Steve Case, Chairman and CEO, Revolution LLC

as I said earlier our special guest is Steve Case and among all the things he's accomplished perhaps the most impressive is he's also a member of the Economic Club of Washington but all of you know Steve a bit but let me give you a little bit of his background Steve is a native of Hawaii he went to the Punahou high school there and graduated in 1976 three years before President Obama graduated from that school Steve then went to Williams College graduated in 1980 and from Williams College he then went to a great entrepreneurial venture Procter and Gamble served a few years there and then join Pizza where he had his favorite job title director of new pizza development from that position he was told about a physician company in the Washington area CBC that his brother Dan case who was an investment banker had thought might be a good fit for Steve Steve joined this company CBC and that became later as we all know AOL and Steve took that company as the chairman and CEO to one of the most incredible success stories in American business it started out as a company with virtually no revenue and when the company went public in 1992 at a market value of 70 million dollars it then went up to a market value at the year 2000 of 164 billion dollars and then Steve took that company and merged it with Time Warner and made it a company of three hundred and fifty billion dollars in market value Steve became the chairman of that company and then after a number of years as chairman decided to focus his energies on more entrepreneurial ventures and started revolution LLC which invests in growth capital companies and venture capital companies that company is based here Steve has made a number of well-known investments in that area Zipcar being one among others that you've heard of and Steve has also been very involved in film philanthropic activities he started in 1997 the Case Foundation which he's the chairman and his wife Jean who's over here is the president Alvin and they've been very involved in trying to revolutionize philanthropy a bit very involved in civic engagement and very involved in entrepreneurial activities that he tried to foster in the philanthropic area Gina and Steve also were among the first forty people in the United States who signed the Giving Pledge which are basically said you're going to give away half of your entire net worth as did David just record okay now you lost my all right so but in my lair by the way you said that we started when we started up we had very little rubber actually started so they started have zero zero zero right oh well revenue was overrated sometimes in a venture capital world but okay so Steve also has been very involved in the public space as well and the nonprofit area really fostering entrepreneurship and he was a person who was appointed by President Obama to serve as a presidential ambassador for Global Entrepreneurship he was also asked to head up startup America which led to the JOBS Act and Steve as was also a member of the President's Council on competitive competitiveness and jobs so he has a full life doing many things in the public area the philanthropic area and the business area he's also had time to write a new book the third way which I have read several times I highly recommend it everybody has a copy as I mentioned and we're gonna talk about that book and Steve's life which is reflected a bit in this book so why don't we start with the obvious the third wave what is the first wave the second wave and then what's the third wave why don't you describe that for those who haven't yet read it sure well first of all it's great to be here I've always enjoyed coming to these lunches and David as you know is a terrific interviewer I always joke with him he could be the next Charlie Rose and he said well but it doesn't pay all that well compared to its Carlisle full-time gig and great to see so many friends including a lot of people work in that revolution the case foundation a lot of AOL folks so great - great to see you thanks for coming terms of setting up the the book I first should say I resisted writing a book for 20 years or so people though I write a book about this or that or the other I just wasn't that interested because I've always been more interested in what's happening next as opposed to what happened already so it's more kind of looking forward not looking back so the idea of a memoir something just personally wasn't all that interesting but a couple years ago I realized that some of the things that happen in the first way we're gonna happen again in the third wave and so and they were different than the second wave so it felt like the right time but just to answer your question the first way be just building the internet and building awareness to the Internet and building the on-ramps to the Internet and building the software or the networks and the services to enable people to get connected the Internet which of course we now take for granted but when we started AOL in 1985 and I should say the other two co-founders Jim Kinsey and Mark Sarah were critical and most do you know here Jim we lost Jim last month and err will never would have happened without you know Jim's kind of leadership and the credibility he provided so that was a big loss but we started only 3% of people online it was 3% were only online in one hour a week and so we said we wanted to get America online and we were we were serious and it took us a decade before we got going and many other companies that IBM and Microsoft and Sun and HP and you know hold cisco whole host of companies really were part of that first one just building the internet and getting everybody connected the second wave has been the last at ten or fifteen years and it's been building on top of the unit so it's