Oct. 3, 2022

How the Founder of AOL Plans to Fix the Broken Economy

How startups can save the economy

Nora speaks with Steve Case, co-founder of AOL and the venture capital firm Revolution, about his new book The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream. He discusses his initiative to accelerate the growth of tech startups across the country—even for people who live outside the major coastal tech hubs—and renew communities in the process.


Host: Nora Ali

Producer: Olivia Meade  

Video Editor: Sebastian Vega

Production, Mixing & Sound Design: Daniel Markus

Music: Daniel Markus & Breakmaster Cylinder

Fact Checker: Kate Brandt 

Senior Producer: Katherine Milsop

VP, Head of Multimedia: Sarah Singer 


Full transcripts for all Business Casual episodes available at https://businesscasual.fm


Speaker 1: Welcome. [Dial-up tone.] Internet!

Nora Ali: For Morning Brew, this is Business Casual, bringing you convos with people you know, and some you may not know yet, to make business less intimidating. Because money talks, but it does not have to be dull. I'm your host, Nora Ali. Now let's get down to business.

Imagine for a moment the year 1985, the year that "We Are the World" by USA for Africa hit number one, along with Madonna's "Like a Virgin.” Big hair and spandex were in. The Golden Girls premiered on television and delighted audiences everywhere. And only 3% of people were on the internet, for an average of about one hour a week. Needless to say, a lot has changed since then. Our guest today, Steve Case, co-founded AOL in 1985. And true to the company's name, their mission was to get America online. As Steve tells it, it took at least a decade of persistence and hard work before AOL finally broke through. And by 1996, AOL reached five million members. Because of this dedication and ability to fight through the naysayers, an experience many entrepreneurs may find familiar, Steve helped create a staple in many of our lives, including for young me. Who could forget the sweet sound of dial-up, until your mom picked up the phone and booted you off the internet, or the flood of excitement when you heard...

Speaker 1: You've got mail.

Nora Ali: ...or, for me, the thrill of your crush entering the chat on AIM? The joys were simple back then. But now the internet and entrepreneurship are wildly different, with dreams of innovation expanding in unexpected places. In 2014, Steve Case launched Rise of the Rest, an initiative to accelerate the growth of tech startups across the country, even for people who live outside the major coastal tech hubs. As he writes in his new book, The Rise of the Rest, for most of the past decade, 75% of venture capital has gone to just three states: California, New York, and Massachusetts.

We spoke with Steve about his mission to bolster entrepreneurs and startups across the country. We also, of course, got his take on Web3 and the future of the internet, given that he played a massive role in building Web 1 and Web 2. We also got a little nostalgic with our game at the end of the episode today, so stay tuned for that, because nothing makes me feel more nostalgic than talking about AOL. While the economy might feel kind of garbage right now, this episode definitely made me feel optimistic about our country's ability to keep leading in global innovation. That's all next, after the break.

Okay, before we get into it today, I have a request for you, Business Casual listener. We are entrepreneurial ourselves over here at Morning Brew, of course, which means we want to continue learning, testing, and improving. And there is no one more important to us than you, because that is how we get paid. So as we do some serious thinking about what's working and what's not, I'd love to hear from you, specifically. Send me a DM @NoraKAli on Twitter and let me know, what do you want to see more of? What topics are interesting to you? What do you wish you could learn more about in the world of business? Any dream guests you want to hear from? What do you want to see less of? You can also just DM me and tell me what you had for breakfast, because I actually want to get to know you. Just don't try to sell me any NFTs, like most of the people in my DMs currently. Thank you, and let's get right to it.

Steve, I'm really thrilled to be chatting with you, and there's so much to get to. But first and foremost, welcome to Business Casual. Excited to have you here.

Steve Case: Great to be with you.

Nora Ali: Let's start with a quick little icebreaker. This is for a segment called OG Occupations. Steve, what was your very first job that you ever had—your OG occupation?

Steve Case: Well, my very first job, depending what you mean by real job...I scooped ice cream for a while. But no, my first job out of college, I worked for Proctor & Gamble on marketing hair care products in Cincinnati, Ohio.

Nora Ali: I'm more interested in the ice cream scooping. Did you enjoy that?

Steve Case: Not really. It was really hard.

Nora Ali: Your hands were probably always cold.

Steve Case: After a summer of that, I think, I wasn't so into ice cream for a while. But it's okay now.

Nora Ali: Yeah. Look at you now. Okay, so let's get into a little bit of background. Our listener base is quite young, so most of them, a lot of them at least, were not born when AOL, America Online, was co-founded by you in the '80s. Can you describe sort of what the state of the internet was when you co-founded AOL in the '80s?

