Steve Case thinks Cleveland is making progress in its start-up scene. The co-founder of AOL-turned-investor has long talked about getting money out of Silicon Valley and into other places, like Cleveland…he even toured the country looking at what he called the Rise of the Rest.
Case will speak at the sold-out annual meeting of the Cleveland Foundation on Wednesday. He recently spoke to me about, among other things, Cleveland as an investment
Extended interview with Steve Case:
CASE: “Progress is being made. Certainly in the Cleveland-area we’re seeing some good momentum on the start-up side. But the reality is, last year nearly 80% of venture capital went to just three states: California, New York, and Massachusetts. California alone got 50% of all the country’s venture capital, so how do we get that spread around so that more entrepreneurs have a shot, and in the process create the jobs…that people are desperately looking for.”
GANZER: “A few years ago you launched a ‘Rise of the Rest’ tour where you sponsored a business pitch competition, and you learned about innovation in cities like Pittsburgh and Cincinnati, not Cleveland though, I noticed that. I wonder what reputation does Northeast Ohio have to you, and other investors that you know?”
CASE: “I think there’s growing awareness that Cleveland is rising as a start-up city. The data I saw, last year about $200 million of venture capital went to nearly 100 start-ups in the Cleveland area. So I think there’s some progress there, but there clearly are opportunities to back more entrepreneurs and provide more of the growth-capital that they need to scale their ideas. So I think Cleveland is a perfect example of a ‘Rise of the Rest’ city where there’s more happening in Cleveland than most people are aware, and so part of this is an education effort to promote what’s happening in cities like Cleveland. But some of that also is, how do you get more people who are not in Cleveland—maybe they are venture capitalists in San Francisco, or New York, or Boston, or some other place—how do you get them interested enough in Cleveland to get on planes and visit Cleveland? And I think they’ll discover there are great entrepreneurs building great companies in Cleveland and these other ‘Rise of the Rest’ cities that are showing real momentum.”
GANZER: “You have a book called ‘The Third Wave,’ maybe can you first summarize the technology waves that you’re looking at in the work?”
CASE: “Sure, the first wave really was getting everybody online. It sorta kicked-off in the 1980s, companies like America Online, at AOL when we started 32 years ago only 3% of people were online, and they were only online one hour a week. So essentially nobody knew about the internet, or cared about the internet. By the end of the first wave, roughly the year 2000, everybody was connected and really couldn’t live without it. That then unleashed the second wave which has been the last 15 years or so, which has really been about software and apps and smartphones, so things like Facebook, and Instagram, and Twitter, and many other applications—basically software built on top of the internet. And the third wave is just now really starting to gain a head of steam, and that’s really taking the internet to the next level, integrating it in seamless and pervasive, sometimes even invisible ways, throughout our lives and in the process change how we think about healthcare, and education, and transportation, and food, and agriculture, and pretty big sectors of the economy, and pretty big important parts of our lives that really are ripe for disruption in the third wave. But the reason I wrote the book is that I think it’s going to require a different mindset for the innovators, and for everybody who wants to be part of this future, how do they think about their career in a different way, and the skill-sets necessary to be successful in this emerging third wave in a different way.”
GANZER: “As you mentioned the third wave that you’re talking about includes healthcare in its disruption, which is a vital sector for our region. I wonder how can regions like Northeast Ohio best continue to nurture and maybe capitalize on disruptions? Do you have any insights in that?”
CASE: “First of all I agree that Cleveland is very well-positioned in sectors like healthcare. Obviously the Cleveland Clinic is well-respected all around the country, indeed all around the world. And one of the things that I talked about in the book ‘The Third Wave’ is the importance of partnerships. The real innovations in healthcare are not going to be just about the software, the technology on a stand-alone basis, how it then is connected-to, integrated by doctors, by hospitals, and into the healthcare system. And so being close to where those customers are, those partners are, will be more and more important in the third wave. I think that does create a great advantage for Cleveland, but it does also require building a community that is really supportive of this risk-taking, supportive of entrepreneurship, supportive of start-ups, you know really leaning into the future, not just celebrating the past, but figuring out where things are going and trying to encourage the community and people within the community to be a little more fearless, take a little more risk, really see the world in a different context. That is one part of Silicon Valley I think we should celebrate, there is a sense of possibility there, a sense of fearlessness there, that does lead to a lot of great innovation. So how do we take that kind of fearlessness and bring it to these ‘Rise of the Rest’ cities like Cleveland, and then leverage the inherent expertise they have in sectors like healthcare, and the potential for partnerships with institutions like the Cleveland Clinic.”
GANZER: “To a degree a region, though, needs to have the capacity to fail to be able to take those big risks. Poor communities, and communities that have lost population and thus a tax base don’t often have much room to fail. What do you say to that difficulty in framing this risk-taking and innovation and attracting capital, with that reality and that history of difficulty?”
CASE: “It’s a fair point, but that’s why organizations like the Cleveland Foundation are so important, really rallying together various constituencies within the community and trying to create more of an integrated approach, systems approach that really does help everybody, including in some of the neighborhoods that are left behind. As we’ve traveled around the country on these ‘Rise of the Rest’ tours it really has been striking how many neighborhoods we’ve visited where things were really quite desperate even ten years ago, but because of some of the innovations that have happened—for example in Cincinnati, there’s an area called OTR (Over the Rhine) which was very challenged neighborhood a decade ago, and now is growing rapidly in part because that’s where the entrepreneurs have decided to hang-up their shingles. Start-ups are, sometimes we think of them as just Silicon Valley start-ups, and just technology start-ups, but they also are a change-agent in communities and can lift up communities and create jobs…I’m optimistic. I recognize there are a lot of challenges, and part of it is, as your question suggests, how do you level the playing field in terms of opportunity, have a more inclusive approach to innovation, and focus more on positive impact on communities. I think it requires a different mindset in this third wave. But if organizations like the Cleveland Foundation continue to rally the various groups within Cleveland to focus on common ground, and focus on shared prosperity, and focus on trying to create on-ramps for people who want to be part of this future, I think there’s reason to be optimistic.”
GANZER: “I’m not sure if you think of yourself this way, but you are kind of an elder statesman of the Web, being there at the ground-level at the beginning. And AOL was principally a social service, and we talk so much about social networks nowadays. They are sometimes vital habitats, sometimes dangerous habitats, you know we’re seeing crimes committed live on video, police interactions broadcast live. I’m just curious how you see social networks now, with the eyes you have?”
CASE: “Well I think that’s it’s fair to say the creation of the internet more broadly, and the particularly the community functions, the social functions, of the internet, which have become so popular over the past three decades, have created enormous benefits, but also created some risk. And the challenge with any new technology, it seems to me, is how you maximize the benefits to individuals, to society, but also how you minimize some of the risk. So that’s always going to be the challenge. There are some areas that have become more challenging that surprise me. The whole idea of having the internet as a way for different peoples’ voices to be heard was one of the real things we were optimistic about three decades ago. That has happened, everybody now does have a voice whether it be a blog or on Facebook or Twitter or what have you. What surprised me, and frankly disappointed me a little bit, is how many people seem to live in there own world, and what some have called their own filter bubbles. And rather than understanding the other side of the issue, are really just hearing from people like them who kind of reinforce their own views. So there are some unintended consequences here that need to be addressed—the whole problem recently of fake news and things like that need to be addressed. But overall I think the benefits of the internet have been significant and have really changed peoples’ lives in mostly positive ways, and improved our society in mostly positive ways. But at the same time I don’t have my head in the sand, I recognize there are some risks as well.”