been absence services on top of the internet and and the most famous ones are things like Facebook and Twitter and Instagram and ways and things like that basically software as apps riding on top of the Internet mostly of writing on top of smartphones and there's been huge successes there obviously there will continue to be but I think the third wave is sort of what's about to happen and it's kind of taking the next level which is integrating the Internet in seamless and pervasive ways really in every aspect of our lives and in the process there's a potential to really change I think in a very powerful impactful way fundamental things like how we stay healthy or how our kids get educated or how we think about energy or how we think about money or how we think even about things like food which haven't changed that much in the first or second way but I think are gonna change in the third wave and but it needs a little bit different mindset to be successful and a little bit different playbook so that was the motivation to say okay rather than maybe it's time now to kind of put pen to paper okay well let's we're going to talk about the third wave in a moment before we get into that I like to talk about your background because it's quite interesting when you grew up in Hawaii did you ever have an interest in entrepreneurial activities was that always your bent kind of but I can't say when I was kid I even know what an entrepreneur was but I kind of liked the idea of starting things and you know like the idea of you know imagining different ways to do things and like the idea of making money sometimes they work sometimes they didn't but I kind of liked that aspect so I think I was in entrepreneurial aeon but it was really only when I was in college that I really kind of kind of focused and particularly I should say that I read a book by Alvin Toffler in 1980 called the third wife and it starts off the book with that story and and kind of paying homage to him because he really was pretty pivotal in terms of my thinking about the future and he talked about the electronic Cod it talked essentially about what we think of as the internet years before it was it was really commercialized and so that sort of set me on this path saying that's really interesting I think that's gonna happen I want to figure out some way to do it when I graduated in 1980 there weren't really companies to go to to do it there wasn't really the kind of startup culture we have now where you can basically figure out a way to get going so that's why I did my Procter & Gamble and Pizza Hut jobs for a little while while I was kind of figuring out a way to kind of break into this thing but the Williams didn't encourage you to do entrepreneurial activities they didn't have any entrepreneurial courses I assume yeah they weren't particularly it was it's a great school a great liberal arts school but there was not anything even remotely related to business or entrepreneurship or marketing or or thing I used to joke I ended up majoring it maybe it's not a joke in Washington but I used to yeah I majored in political science because that was like the closest thing to marketing that Williams offered you're right in Washington that's nice I'm sorry but I'm tired of fence so all right so tell us are you went Procter and Gamble for a couple years and then you went to be in charge of new pizza development at Pizza Hut what are you doing job around the country to you pizza it's actually a really cool gig if you're like 23 years old the reason I did that was some practical reasons like I was I got a better title and my salary went up substantially but also practically I was a great company and I learned a lot quitting the way they sample products like free shampoo to give you a tribe kind of help inspire it our free trial disc for al which I suspect some of you got at some point in time I learned a lot from is a terrific company but it's sort of a classic kind of top-down company Pizza it's really run by the franchisees so it's much more of a bottoms up the innovation was happening at the periphery so that's why I did Alice only there for about a year before they moved to DC in 1983 but it was there both were interesting experiences both kind of relatively large companies but with a very different mindset in terms of how to organize particularly around innovation so when you started in Washington a company called CBC I guess your brother had recommended that you might be able to help them but that company didn't really work and it morphed into another company and how did it actually come to AOL where did it become where that type of that name come from there were several pivots there we moved to 1983 was to join this company called at a time control video and they had a product called game wine essentially for Atari game machines the PCs didn't really exist a lot of people had Atari game machines and so the idea was essentially a communication modem masquerading as a game cartridge so you plugged in their car a game machine plugged in your phone and you could download game almost like a Netflix route for video games which everybody thought was a great idea when it got announced but by the time it actually started shipping in the fall of 83 that market had kind of blown up and I remember going to my first board meeting as a like this is my welcome to the world of startups and Frank coffee although the venture capitalists founded the firm Kleiner Perkins Caufield Byers one of the top firms was in that board meeting I looked at the sails and said you would have thought they would have shoplifted more than that it was terrible I think we're like 99% off plan and so suddenly like they had to lay off like 80% of the company and as I startups so maybe it but then we tried to do partnerships with some phone companies