Steve Case: Well, we started in 1985. And at the time, believe it or not, only 3% of people were online, and those 3% were online an average of one hour a week. So it was pretty early days, and we said we wanted to get America online. We were totally serious. And it took us a long time, really a decade, before we finally broke through. And that was one of the lessons I learned as an entrepreneur: the importance of persistence, perseverance. If you think it's important, never give up.

Nora Ali: Do you ever miss those days, when we were only online for an hour a week? It's kind of frustrating now that we're constantly connected, and there's some pressure.

Steve Case: Yeah, maybe we went too far the other way, particularly during the pandemic, when essentially we were always on because there was no other way to really connect to people. I think those early days were exciting, just trying to figure out ways to create something that was easy to use, useful, fun, and affordable. I think there have been a lot of benefits, obviously, the internet has given us in our lives, but also comes with some frustrations, for sure.

Nora Ali: So, when you were building AOL, what did the skeptics say to you back then? And are there any parallels that you can draw to what skeptics are saying about Web3 and the future of the internet now?

Steve Case: Well, in those early days, most people didn't really believe the internet was ever going to be a mainstream phenomenon. Most people thought it would be limited to computer hobbyists, that the average person wouldn't see reasons to be online. In fact, it took us a number of years to even convince personal computer manufacturers to build communication modems into their computers because they said, "Why would we add that as a cost to every computer, when most people don't seem that interested in being connected?" So it was a lot of those challenges that were there in the early days. And I think the Web3 kind of challenges are similar. There's a lot of people trying different things. We're in that phase of rapid experimentation, but it's going to take a while for things to settle out. And anytime there's some new revolution, if you will, people are going to be skeptical, and you just have to keep powering through.

Even the work we've done more recently on trying to back entrepreneurs all over the country, trying to promote regional entrepreneurship, what we call Rise of the Rest, when we started that effort nearly a decade ago, most people thought it was a crazy idea. They believed that because most of the venture capital was in places like Silicon Valley, that's where most of the great companies would be built, and most people who wanted to be part of the innovation economy would move to Silicon Valley. And most people didn't believe you could build really significant companies in other parts of the country. That's starting to change, but there's still a lot of work to do. I've seen this movie before, and I know that in the early days, there're always going to be skeptics. And if you believe in your idea, keep fighting for it and recognize, sometimes the light at the end of the tunnel, it seems dim or flickering, but you just have to keep fighting. Eventually the tunnel gets a little shorter, and the light gets a little brighter.

Nora Ali: Yeah, I mean, there's certainly plenty of skeptics now when it comes to the next generation of the internet, I guess. But then you have those who are very bullish on the metaverse, for example, like Mark Zuckerberg, who recently predicted that a billion people will join the metaverse, in part using Meta's tools. And that is despite a consumer survey from November 2021 that found that more than two-thirds of Americans are uninterested in Meta's metaverse vision, at least. What is your prediction and your take on maybe the mainstream adoption of whatever the metaverse turns out to be?

Steve Case: Well, I'll give you a little backstory. When we talked earlier about AOL, in those early days, we actually launched, 30 years ago, a version of the metaverse, which was a virtual reality kind of alternative worlds with avatars, in partnership with Lucasfilm, the movie company, called Lucasfilm's Habitat.

Announcer: Now, using their modems and Commodore computers, people from Westport to Walla Walla can join Quantum Link and Lucasfilm on an electronic journey unlike any other, one that leads to Habitat, where thousands of avatars, each controlled by a different human, can converge to shape an imaginary...

Steve Case: That was with relatively slow computers, relatively slow modems. But the idea was you would, basically, be a character in this virtual world. And that worked reasonably well, but the technology was, clearly, limited. So this idea is not all that new. It's been around for decades. What's happened over those last few decades is the technology's gotten better. Much more compelling experiences are possible. But I think people are still in that experimentation phase, still trying to figure out what the killer applications are, whether it be gaming, or travel, or education, or some uses of it in an office setting, whether it be for meetings or other kinds of things.

And I think it'll take a number of years before that all settles out, although I would say, in a couple years where all of us were mostly remote, that felt a little about living in a metaverse. We're online pretty much all day because that was the way to do business, conduct your lives. You weren't really very connected to real people. It was more, you're living in this virtual world. And people got things done, but think most would agree that while there were some positives to that, in terms of being able to continue to connect and even some convenience, there are also some negatives. And that's why, I think, more and more people kind of are enjoying being back together with other people. So it's always going to be a mix, always going to be a balance.

Nora Ali: Yeah. Definitely. Wait, I want to know more about this alternative world from 30 years ago. Can you illustrate what that experience was like? What did it even look like?

Steve Case: Well, you could say it's still online. It was a service we launched called Quantum Link or Q-Link. This is before we actually launched AOL as a brand. And it was dedicated for Commodore 64 computers, which, back in the mid '80s, was the most common home computer.

