Recently, Washington Post columnist Steve Pearlstein wrote a wake-up call to the nation’s capital. In it, he argued that while “local economic boosters love to remind anyone who will listen that the Washington region boasts the greatest concentration of technical or knowledge workers in the country,” the claim is “misleading.”

The reality, wrote Pearlstein, is that “almost of all of the high-tech work is done for the government,” and for a region facing a “decade-long decline in federal spending,” it needs to do more to reinvent itself as true peer of Silicon Valley and other tech centers.

Perhaps unsurprisingly, AOL co-founder Steve Case doesn’t think much of such calls to action. Instead, the marketing whiz-turned-investor says Washington is much better positioned than it was 10 years ago, and that the region’s tech industry is poised to explode over the next decade.

I talked with Case earlier today about why it is that Washington is rarely mentioned in tech circles, as well as whether the city is focused enough on entrepreneurship. Our chat has been edited for length.

Why do you think Washington hasn’t kept better pace with other growing tech centers, including New York? You started AOL in Washington. It was enjoying some momentum. Then it stalled.

I don’t agree that it has stalled at all. In the last few years, there’s been considerable momentum across multiple sectors in the region. There are entrepreneurial companies that work with the government like FedBid [a Vienna, Va.-based online reverse auction marketplace that recently received funding from Case].

There’s also a very strong education sector that includes [online education startups] Blackboard and K12.  [Blackboard was acquired by Providence Equity Partners last July for $1.64 billion; K12 is publicly traded.] And Washington has become pretty active in terms of healthcare and biotech and energy companies –-sectors where there are advantages to being here in Washington.

How would you characterize the digital media industry in Washington?

If you focus just on digital media, Silicon Valley has the lead there and Silicon Alley has a lot of momentum. But I think people would say DC is third [in that ecosystem].

When we invested in LivingSocial, it had five people. It now employs 5,000. We’ve probably invested in 10 companies in the last five years that are in Washington or [its neighboring regions], so our sense is that the market is developing nicely.

It’s certainly much different than when we started AOL here in 1985. Then it was really a government town. There wasn’t anything but law firms and lobbyists; no one was focused on entrepreneurial companies. And compared with the [the late '90s], it’s much broader. AOL was sort of the main company here back then; there weren’t a lot of others. Now, if you drive down the access road between Washington and Dulles, there are hundreds of companies.

Do you think a ploy like Mayor Bloomberg’s to lure a school to develop a tech-oriented campus might make sense for Washington?

I think it could only be additive and helpful, though the universities here are pretty strong. George Mason and Georgetown and Johns Hopkins and American University: they all offer a good mix of things.

What people don’t focus on so much is that people from around the world move to DC, and some of the best and brightest go into the government agencies that make decisions about funding innovation around the country. And many are focused on serving the nation, but not on permanently [serving] the government.

Yet smart people aren’t necessarily entrepreneurial people. I guess what I’m wondering is whether would-be entrepreneurs get enough encouragement in Washington — even while I sometimes think they get too much encouragement out here in the Bay Area.

There’s no doubt that entrepreneurship is in the air and water in Silicon Valley. And if you’re going to Stanford, for example, it’s hard not to run into people who are in that world and to meet people and see ideas. I would not say that the same exists here.

But very smart engineers who go into the government – while they might not necessarily be great entrepreneurs – can do a lot of the heavily lifting required [of a startup]. Maybe they can’t take on the risk of starting a company, but they can help scale one. And as more companies are started here, you’ll see greater network effects and increasing returns.

Momentum begets momentum. I think you’re going to see more coming out of Washington over the next decade than most people would expect.

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