and did for a little while then we restarted as a new company in 1985 called quantum computer services did partnerships with Commodore and Tandy and Apple had a big deal with Apple first time they licensed their brand name called Apple Inc personal edition and then in 1989 probably they decided want to license their name anymore didn't like the you know the idea of this partnership and so they said we want to cancel a deal that forced us to rename the company and that became a service America Online and mention they became a well but it was if that partnership had worked I'm not sure we ever ever would have been forced to come up with America Online so sometimes these crises end up creating opportunities so you were trying to convince people then that they would should get on on the internet people didn't really know what it was and they had to dial up on their telephones and that technology how hard was it to convince people to do something on the Internet it was really hard yeah I recognize that it's it's sort of be taken for granted now but it was really hard took us a decade before we really got going you know you mentioned the IPO it was 1992 we went public was the first Internet company to go public we've been at it for seven years and we had one hundred and eighty four thousand customers and seven years later we had twenty million customers so there was it was a slow going eventually it took off the reason was slow going most people in that pcs the people had pcs most of them have a communications modem remember back then you'd have to go to the computer store to the peripheral section to get this wacky thing called a modem oh if you did get connected there was nobody to talk to because nobody was online there was nothing to do because there's no cotton on much content it costs them any of these service $10 an hour to be connected so there's a reason why it was slow but eventually we figure out a way to make it easier to use more useful or fun more affordable and eventually you know it got motivated this event all the pcs eventually got modems built and communication everything kind of came together kind of the mid 90s and that's when it finally took up but that first decade was tough even the IPO Roadshow I still remember it vividly it was 20 but 23 24 years ago most of the meetings were why would anybody other than crazy hobbyists and hackers ever want to get online that was that was the conventional wisdom a pretty smart you know people I remember watching us work on his book where we looked at some old stuff and there's a PBS interview on the PBS nightly show and the interviewer asked me this in 1995 why would anybody need this we've been at it a decade and they were still asking why would anybody need this so to me the lesson was sometimes revolutions happen in evolutionary ways and requires perseverance and that's one of the themes in this third wave wrote the book that there the second wave has been there been a lot of overnight successes really great great companies came out of nowhere I think there were something some of those but far more of them will be like that aol's 10 year in the making overnight success so you had a thing in AOL which was you have mail right and where did the voice come for that it's a great story there we were trying to make the service friendlier more human so people would be less threatened by it and more likely to try it and so one of the ideas we had was to basically add voices to the software the the modem the narrowband dial-up that screeching modem sound that you might I fondly recall maybe maybe less though basically it was pretty slow so transmitting voices and graphics and music was impossible 20 years ago but we basically decided to store a voice file on the software and when you first connected it basically triggered that file and it's a welcome you've got now the voice actually came from the husband of a woman who worked in our customer service department Karen Edwards her husband Elwood did like voiceover things so I was talking about this we have small we only had a few dozen people a time talking about we should add some voices and she said my husband does like radio work so okay why are you so I scribbled down like welcome and you got mail and a few other things then why you have them record this figure it's almost like a demo we'll see how it worked and then like get somebody like somebody else to do it right and you know the next morning she brought the tape in it was perfect and so he added it to the software and Biggie became one of the most iconic voices of that generation so you decided to make some acquisitions and one of the companies you bought was run by a guy named Ted Leonsis Redgate how did that come about it was the first acquisition we made after we went public so it must have been 1993 and we're what he was doing particularly around multi media and new media he was based in Florida at the time Vero Beach Florida and so I talked about the book the the lunch with him breakfast to lunch with him in Boston and basically at the end of the I think it was breakfast the end of it said like we should merge our companies and Ted looked at me said like can't we date first I mean like but yeah I took that's a few months and then let's just say well while we do this do you can stay in Florida and keep running red gate and you can gonna be the center of what we're doing around multimedia and marketing and stuff like that and a few months later I call him I said well you could stay there but seems like it maybe be better for you and us if you moved here and you know you basically basically became one of the the key executives that drove that that that growth phase and you know thankfully I ended up you know with some of the money he made there buying some sports teams here's everybody knows