Announcer 2: Commodore 64. Once you get it, you'll wonder how you got along without it.

Steve Case: And it used a very slow 300-baud modem and had graphics stored on a disk, floppy disk, that you would use. So you wouldn't transmit a lot over the phone lines because you couldn't. So you'd pull up graphics. They were very rudimentary, and I think if you look back at some of the things online or some of the videos online, it's almost laughable. But it was an example of kind of a first-generation attempt at the metaverse.

Nora Ali: I'm going to have to check that out. That sounds kind of cool. If you were to start an internet company today, how would you go about doing that? What would be some of the key components you would want to include, given all your learnings over the decades?

Steve Case: Well, I think it really depends on, more specifically, what you're trying to accomplish. I think we went through that first wave of the internet trying to build the on-ramps, educate people why they wanted to get connected, create the services, the infrastructure to make that possible. That sort of set the stage for the last, call it 20 years of a second wave, which is really more about software apps writing on top of the internet. You didn't have to build out the infrastructure anymore. It existed, so you could focus on innovating on top of that infrastructure. Now we're in the third wave of the internet, which is really when the internet meets the real world, and you're focused on things like health care and education and food and agriculture, some of the most important aspects of our lives and some of the biggest industries.

So I try to figure out first what exactly I'm trying to accomplish, what battle I'm trying to fight, then figure out what partnerships might help accelerate that, what skill sets are needed, and the team that you need to assemble. And also...and this is sort of new and ties in with the work we've done with Rise of the Rest, even the book I wrote on Rise of the Rest...figure out what is the best city to launch that company in. The last 20 years, the presumption was the best city was San Francisco, because that's where a lot of other people were, and that's where most of the venture capital was. I believe in this third wave, domain expertise will matter more. If you're trying to disrupt healthcare, understanding the culture of healthcare and having trust with potential partners that could really help accelerate your growth is going to be important. That leads to potentially being in other cities, like Minnesota, where there's a lot of big healthcare companies like UnitedHealth and key players like Mayo Clinic, or in Ohio because of the Cleveland Clinic. So that figuring out what the right place is to launch the company is important.

One example, one of the investments we made with our Rise of the Rest Fund is a company in northwest Arkansas, Fayetteville, called AcreTrader. That company actually started in San Francisco, but they moved. The founder, Carter Malloy, moved to Fayetteville because AcreTrader is a platform that allows people to invest in farmland, and he concluded that if he was going to try to create this platform to invest in farmland, it better be close to where the farmers are, to build trust. And so that company is scaling quite significantly, and there's a benefit for AcreTrader to be in northwest Arkansas as opposed to in San Francisco. There are a lot of other examples I could cite of why, strategically, the decision about where to start the company is going to become more important. And now, thankfully, there is more flexibility in terms of where entrepreneurs can start and scale than there might have been 10 or 20 years ago, because we're starting to see a dispersion of venture capital, even a dispersion of talent, and that was accelerated over the last two years with the pandemic.

Nora Ali: Yeah, I want to emphasize something that you said: "Domain expertise will matter more." So you're not just going to be someone who's familiar with tech, who can just randomly launch a company. It's beneficial to be close to those who are the experts in a particular industry. I love that you brought up Minnesota. I was born and raised in Minnesota, and you're right, it's a huge hub for healthcare, a huge hub for science as well, with 3M, for example. So, a lot of really great examples that you listed out. We are going to take a quick break. More with Steve on Rise of the Rest when we come back.

Okay. Let's dig a little deeper into your new book, Steve, The Rise of the Rest. In the preface, you wrote, "As I write this, I'm looking ahead with anticipation to a date four years away, July 4th, 2026, when America will celebrate its 250th birthday." What is your biggest hope for the year 2026? It could be internet-related, the planet, entrepreneurship, anything. What do you hope to see over the next four years?

Steve Case: As I mentioned in the foreword of the book, I've been chair of the Smithsonian Institution, and it has, obviously, a number of museums, 19 museums, on the National Mall, and been working on some of the planning for the 250th celebration. And my hope is it will allow us to take a step back and celebrate what got us to now, and then also help inspire us for this next chapter. And it is worth remembering, as I pointed out in the book, that when we got started, nearly 250 years ago, America itself was just a startup, and, like many startups, almost hit the wall. Wasn't at all clear it was going to make it, but we kind of struggled through those early years. And then, thankfully, we're, as a nation, able to lead the wave of agriculture revolution and then the Industrial Revolution, then the digital revolution. And now we're the leading economy and the leader of the free world. So the entrepreneurs played an important role all across the country, all across many different industries. And my hope is, as we think about this next phase, we take the steps necessary to make sure America remains the most innovative, entrepreneurial country in the world, and continues to be a magnet for talent, people coming from all over the world to start companies in the United States, and that we also help level the playing field in terms of opportunities so everybody, everywhere in the country really, has a shot at the American dream. If they have an idea, they have a shot at starting a company. That has not been the case for most of the past couple decades, when 75% of venture capital's gone to just three states. That leads to a brain drain of people, perhaps like you, that are leaving Minnesota because there're greener pastures on the coast, where most of the venture capital was.

