Earlier this week, AOL co-founder Steve Case swung by the San Francisco offices of Thomson Reuters and was nice enough to chat for an hour. Look for an extended version of our talk — including an in-depth discussion about his investment firm, Revolution — in the upcoming issue of Venture Capital Journal. In the meantime, here’s part of what came up during our sit-down, which has been edited for length.
You went to the same high school as Barack Obama. Did you know him?
It was a big school and I was a senior when he was a freshman, so we never took any classes together, though I had a vague recollection of him playing basketball and things like that.
I didn’t really know him until he was a Senator, and then I met him more recently, obviously, with the Jobs Council. [Despite] growing up in Hawaii and going to the same school, I can’t say I’m best buddies with him [laughs].
How did you get so involved in policy work then? Who reached out to whom?
[My involvement in public policy] probably started 15 years ago. [When the] Internet was surging and coming of age, I spent a fair amount of time on public policy issues, whether it be e-commerce rules or digital divide or making the Internet safe for kids, partly because AOL was based in Washington D.C. and partly because the Internet — as it became part of everyday life — people were trying to figure out the rules of the road. So [I was] testifying, working with the Clinton administration on different policies…
Over the last two years, you’ve become very involved, co-chairing the National Advisory Council on Innovation and Entrepreneurship, chairing the private sector Startup America effort, and becoming a member of the Jobs Council, among other things. Do you ever discuss your political leanings?
No, that’s perhaps why I’ve had some success in building bipartisanship. I deliberately focus on policy and stay out of politics. I’d rather focus my attention on the strike zone around entrepreneurship.
But you vote?
If Romney were to win, would you remain as active in public policy?
Yes, I’ve not brought a partisan perspective to this. It really is around, how do you make sure, as a nation, that we remain the world’s most entrepreneurial country.
Fortune 500 companies don’t just instantly become Fortune 500 companies; they start as startups and eventually some are successful enough to be big companies, and that drives our economy and drives innovation and it’s the secret sauce that continues to drive the nation. Meanwhile, everyone talks about manufacturing [moving] offshore. Well, entrepreneurship is moving offshore, too, and some of the capital and talent that used to be unique to the United States is moving more broadly [away from this country].
Accel [Partners], which backed Facebook, they now have more investors in China than they do Silicon Valley. That’s cause for some concern. [And] Singapore, India, Israel, China – a lot of countries are doing a lot of things in terms of immigration policy [and] capital incentives to make it more attractive for people to start or scale companies. I think the glass if half full rather than half empty, but we need to take it seriously.
Not for me, I’m just an evangelist.
Were there recommendations you fought for that didn’t make it into the JOBS Act?
No, I think it’s a good step forward. To me, the key was just giving entrepreneurs more tools in terms of accessing capital, [including through] crowdfunding.
The thing that people miss around crowdfunding is that it isn’t really directed at technology companies in Silicon Valley. They don’t really need it. But most of the country does not have venture capital and even angel networks, and most sectors outside of technology struggle. As we’ve done some of this work, it’s amazing to [discover] two Americas, with those who have access to capital and those who don’t. So where this is going to be particularly valuable is in regions that are underserved and in sectors that are underserved.
For example, Chipotle started in Denver. It now happens to be worth $12 billion because they got lucky and McDonalds is a big investor. But there are a lot of restaurant concepts with strong regional support but that don’t really have the capital to expand and build a broader brand. Under Armour, based in Baltimore, an athletic wear company – they struggled for a bit. They were finally able to get a $250,000 SBA-backed loan and had some capital. But a concept like that I think could get some traction. [Prospects like these can] frankly broaden America’s economy so it’s not so reliant on Silicon Valley and a few other places, [which then] gives it more resilience.
But Chipotle and Under Amour succeeded without crowdfunding, presumably because they’re strong companies. You don’t think it comes down to Darwinism?
I think everyone should have a shot and right now, they don’t. [Until now] the laws governing [investing] were put in place in 1933, and a lot has changed in the last 79 years. The Internet didn’t exist, you couldn’t buy stocks online, mutual funds didn’t exist. So adding [crowdfunding] as a tool for people who need access to capital to start a company — and that allows people to invest in those companies — I think is helpful.
Obviously investing in startups is risky and many companies will fail. That’s true for venture capitalists, too. And that’s why there’s [ongoing] work to make sure that are sufficient investor protections. But I think [crowdfunding] make sense. People have the ability to invest in the stock market; they have the ability to go to Las Vegas and bet money. Giving them the ability to invest in early-stage startups if they want to [and protecting them with some SEC mandated] built-in precautions and systems is a good thing, and we’ll see how exactly it plays out. My own view is that some of the concerns around fraud are likely overblown.
Since the JOBS Act’s passage, you’ve been very focused on visa reform; what would you like to see happen, or should our focus be on education here instead?
I think everyone agrees our education system needs to get rebooted. In a perfect world, we’d be able to train all the engineers we’d ever want and not rely on people from other countries to drive our entrepreneurial economy. That’s not where we are now, though. Even the most ambitious proposals say it would take 10 or 20 years to get the education system to where it needs to be, which leads to immigration. In the meantime, we do a good job of attracting some of the best and brightest folks from around the world to get PhDs and masters degrees at Stanford, MIT, Carnegie Mellon and so forth, but once we give them these educations we, for the most part, kick them out of the country. And essentially what happens is people start companies [in their home countries] that compete with companies here. And it’s just crazy.
The analogy I’ve used in Washington: nobody would think it makes sense to invite people from China to attend our Naval Academy, train them on our naval strategies, and upon their graduation, tell them they have to go back to China to join the Chinese navy.
What are your feelings about the importance of getting more women into high tech? Do you think more needs to be done to empower them, too?
Yeah, actually my wife Jean and the Case Foundation are working on some of those things. The Kauffman Foundation that we partner with on Startup America is working on some things. So clearly there’s a need to figure out ways to be more supportive of more women as entrepreneurs.
Do you think government should play a role in some of those ways?
I’ve not heard a specific recommendation from a policy standpoint, so it’s probably more private sector and education and encouragement and mentorship. There are some great organizations that already are doing this, but there could be some more.
Image credit: Photo of Steve Case by Oscar Urizar for Venture Capital Journal. Property of Thomson Reuters