can to make sure America does continue to lead. I mentioned I got started with Rise to Rust when I was asked to co -chair the National Advisory Council on Innovation and Entrepreneurship 14, 15 years ago. I was asked to co -chair, restart it and co -chair it by Senator, Secretary Raimondo, who runs the Commerce Department and done that. And just last week, we actually issued a report from the National Advisory Council, NAICI it's called.

around how does America continue to lead the way and what steps do we need to take in terms of more investment in R &D, smarter tech transfer, changes in immigration policy, incentives around capital, many other things to make sure America continues to lead the way.

Auren Hoffman (46:41.582)

You were, I'd say until you left AY, you were definitely the most famous graduate of your high school in Hawaii. Then like a few years after that, you were eclipsed by Barack Obama.

Steve Case (46:51.995)

No, beyond the clips. Actually, I thought when he moved to Washington, he became a senator. And we were at an event together. I say hi to him and say, oh, it's good to meet you. You're the most famous guy I ever graduated from, Pono School. I told him then, and this is before he announced for president, that, well, I have a sense that that's going to change. And sure enough, a few years later, he was in the White House. It's amazing to watch his trajectory.

Auren Hoffman (47:16.366)

And I, before we did this interview, I checked your guy's ages. He's like three years younger than you. So did you overlap with him in high school?

Steve Case (47:23.419)

Yeah, I was a senior when he was a freshman. So I don't remember having classes with him. I do remember playing basketball with him. I remember he was a better basketball player than I was even though he was three years younger. But I didn't really know him. I was in school with about 3 ,000, the largest independent school west of the Mississippi, I think about 3 ,000 students. 400 in each of the class in high school. So a 1600 in high school. So I was aware of him, but didn't really get to know him until he moved to Washington as a center.

Auren Hoffman (47:38.638)

Oh, 3000 people in the school?

Auren Hoffman (47:43.918)

Oh wow, that's a big school. Okay, yeah.

Auren Hoffman (47:51.63)

Okay, amazing. This is great. All right, last question we ask all of our guests. What conventional wisdom or advice you think is generally bad advice?

Steve Case (48:02.939)

Good question. I'd say if we think about entrepreneurship,

Steve Case (48:10.939)

The advice often is a great entrepreneur who has conviction about their ideas can make things happen. And at one level, of course, that's the case. But I think it way too celebrates the entrepreneur and way under celebrates the teams that really are, as you well know, required to take any idea and make it scale. So it's.

it's more focused on entrepreneurship as a team sport, I think is important. And the other goes back to some of the things we talked about is this notion of kind of disruption, full stack, ignore the incumbents, just crash into the market and try to kind of get the whole shebang that happens in some instances. But in far more instances, I think there'll be more in the future. It's figuring out some way to knit together a tapestry of alliances to together do things that you can't really do on your own.

Auren Hoffman (49:06.958)

Sure. Cool. I want to ask you a couple of questions on the first one. So on the first one, you're basically saying like the the founder is less important than we then we kind of ascribe to them.

Steve Case (49:21.115)

say less important, but because obviously are important. They're the leader and they drive it forward and they're critically important. I just think sometimes it ends up being, you know, Steve Case did this or Mark Zuckerberg did that or Bill Gates did that or Elon Musk did that or what have you. And the reality is, certainly my experiences, I think in all their experiences, it was partly that person, it partly that idea, it partly that time, partly competitive dynamic, maybe a little bit of luck, but mostly,

Auren Hoffman (49:24.204)


Steve Case (49:51.131)

the team. And so assembling the right team with the right mix of skills and perspectives is to me, you know, is as important as the idea or the founder. And so it's the ability to take the idea and execute against that idea. And there many facets to that. But the team is sometimes under celebrated.

Auren Hoffman (50:08.942)

In history, there's this idea of like the great man theory. Some people in entrepreneurship call it like the great founder theory or something. And of course, there's a lot of people on both sides of the debate. Like, do you think a lot of these innovations would have happened anyway if those people just weren't alive? Or, or do you think like, actually they are like, these people are actually the ones shaping the innovations.

Steve Case (50:31.259)

I think most of the things that eventually happen would eventually happen, but they might have taken a lot longer and they wouldn't have been developed in as a compelling kind of way. You know, Steve Jobs, for example, obviously is celebrated for his work with Apple both the early days and creating one of the first computers. And of course, later on with all the other things he did with the iPad, iPhones and things like that. Those ideas, you know, the computer, personal computer, was going to happen, I'd say, whether or not eventually.

Auren Hoffman (50:36.492)


Auren Hoffman (50:57.804)

Yep, there was a Xerox PARC stuff.

Steve Case (51:01.327)

smartphones with apps were going to happen. And so I think most of these things, internet in my case, was going to happen, whether that be with or without AOL. But entrepreneurs can certainly drive in a certain direction, you know, seize a particular opportunity, create a bring a certain mindset to it, assemble a certain team that can, you know, kind of tackle it. So I think that the role they play is critical. I don't want to diminish that. I just think sometimes the team aspect needs more attention and sometimes

the context, including with timing, needs more attention.

Auren Hoffman (51:35.286)

Yeah, it's always like, you know, 24 years ago, there's this famous car ride where Elon Musk and Peter Thiel and the lines driving his McLaren and he flips the McLaren and and lucky for them, like they both come out like some pretty much unscarred, maybe not emotionally, but but but unscarred. But you could see it like easily going the other way where like it had both been killed like like that. And it does to me, I do think like the world would be.

very different today if that car crash turned out a different way or you think, okay, broadly, obviously it'd be a tragedy, but broadly, we would have had similar innovations.

Steve Case (52:17.083)

Well, I think both could be true. Of course, of course, you know, Elon or others played a central role in innovations across a number of different technologies and industries and don't want to diminish that in any respect. At the same time, and he did get it should get credit for, you know, the sort of current EV revolution, which was started 40, 50 years ago, including by GM. And then for a whole host of reasons, kind of was stopped.

Auren Hoffman (52:17.934)


Auren Hoffman (52:43.822)

Yeah, and it's more of a space, you got the space revolution going as well. Yeah.

Steve Case (52:45.229)

restarted and got that whole thing going. At the same time, if Elon hadn't existed, obviously Tesla wouldn't exist and we wouldn't have the momentum now with many other companies, Rivian and others doing interesting things in that space right now. But do I think that eventually somebody somehow would have taken a stab at EVs? Yeah, I think it would. So, it's a combination of the right person with the right team with the right idea at the right timing.

Auren Hoffman (53:02.478)

Okay, sure.

Steve Case (53:13.445)

that is really what can be so magical.

Auren Hoffman (53:16.62)

All right. This has been awesome. Thank you, Steve Case for joining us on World of Daas. I follow you at Steve Case on Twitter. I definitely encourage our listeners to engage with there. This has been a ton of fun and I'm a huge fan. So I'm really happy that you're on World of Dazs.

Steve Case (53:30.555)

I enjoyed the conversation. It's great to have you in the DC area.

Auren Hoffman (53:32.846)

Thank you. All right.


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