Nora Ali: Sure. Yeah. Mm-hmm.

Steve Case: So how do you slow that brain drain of people leaving and create a boomerang of people returning? I think that will result in a more inclusive innovation economy. I think that has the potential to help knit together a very divided country, where some people are excited about the future, most people are anxious and worried and pessimistic about the future, and also maximize the likelihood of remaining, like I said earlier, that beacon of just liberty but also innovation and economic progress. So hopefully, some of that will happen. Obviously, part of the reason I wrote this book, Rise of the Rest, was to shine a spotlight on some of the people and places that are giving me hope around that future.

Nora Ali: Mm-hmm. And you had mentioned that people were skeptical, when you first started these Rise of the Rest bus tours so many years ago, because they didn't quite believe that you could see that kind of innovation across the country and not just on the coasts. Can you bring me back to how you were inspired to go on these bus tours, these Rise of the Rest tours, and what were you hoping to learn when you first started on the journey?

Steve Case: I sort of stumbled into this. I was asked about a decade ago to co-chair an initiative called the National Advisory Council on Innovation and Entrepreneurship. That led to being asked to chair an initiative launched by the White House, President Obama, called the Startup America Partnership. And I also was on the President's Jobs and Competitiveness Council and worked on policies specifically around innovation entrepreneurship. So that really opened my eyes to a couple things. One is that while small business is critically important, almost the fabric of our communities and big business, our largest companies, our Fortune 500 companies, are critically important as well. It's new companies, less than five years, startups, that really create most of the net new jobs. So we need to focus more on startups.

And I also learned...I didn't know at the time, some of those statistics I mentioned earlier: 75% of venture capital going to just three states. If you go beyond place and look at people, there's also some statistics I learned that were troubling: that women are 50% of population, get less than 10% of venture capital. Black Americans are 13% of the population, get less than 1% of venture capital. So it does matter where you live, does matter you what you look like, whether if you have an idea, you have a shot at starting your company. And that's what we're decided to start changing initially, through that work at the policy level.

And then we hit the road about eight years ago with our first Rise of the Rest bus tour. We went to cities like Detroit and Pittsburgh, that a hundred years ago were innovation powerhouses. In many ways, Detroit a hundred years ago was sort of like Silicon Valley is today, when the car, the automobile, was the hot technology of the day. There was a sort of a sobering reminder that things rise and things fall, because it went from being the dominant innovation city in America, Detroit, to losing 60% of its population over a half a century. And then, the year before we rolled into town on our Rise of the Rest bus, the City of Detroit went bankrupt. And now they're fighting their way back because they're backing entrepreneurs, particularly under the Downtown Detroit effort. But that really inspired us to continue.

And now we've done eight of these bus tours, visited 44 different cities. We've now made investments in a hundred cities. And it's really amazing what we're seeing. It is inspiring, and hopefully will inspire the next generation of entrepreneurs to start wherever they are, and not feel like they can't start a company there and hopefully inspire people in their communities to support them, whether it be as investment, or customers, or partners, or just mentors and encouragers. And we really are trying to level the playing field so that everybody does really have a shot, and every community can rise.

Nora Ali: As you're trying to level the playing field, what are you finding are the biggest barriers, at this point, for folks who are trying to start companies? Access to capital is difficult because a lot of the money sits on the coast. So what are some examples of what's preventing these communities from thriving as much as they could?

Steve Case: There's a number of things. One is the capital, and that's what we're trying to address. And we've been encouraged by some of the progress over the last decade. 1,400 new regional venture firms have started up, backing entrepreneurs in their own backyard. That's super helpful. We've also seen a sixfold increase in the amount of venture capital going to these Rise of the Rest cities. That's obviously helpful, but there's still work to be done on the capital point. And pandemic, frankly, was a little helpful on that front there. The venture capitalists on the coast started doing Zoom meetings and realized that they could actually do a Zoom meeting with an entrepreneur in Minnesota or Ohio as well as somebody in their own backyard. So the capital piece is part of it. The talent piece is another part of it, how you attract the entrepreneurial team you need to be successful. How do you slow that, like I talked about earlier, that brain drain of people leaving different parts of the country and going to the coasts? How do you create a little bit of more of a boomerang? So the talent piece is critical.