and been a great great owner so there's no glad I glad we did that deal because he was helpful a well I'm glad he agreed to come to DC because I think that's been helpful to DC so at some point as you were getting more attention somebody said well maybe this is a good company I should start buying the stock and Paul Allen one of the cofounders of Microsoft started buying your stock did you think he was trying to take over your company initially not initially he was very interested in the future and was making a lot of investments this is now 20 plus years ago not long after went public a year or two after went public and initially we thought he'd be a great ally that we could be on part of the company in five or ten percent of the company maybe partner together on broadband or other other initiatives because he was doing a lot of investments and but then it got a little more complicated because he kept buy more stock and you know it was a little crazy because we were our biggest threat then was Microsoft which was you know we believed would gear up to launch and you're still in the Microsoft board and you know we're having discussing Microsoft and so we quite weren't quite sure what to do with it and eventually when they really accelerate it we put our board was advised by our lawyers and vestment bankers to put a poison pill and you know because you know what it is but basically it was investor buy up to a certain percentage but then it's highly punitive if they go over so people don't and they say you should put this in like the 15% level so in feelings 15% that's fine but more than 15% not fine they blew past that before we we kind of were able to prove it so it ended up being 20% so that we had to kind of then we didn't really trust them and you know we had to like this so did anybody actually come along at some point Microsoft or anybody else and say we'd like to buy your entire company several several and I meant to actually one of our early competitors a company on at a time by H&R block called CompuServe tried to acquire it just before I went public and they offered 50 or 60 million dollars and they're a bunch on the board who want itself it was sort of like a big competition coming seems like we've had a nice run you know we you know collectively over seven or eight years we'd raise like 10 million dollars of venture capitals of 50 60 million seems like not bad want to mention their names those are one of the cell or nope but they know who they are and then the other way well it's Microsoft after we went public that they really didn't want to and I have this little bit in the book about some of those meetings with with Bill Gates they basically decided and not surprised I knew the internet was gonna be a key part of the you know the future and they needed to be a significant player in it so they kind of said you know we'd like to acquire you or at least invest in you or we're gonna do something that he didn't use these words but essentially do something that might crush you so it's gonna like me we can play in a nice way or we could play the tough way and we we then again had a you know just a little bit of a kind of a discussion about it and ultimately decided that it'd be better to say they say the course and kind of told them we were not interested in that path so in those days you dealt was with Steve Jobs as well and how did you compare Steve Jobs and Bill Gates in those days that you think they were both uniquely smart but different or haven't you they're very different and I should say when we were dealing with Apple and early Steve was not there that's he's been fired and so he was not there in that period so I when he went back to Apple he something like that you know I reengage with them and we work together on a bunch of different different initiatives but yeah they're very different you know you one was much more you know Bill was and still is very disciplined and you know he's getting market share or now some of the initiatives with with the Gates Foundation which have been you know just extraordinary and and but not as creative it was more he was more focused on you know the alliances the partnerships the deal side of it you Steve was well that part was obviously important it was much more focused on sort of the product side of things so your company growing and growing as I mentioned it became around the year 2000 market value about 160 some billion dollars you then decided maybe you should buy somebody else how did you decide to pick Time Warner versus Disney or others and what were the processes that you went through it was complicated we spent probably six months thinking about it but yeah the Ron had been pretty extraordinary I think it was two years before we did the merger our market value was twenty billion dollars and then by the time we were you know talking about this it was one hundred sixty billion dollars so you know we'd been a pretty good pretty good run and so we were a little worried about that in terms of what would continue but also where they wanted to make sure we're well positioned strategically for the future more of a broadband future so some of it was defensive in terms of having believed having a more diversified mix of businesses would be good and some of it was also trying to you know be positioned for where we thought the market was going okay so you ultimately decided Time Warner was it hard to convince Jerry Levin at the time to do this deal it took a little while I did as in the book but I knew in order it would be hard to do because this Time Warner was a much much larger company much much more revenue much much more profits yeah we had a higher market cap so instead of a it was it was gonna be challenging and it he inning anyway but I did say the first time I proposed it to him I called him