Following the dramatic fall of FTX and its young founder, Sam Bankman-Fried, which blindsided investors, some might argue that it’s time for venture capitalists to pay more attention to entrepreneurs in overlooked communities across the country who are building the new American dream.
Over the past decade, nearly 75 percent of venture capital has gone to traditional tech hubs in California, New York, and Massachusetts. But this trend is steadily changing, according to Steve Case, co-founder and former CEO of America Online (AOL).
After leaving AOL in 2005, Case launched his investment firm Revolution to back entrepreneurs with growth, venture, and seed funds. His Revolution Growth fund, for example, has invested roughly $1 billion in growth-stage startups such as Sweetgreen, Tempus, Tala, and DraftKings.
Local entrepreneurs understand the challenges that their communities face, and they know the solutions, according to Case. What they need is funding.
In 2014, he launched an initiative called “Rise of the Rest” to support the growth of startups in many cities across the United States. His belief is that great entrepreneurs can be found anywhere and can thrive with the right support and funding.
As part of the initiative, he organized bus tours visiting dozens of cities to meet entrepreneurs and learn about their businesses firsthand. He documented his observations from his tours in his latest book, “The Rise of the Rest: How Entrepreneurs in Surprising Places Are Building the New American Dream.” In his book, Case introduced dozens of entrepreneurs and their inspiring stories.
“I do think it’s a story that hasn’t really been told. Most people are unaware of it and hopefully this book will open people’s eyes to it,” he said.
Case launched the Rise of the Rest Seed Fund to invest in these startups. So far, the fund has invested in 200 companies in more than 100 different cities. Case’s initiative is backed by well-known investors and entrepreneurs such as Eric Schmidt, Jeff Bezos, Tory Burch, and the Walton family (Walmart).
“A lot of places are struggling and feeling left out and left behind. If we can back new companies that can create new kinds of jobs and create more hope and opportunity in those communities, and do that in enough places, it also has the potential to help lift up, and maybe even in a small way, unite a very divided country,” Case told American Essence.
It’s like asking a parent to choose their favorite child, Case said when asked which cities outside the major tech hubs had surprised him the most.
“It’s not just two or three or four cities that are rising up. It’s really several dozen cities,” he said, citing Chattanooga, Tennessee; Detroit; Indianapolis; and Bentonville, Arkansas, as examples of cities with thriving startup ecosystems.
Case also mentioned that an increasing number of people are returning to their hometowns after leaving to pursue tech jobs in big cities such as San Francisco, New York, and Boston. They’re returning home because of the affordability, increased job opportunities, and proximity to their families. According to Case, this trend has accelerated since the COVID-19 pandemic.
The AOL co-founder believes that the next generation of successful Fortune 500 companies will come from all parts of the country, not just from tech hotspots such as Silicon Valley. He feels there’s a strong case to be made for investing in these companies, and that venture capitalists don’t have to make sacrifices in terms of returns.
Because these companies don’t have as much access to capital as companies in places such as Silicon Valley, their valuations tend to be more modest, and the business ideas are quite compelling, he said, so investing in those companies can “generate terrific returns.”