There's also a culture piece. One of the great things about Silicon Valley is the sort of the art of the possible. They're willing to think big and take a long-term view. Some communities, in fact many communities in the United States, don't have that view. They're a little more cautious, a little more risk-averse. They hear an idea for a startup and figure out why it might go wrong as opposed to why it might go right. So there's a culture piece as well. There's also a collaboration piece. We have to make sure that the entrepreneurs are able to connect with people in the universities, connect with some of the big companies in their community, get support from policy makers, mayors, and others. How do you create a vibrant ecosystem that's collaborative in each of these? So those are some of the examples. There's others as well. I have a whole chapter in the book about what we've learned in terms of the key kind of ingredients that create a thriving startup community.

But it is encouraging. We profile 30 cities all around the country that are really doing it. These are cities that will surprise people. Buffalo, I mentioned Fayetteville, Chicago, Atlanta, Chattanooga, Indianapolis, Richmond. These are cities all around the country that really are kind of ushering in this next era of American innovation, not just doing it in Silicon Valley but doing it all across the country.

Nora Ali: Do you feel like venture capitalists are paying attention enough to these regions? Because you mentioned that investors are realizing that you can just Zoom with an entrepreneur, and that's fine. You can learn all about their business virtually. But now that in-person events have returned, I've been going to lots of networking events, and I'm seeing deals being made and people meeting each other that they otherwise wouldn't come across. And I'm in the heart of Manhattan, and there's a lot of these events in Manhattan. So what do you hope investors will do to encourage those kinds of relationships with entrepreneurs who don't live in the city that they live in? Is there anything they can do to sort of create these organic meetups, these organic connections?

Steve Case: Well, I think, as I said, the pandemic helped open some venture capital eyes to the possibility of these Zoom pitch meetings and open their eyes to the fact that there really are entrepreneurs all across the country that are building really exciting, groundbreaking companies that have the potential to be worth a lot of money, so to generate significant returns for their investors. But you're right. It also requires a network, once you invest, to help those companies succeed. So the first step is finding these entrepreneurs in these cities that you otherwise haven't invested in.

The second step is to learn more about what's happening in that particular industry, what's happening in that particular community, so you are able to provide help. There is some value, obviously, even in an increasingly remote world, to having boots on the ground and actually showing up and meeting people, just as you're saying in Manhattan, kind of face-to-face. That's also a reason why the Rise of the Rest cities are cities. These are smaller cities than New York City or San Francisco, but they're cities. There is something to clustering people together. There's something to building sort of innovation districts within different cities that is where the entrepreneurs kind of come together, because that is how the ideation, the incremental improvements, and even sometimes the breakthrough ideas often happen. Sometimes that can happen through remote technologies, and there are certainly some very successful companies that are all remote, but I think there still is a lot of value to people being together. And that's true at a company level, and that's also true in a community, building a strong start-up community in these Rise of the Rest cities.

Nora Ali: Mm-hmm. Definitely. All right, we're going to take another quick break. More with Steve when we return.

Steve, one specific example that I wanted to point out from your book is the story of Jonathan Webb, who is an entrepreneur from Kentucky. And he's working on his startup called AppHarvest, trying to, quote, "turn coal country into a rich agricultural and energy-thriving territory with a 21st century story to tell." How is that particular story emblematic of the entrepreneurs in lesser-known parts of the country who are trying to upend how it's always been done?

Steve Case: Jonathan's a fabulous entrepreneur, and he had this bold idea, just as you described, of trying to create a new kind of agriculture company, and not do it in some of the usual places, but do it in a place that desperately needed jobs. They're outside Lexington, Kentucky, was kind of traditionally coal country, which has lost lots of jobs in the last half century, and frankly also lost a lot of hope. There are a lot of people that are really feeling like they're left behind. He decided to start the company there. So far, they've created 500 jobs there, which has surprised people in the community and given them that sense of possibility and that sense of hope. And part of the reason he was able to do that is because that particular location. About 70% of the US population is within a 24-hour drive of where they're headquartered. So that allows them to get these fruits and vegetables to market quickly. So there's some strategic advantage to be in that particular city.

Also, he's very focused on sustainability. And the way they designed it used 90% less water than traditional farming does. So there's all kinds of reasons why a company like AppHarvest needs to be successful. Some of it is the impact they're having on their industry in moving to healthier, more sustainable approaches. And some of it's the impact they're having on a community that had been left behind, that was struggling, and now, because of the success of AppHarvest, is starting to see real momentum and possibility.

Nora Ali: How did you find Jonathan? And I guess more broadly, how did you find the entrepreneurs you wanted to talk to and profile in this book?