I said if we could put this these two companies together I'd be willing to step aside as CEO let you be the CEO and I thought that was you know that was an important thing to signal early on just you know that would increase the odds I think it did of actually getting something done but it took a few months and you know stopped starts you know close not close before we finally right so you announced the deal in two thousand and two thousand two thousand her in January 2000 and everybody said this is the biggest deal of all time and so forth but it didn't quite work out the way you thought what went wrong what I thought a lot about that obviously and there's a whole chapter in the book on it but the core to me is that it was about people and culture the idea of the merger I still think made sense and some of the things we talked about when we announced the merger what's that now sixteen years ago has happened you know if you look at the innovation including Apple which then later at lunch type odd and digital music and YouTube and you know a lot of things that that they've become really Netflix become really popular most of those things didn't exist at the time or we're just you know really small things and like these combined company should have been able to do that it just wasn't able to get organized with the right people focused on the right things working together with the right kind of spirit of collaboration that there were a lot of you know turf wars and things like that so to me it was AI site at Thomas Edison quote when I think about the merger which is vision without execution hallucinations ideas are great you know vision is important but you got to execute that ultimately is about people and thinking about how to you know get people all on the same page and kind of working together headed in the same direction just was difficult they're all a whole host of reasons why and I go through some of them but at the core it was about execution and it was that was at the core that was people so did you get nervous at that at the announcement of it you the high tech guy showed up with a coat and tie and I appreciate you're wearing one today I'm not trying to be respectful of David right but and he who always workouts by the way clip on that's mine or two so and Jerry who was a guy that wore tie I assume all the time he showed up with no coat and tie how did you knock that was it no he didn't coordinate that was a signal that we both were trying to signal you know that I was trying to signal respect for the legacy of Time Warner had been around for nearly a century and he was trying to signal welcoming to the younger entrepreneurial you know technology crazies so when the deal didn't work and this stock was heading down you were vilified because you were chairman of the board that you weren't running the company was that hurtful that you were being criticized by many people who really didn't realize you weren't running the company or yes it was okay no it was and I understood some of that goes with the territory the idea of the merger was my idea I was one who pushed for I was want to propose it I was one of built support within a wall and ultimately with Time Warner so at that since of course I'm responsible for it at the same time you know there were some disagreements about strategy we should do this versus do that and so it was frustrating that we weren't able to get things all in the you know headed in the right direction but after a couple years actually it wasn't too long I decided to step aside as the chair because it wasn't really working for anybody you know I was frustrated they were frustrated so it just kind of time to move on that's when I decided to I gotta start making investments here and now 14 15 years ago and then over time build up a revolution so talk about some of the deals you've done a revolution that you think are revolutionary and maybe examples of either second wave or third wave deals well why do I we did it relatively early on probably no 12 years ago was a Zipcar you mentioned it which was really the first sharing economy company there's now a bunch of companies Airbnb and others that have become you know really important companies but the idea then that in that there would be this sharing economy that it didn't really make sense for most people for the CLE most young people living in cities to own a car it made sense to share access to a car that concept was something that really struck a chord at a time they weren't in that many cities they didn't have that many members it was still relatively early but they were able to you know build it into a broader phenomenon now obviously there's other things in mobility were being the most visible that are showing this this kind of sea change in terms of how people even think about you know cars so that was an example of something that we were you know saw relatively early on and and didn't we've done a bunch of things we have as you said a venturi group and a growth group we've done a bunch of things including many things in the DC area we're quite bullish about you know do you see we think there's people don't fully understand they are appreciate the momentum in the startup community here and I think DC is uniquely well positioned for this Third Way so one of the other companies in this part of the sharing economy is you have a company that you can rent a luxury home or something like that and how is that done it's exclusive resorts we did that probably again 11 12 years ago it's done pretty well but when the market turned a few years ago you know that we've got a little more difficult but it's growing again okay and you have a food company like a healthy food company in the Washington area actually - we've invested in - we believe food is one of the area's most ripe for