Steve Case: It's a mix. In Jonathan's case, he found us. He heard about what we were doing with Rise of the Rest, and said he was going to figure out some way to get in the door, and kept showing up until we finally listened to his pitch, and we made an initial investment. I think it was $100,000 just to kind of get him going. And he's now gone on to raise hundreds of millions of dollars and really built a pretty significant company. We also meet people when we're on the road, in terms of the bus tours we've done. We do pitch competitions in each city and meet some fabulous companies. I remember one in Indianapolis, company called 120Water. The founder, Megan Glover, was concerned after the Flint, Michigan, water crisis that her own family, her kids, might be drinking bad water, so tried to get her water tested, found out she couldn't. There was no real way to do it for an individual family. So she decided to start a company to do that. Now actually, a number of cities have licensed her technology. As I said, that company's in Indianapolis. They won our pitch competition there.

Winner of our pitch competition in Chattanooga was a company called FreightWaves that does this Bloomberg data platform for the trucking and logistics industry. Most of the big trucking companies in America are based in Chattanooga, so that obviously is a great place to be. And then we also built a network of venture capital. We've co-invested now with 400 different venture firms all around the country. And they obviously send us some of their interesting companies because they want to co-invest with us so the companies can be part of what we're building with the Rise of the Rest network.

Nora Ali: Mm-hmm. And I like what you had said before about trying to promote inclusivity and equity amongst the people who actually get investment from venture capitalists and other investors. And in 2020, your Rise of the Rest virtual tour had an equity edition to promote inclusivity. What came out of that? Do you feel like you achieved your goals in trying to promote inclusivity and equity within the realm of entrepreneurship and investing?

Steve Case: Well, I think we made some progress. We did this national competition specifically for Black founders and did that in partnership with Morgan Stanley and others, really to try to shine a spotlight on these great entrepreneurs building great companies all across the country. And we ended up investing in, I think it was six of those companies. The winner at that particular pitch competition was a company called Rheaply, based in Chicago, which was focused on sort of recycling things, the circular economy. Particularly in the office setting, there are a lot of products that are bought and not used by certain companies, or even certain departments in certain companies, or certain groups within hospitals. And Rheaply really helps recirculate that so it gets put to a better use, which results in less waste. And the founder there, Garry Cooper, has done a great job of building up that company, but it was just a great example of that there are entrepreneurs everywhere, not just in terms of different parts of the country, but also different parts of our communities. And you have to be intentional about figuring out a way to reach out to them.

And our Rise of the Rest team has done a pretty good job on that front. Over 40% of the investments we've made are female founders or founders of color, which is still not what it should be, but a lot better than it is in most parts of the venture capital industry. And that's because of the intentionality. When we are doing pitch competitions, we're really trying to reach out and into the broadest possible array of entrepreneurs. So there's still work to be done on place, trying to get more capital to different cities. But then there's also still work to be done on people, trying to get more capital to the people who historically have not been getting the same access to venture capital. But I think we're making progress, and hopefully some people who read the Rise of the Rest book will be similarly inspired to do their part to help this next generation of entrepreneurs.

Nora Ali: I want to discuss some possible negative externalities to a city becoming attractive to entrepreneurs maybe for the first time. One specific example, in your book you mention Cincinnati's Over-the-Rhine district, and it was able to transform from one of the country's most dangerous neighborhoods into a, quote, "revitalized and rebranded OTR that quickly became a magnet for entrepreneurs." But that region has also been at the center of some conversations around gentrification. There was a 73% drop in affordable housing in that region between 2002 and 2015. Is there a way for startups to thrive without coming at the expense of those existing communities? Are there some solutions to that issue?

Steve Case: Well, I think it's multifaceted, but it starts with, some of these neighborhoods, like Over-the Rhine, OTR, really were challenged. And figuring out ways to create more momentum there, so more people wanted to live there and offices would open there and restaurants would open there and so forth, I think is very important. Obviously, the issue of gentrification then kicks in, when a community has success and some of the people who could afford to live there are unable to live there, which is why there needs to be more innovation around affordable housing. And some of that needs to come and is coming from governments, both at a national level and more of a city and state level.

But a lot of innovation I'm really quite encouraged by is, again, coming from the entrepreneurs, who are building new kinds of companies that allow affordable housing to be manufactured much more cost-effectively, and even different models in terms of shared ownership that can reduce the cost of access, and different ways to allow people to rent more flexibly. So it is important that as these neighborhoods, these communities change and start rising, we figure out ways to make sure people within those communities aren't left behind. Some of that is public policy, but a lot of that, I think, really will come from the innovation of entrepreneurs in these communities.

Nora Ali: Yeah. And while it's an exciting time for entrepreneurs, it's also, obviously, challenging, given the macro environment we're in. Capital is not as easy to come by as it was, say, a few years ago. But specifically on inflation, which is at an all-time high, I would love to hear your take on what that means for entrepreneurs now and maybe even broadly for the tech sector. What does the high inflation imply, now and for the next few months or even years?

Steve Case: Certainly, there's some challenges. As you mentioned, inflation is one of them. But entrepreneurs have to take a long-term view. Most companies take 10 years before they're really successful. That was my own experience with AOL, and it's my experience with a lot of companies we've backed. And so you have to recognize, it's not any particular economic cycle. You have to take the longer-term view because of what's happened more recently. As you say, it's a little more difficult to raise venture capital. But interestingly, in these Rise of the Rest cities, it was always difficult to raise venture capital. So that hasn't changed that much. What's changed more is in the places like where you are in New York, or in San Francisco, others, which were awash with venture capital. Some of the venture capitalists are pulling back there.

But these other cities that we've been seeing and investing in all across the country never really had the benefit of a lot of venture capital, never really had the benefit of some of these pretty robust valuations. And as a result, there's less of a reset happening there. I'm hopeful that, because of what's happened, some of these economic factors, venture capitalists on the coasts will recognize that these cities do have an advantage, where if they were able to raise a million dollars, say, it can go a lot further. Office space is less expensive. Salaries are less expensive. It's easier and more affordable for people to live in those particular communities. So that all bodes well, I think, for these Rise of the Rest cities. It could create an opportunity that has not really existed for quite some time.

Nora Ali: Mm-hmm. I know. Just a way to use capital a little bit more efficiently—I think we could all do that in our lives. Okay, Steve, before we let you go, we have a fun segment. It is called Shoot Your Shot. So I would like to know, Steve, what is your moonshot idea? This is your wildest ambition, your biggest dream. It could be personal, professional. It is your chance, Steve to shoot your shot, so go for it.

Steve Case: Well, the easy answer is what we're talking about, which is how you level the playing field around entrepreneurship and Rise of the Rest. But the other one I'd say, just a little bit different topic, is I, as chair of the Smithsonian, have been really focused on trying to create a virtual Smithsonian. Not just...

Nora Ali: Ooh.

Steve Case: ...assume people are going to come to Washington, DC, to visit our museums in person. We want go to them and have the Smithsonian be in every home and every classroom. And we've made some progress on that, but there's still a lot of work to be done.

Nora Ali: Awesome. I love that. Okay. Are you down for playing a quick game? It's very easy.

Steve Case: All right.

Nora Ali: Okay. This is called Bullish or Bearish, and this is the nostalgia technology edition. It's just a nod to AOL. I grew up on AIM. What can I say? Wait, by the way, what was your screen name on AOL Instant Messenger?

Steve Case: I had several. Obviously, since I was one of the first users, it was Steve. But I also had SteveC and SteveCase and Steve other versions. And when AOL got successful, I had to keep adding new ones because my email was getting barraged. I had a welcome email to every new AOL customer, welcoming to the service. And it worked pretty well in the early days, but when we had tens of millions of people, a lot of people clicked on Reply. And so...

Nora Ali: No.

Steve Case: ... one point we had actually dozens of people who were in charge of what was called the "Steve Case mail," just trying to keep up with the responses. But it was fun.

Nora Ali: Oh, my gosh. The original Steve on AIM. I was NoraGurl, spelled G-U-R-L.

Steve Case: Ah.

Nora Ali: Pretty good, I gotta say. I didn't have to tack on any numbers to that. One of the OGs. Okay. All right. So this is Bullish or Bearish, like I said, nostalgia technology edition. So I'm going to give you the thing, the technology, and you have to tell me, at the time, were you bullish or bearish on that thing? 

Steve Case: Okay. 

Nora Ali: Okay. First up, Tamagotchis. For our listeners who don't know, these were handheld digital pets. Bullish or bearish?

Steve Case: I was bearish. They were a lot more popular than I would've expected.

Nora Ali: Really? You didn't have one? Your family members didn't have any?

Steve Case: Well, yeah, some of my kids had them, but no, I wouldn't have thought that would've been a phenomenon.

Nora Ali: Well, they launched...

Steve Case: What do I know?

Nora Ali: ... 6 years ago. Hey, you know a lot, it turns out. So Tamagotchis launched 26 years ago. Fun fact. I just figured this out. For its 25th anniversary last year, they released a Tamagotchi smartwatch so you could strap your digital pet to your wrist. Isn't that cool?

Steve Case: Oh.

Nora Ali: I personally, Steve, did not have a Tamagotchi. I had a GigaPet. I don't know if you remember those.

Steve Case: I do.

Nora Ali: Very similar. Turns out you can still buy them on Amazon for $16. I might buy myself...