disruption it's when investors look at markets they look at what's called total addressable market orcam for food it is 100% like everybody eats and in this country on average is not three meals a day by the way it's 4.6 meals a day so there's a lot of people eating a lot of stuff and mostly junk stuff and so there there is a expectation that a next decade you know you'll see a whole slew new brands emerging that are providing healthier options - that we back one was based here a sweet green started - in Georgetown Georgetown grads said they were frustrated I didn't have healthier options that's growing like crazy they've got DC and Boston and Philadelphia New York and Los Angeles pods open in San Francisco well against the markets in the middle of the country and they're sort of the next generation you know fast casual business and fast casual Chipotle sweet green things like that are eating away at the fast food business and the biggest trend there is around healthier options and so that's one the other is revolution foods which company based in Oakland that's providing healthier school lunches that was the core of what they're doing now doing a couple meals a week into supporting schools all over the country most of the most of students in most schools in most parts country it's the stuff they get at lunch it's not very good and and so there was two moms who believe who had a teaching background said we got to do something better started that that that company it's grown rapidly now they're expanding into the supermarket so it's the whole product why I think there'll be one of the next great food companies but it was inspired by and you know entrepreneurs you said there is a better way you know it breaking into the school lunch business would be hard but eventually if they can do that they can build a significant come as your other 550 million of revenue so it went from a little idea to a reasonably sized company and that's a 20 billion dollar business that seems right for disruption so revolution food the fact that have the name revolution didn't appeal to you particularly here that was that's kind of an accident when we started revolution we tried to lock up a lot of brands and domain just you know so we had the flexibility that's not one we locked up so but then we not I'm four I'm almost the time they started and watch them with admiration there's only a couple years ago they got to the point where they were at this growth inflection and that's when we decided to invest I also joined the board now for those who aren't familiar with the difference what is a venture capital investment what's a growth capital investment the way we look at it venture capital investments are investing in startups and growth is investing in speedups startups for us or may tipping and making a 5 million dollar investment and what people think of as sort of the series a or series pretty-pretty you know the first money are close to the you know the first money and and on the growth side were typically making 30 40 50 million dollar investments when companies have shown some real progress but still have a of a significant opportunity so we're generally with ventures were you know the valuations typically are 20 30 40 million dollars with grows is typically two or three hundred million dollars so it's it's clearly advanced but we believe there's still significant growth ahead so when people invest with you you have outside investors pension funds don't wealthy individuals they're trying to get what kind of rate of return or what kind of rate of return are you trying to get for them two or three times their money and a 20% rate of return annual on better net we want to be one of the top dustman firms focusing on entrepreneurs and be what you know kind of top decile you know for our coach for the venture business generally is three times plus and so that's our kind of target in terms of what we're looking to you know generate does every deal work out or you have source done of course not know they I know Carlisle they always worked out but they're not always we tried to to Alice Lee we also do some really early-stage we call these rise of the rest investments in different cities we're making really kind of you know kind of angel kind of investments early on obviously those are our riskier by the time their growth we actually think there's not a lot of risk the question is can they capitalize on the the opportunity so that they're we're pretty cautious there we want to make sure that the core model and the core team is is in place but sure the the early stage particularly investment business is always gonna be risky so you as I said with your wife signed The Giving Pledge that what did your children say when you said I'm gonna give away half my money do they say what about what's left for me or anything like that they didn't say that no we were blessed with five great kids we think they're pretty grounded and off on their own you know kind of paths and finding their own way and you know kind of doing their own thing and so early on you know we made clear that you know that that was what we wanted to see how come we wanted to encourage them to be independent and do their own thing and you know on in their own way and so they should plan accordingly and so they were not they were not you know particularly surprised by The Giving Pledge because they've kind of made that I wouldn't call it the pledge but we kind of you know kind of laid it laid down some of the ground rules or at least our expectations well they're much much younger so one of the things you've done through your foundation and I gene has been a big leader in this is what's called impact investing so what is impact investing well this is an interesting area and it's really the last couple years gotten a lot of traction