Steve Case: Well, there you go. Sounds like you've done your research here. Did you buy one?

Nora Ali: No, but I think I might because the one I had used to always die. So maybe as an adult, I'll do a better job of taking care of it. All right, next up, the Walkman. Bullish or bearish? Sony Walkman.

Steve Case: Oh, I was a big fan of that. I knew that'd be successful, even though the first one was pretty expensive and pretty bulky. But it was amazing that you could have all that music on something you could carry around.

Nora Ali: I loved my Walkman. Do you remember what your first cassette tape was that you ever listened to, by chance? Or one of the first ones?

Steve Case: I don't. I even remember 8-tracks before cassette tapes. So there you go.

Nora Ali: See, I never experienced 8-tracks. Not even quite sure what those are, but I've heard of them.

Steve Case: I think I'm a tiny bit older than you are.

Nora Ali: My first cassette tape was the soundtrack to Aladdin, and it was magical. So for a listener, some context: the Sony Walkman was invented in 1979, and after selling hundreds of millions of units, Sony discontinued production of the Walkman in just October of 2010. So it had a pretty long run. They are available, Steve, on Amazon for about $250, if you want to shell out the money.

Steve Case: I think I'm pretty good. My phone does a pretty good job on music now, Spotify and other things.

Nora Ali: I saw something funny on TikTok. Are you on TikTok, by the way, Steve?

Steve Case: I'm on it, don't use it as actively as most, but been on it for a while.

Nora Ali: I came across a TikTok, literally last night, where a 22-year-old flight attendant had found a Walkman on the flight after everyone had deplaned. And she thought it was a bomb because it's this electronic thing...

Steve Case: Oh, yeah.

Nora Ali: ...that's ticking, with wires sticking out of it. So the police came. And then when she figured out what it was, everyone laughed at her, and she referred to it in her TikTok as an ancient artifact. How does that make us feel? It is not an ancient artifact.

Steve Case: Well, it does make me feel old. And going back to your cassette question, kind of interesting. I just was reflecting on it, when you're saying that. I do not remember my first cassette, but I do remember my first album I bought. I actually got three as one of these deals with one of these record clubs. And one of them was a Led Zeppelin album.

Nora Ali: I love that. What was the album exactly?

Steve Case: I think it was Led Zeppelin III. I remember it was a kind of white and black. I don't remember exactly what the title was. It's been a while.

Nora Ali: Very cool. Very cool. Okay, last one is MySpace. Bullish or bearish?

Steve Case: Bearish, because at the time, it was just coming out of the gates, and AOL had done a lot of community features, AIM and message boards and People Connection chat rooms, and so forth. And I didn't see how they were going to get traction. They obviously did, in part, by focusing on the music industry and then kind of lost some of their edge, as did AOL, and that's what led to, obviously, the growth and now dominance of Facebook. So these things kind of ebb and flow.

Nora Ali: Did you have a MySpace account, or was it too competitive?

Steve Case: I did, but just to keep an eye on it. Yeah, you have competitors out there. You have to keep an eye on it.

Nora Ali: So you weren't updating your top eight friends every day, like I was?

Steve Case: I was not.

Nora Ali: Yeah. So, for our listeners, again, some context. The co-founder, Tom Anderson, sold MySpace to News Corp in 2005 for $580 million. And then, a few years later, they sold again for just $35 million to Viant. And then, in 2011, Time purchased Viant assets for an undisclosed amount. And for comparison, Facebook's market cap is around $400 billion. All right. We learned some fun facts today, Steve. This was a lovely conversation. Thank you so much for your time, and for coming to join us on Business Casual.

Steve Case: Thank you.

Nora Ali: This is Business Casual, and I'm Nora Ali. You can follow me on Twitter @NoraKAli. And I would love to hear from you. If you have ideas for episodes, comments and thoughts on episodes you loved, fun segment ideas, just shoot me a DM, and I will do my very best to respond. You could also reach the BC team by emailing businesscasual@morningbrew.com. Or give us a call. That number is 862-295-1135. And if you haven't already, be sure to subscribe to Business Casual on Spotify, Apple Podcasts, or wherever you listen. And if you like the show, please, please, please leave us a rating and a review. It really, really helps us. And guess what? We are on YouTube. So if you've ever wondered what I look like or what our guests look like, full episodes are available at youtube.com/morningbrewdaily.

Business Casual is produced by Katherine Milsop and Olivia Meade. Additional production, sound design, and mixing by Daniel Markus. Kate Brandt is our fact checker, and AB Silver is our senior booking producer. Sarah Singer is our VP of multimedia. Music in this episode from Daniel Markus and The Mysterious Breakmaster Cylinder. Thanks for listening to Business Casual. I'm Nora Ali. Keep it business, and keep it casual.