and the core idea is there will be a new class and beginning to be a new class of companies that well of course they're focused on profit they're also focused on purpose and they're focused on measuring their impact and there is even a new legal classification and some folks know about s corpse or C corpse there's now B corpse or benefit corporation where they baked into the Charter you know the impact they're going to have revolution fruits for example one of things they track as job creation because that's a it's a a key you know kind of a factor for them and this is attracting now a growing number of potential investors because the sense is this is a way to have a broader impact on key issues in society while also generating a significant return in particularly younger people really are resonating with companies that have this broader purpose and they you know they don't really want to work for a company or do business with a company or invest in a company it's only focused on on profit so there's some particular a few years ago when Jean and the case foundation team started focusing there's some skepticism he still has some skepticism particularly in the on Wall Street that that the Milton Friedman view of the world which still is the view that a lot of people have as a company should focus exclusively on profit maximizing profit period and anything else is a distraction but I think there's a growing recognition that I share and obviously you know we at the foundation you believe in that this new class of investments are going to end up doing really well it's night the returns are going to be at least as good maybe even better because of the fact that it's able to attract a much lower legs tumor base an investor base and there even some of the big firms I'm sure you you won't announce it today but I'm sure Carlyle is looking at this black rocks announced something Bain the vault Patrick the former governor of Massachusetts joined Bain last yearI they're launching a bain impact fund so it's not just something kind of on the fridges that some people are looking at it's becoming a more mainstream concept in the in the financial world I think it'll be very positive I think the dynamic around impact investing kind of this profit plus purpose the dynamic around the rise of regional entrepreneurship there's notion of the rise of the rest that we we've we've talked about and that's a key focus for us investing at revolution and the rise of this third wave and some of the dynamics around partnerships and policy those are each separate paths but my belief is over the next five or ten years they're actually going to start converging and all three will accelerate as a result so you have revolution you have all your philanthropic activities so how did you have time for and how did it come about that you started to make yourself into a bit of a spokesman for entrepreneurship the president call you and say can you take the lead in the in the JOBS Act that come about over time in the obviously been having like you lived in washing now for more than half my life in the early days of the internet the government actually played a central role and funding it and the decision by Judge green to break up the phone companies the decision by Congress to pass the telecom act to commercialize accident internet and a bunch of decisions around taxation on the internet and and other things you know I was you know in the 90s spent a lot of time on policy we were working at the time with President Clinton and and the Congress so I was always involved in policy it became more of a priority five or six years ago I was asked to co-chair the National Advisory Council on innovation entrepreneurship they made a bunch of recommendations one of which led to the white house watching the startup America initiative another led to essentially the report on access to capital a led to the JOBS Act which legalized crowdfunding and and some other things and that then led to me chairing the startup America thing and joining this jobs Council and it sort of evolved over time and I was happy to play the role because obviously I'm passionate about it and particularly passionate about democratizing access to entrepreneurship and democratizing opportunity part of what was always exciting for all of us who were part of that that early first wave a AOL journey was democratizing access to information how do you come to level a playing field so everybody has access and we're trying to do the same thing around entrepreneurship and and this in trying to figure out how to make sure entrepreneurs no matter where they are or no matter what their background if they have an idea you know they get a shot and there is a role for government to play and sort of setting the the table setting the rules of the road so if you think you've inspired President Obama such that when he leaves office he might want to be an entrepreneur has he ever said that to you he has not said that to me but I hope he actually has been in in the administration and Jeff science and Valerie Jarrett and a lot of other people have been very very supportive of this this effort around startups and entrepreneurship but even the language in the last you know a couple of years the language he's used in the State of Union other things yeah I think really signals the importance of startups the important role they play in an innovation important role they play in job creation port role they play in economic growth so I might I'm not sure he will end up being a start-up entrepreneur tantrapur ship and particularly the idea of loveling the playing field was including inclusive entrepreneurship well last year the data is actually not not so good that 75 percent of venture capital went to three states California New York and Massachusetts Evan T five percent so yeah there forty seven states including US DC Maryland Virginia are basically fighting over the 25 percent we think in this next wave this third wave will see a growth of regional entrepreneurship and that's a big thing the other data point that's not also troubling is that ninety percent of venture capital there different numbers but roughly 90 percent of venture capital goes to men only ten percent to women but that doesn't really reflect the distribution of good ideas and the proof of that as you look at crowdfunding sites like a you know Kickstarter it's closer to half of the successful project so have women and it's also just yet disadvantages people of color don't have access to the networks of people who have access to money and so this idea of leveling the playing field around place including different regions and around purpose including impact investing and also around giving everybody an opportunity everybody gonna be having a good idea not everybody gonna be successful but everybody who has an idea should have the choice or at least the option of making network and I would remind people that you know Mark Zuckerberg when he decided to start Facebook happen to be at Harvard and happen to have a rich friend across the hall most people aren't at Harvard and most people don't have a rich friend so if they had the idea of Facebook what would they do and trying to create an environment all across the you know the country that does allow people to take a shot does allow if they're successful to lift some of those communities and create more jobs and growth and things like that I think it's really very important that my guess is that we'll be helped it'll be one of his priorities post-presidency but you've pointed out in your book that a large percentage of the jobs in the United States and new jobs come from startups and many people think it's the large companies that create jobs but you point out that's actually the startups that are really creating the jobs yeah the data on that's pretty compelling the Kauffman Foundation been tracking this for a while and they say that there's really three sectors of the business world the small businesses the restaurants drycleaners Main Street kind of businesses it's actually a really important and an aggregate account for a lot of jobs but don't in aggregate account for a lot of job growth because generally one restaurant goes out of business the new restaurant comes in but it's not net creating a lot of jobs and the big companies the large fortune 500 companies they generally don't have a lot of net job growth the Kauffman Foundation data said the last three decades 40 million jobs have been created by these young high-growth companies and they say it accounts for all the net job creation so if you really want this what led to the Congress and the White House working together to pass the JOBS Act even though it was a tough election year four years ago and people said well nothing's gonna get done in an election year it did get done it got signed into law because people were focused on jobs unemployment was a real concern I think at the time unemployment rate was 9% something like that and both parties came together and said you know we want to focus on jobs one way to focus on jobs an important way to focus on jobs is to make it easier for people with ideas no matter who they are and where they are to raise capital and so they updated for the first time since 1933 the Securities Act that basically kind of you know said in place the rules of the road in terms of raising capital including using the internet to raise capital through this idea of crowdfunding so I hats off to the the the president in the White House but also the the Republican leadership particularly the time Eric Cantor who took that on and said you know we're gonna figure out a way to even though everybody says nothing's gonna get done you we're gonna figure out a way to get this done and they did get it done you're pointing out in your book the crowdfunding was approved by the JOBS Act but then the SEC took several years to come up with a regulation so the regulation is now such that they can work there they were slow and I in I understand their concern because startups are risky and investing in startups is risky and they wanted to make sure there was sufficient education and and kind of a process to make sure that people didn't get taken advantage of totally understandable but it took a little longer than it should have to put those rules in place I think Congress required them to do it in like a hundred days it took them three years and the rules are a little more cumbersome than they need to be but at least they're there and they'll get tweaked over time and I think it will unleash a lot of capital and will help level the playing field begin I traveled around the country I run into a lot of entrepreneurs who are now thinking about taking that shot because they do feel like there's it's a little easier now to raise capital that was before so this book is written for who is it written for entrepreneurs budding entrepreneurs who do you want to read this and what would you say is the main message you're trying to convey to people well the main message is that this next wave is going to be different and that it requires a different mindset to be successful and it requires a different playbook and so that's that was the main thing in terms of the audience maybe it's we're being overly ambitious but of course we hope to reach an entrepreneurial audience we also think that in the Third Way big companies are gonna be more important and they need to figure out ways to be more flexible and nimble and agile and partner with entrepreneurs so hopefully some some large companies will figure out a way to kind of lean in the future obviously is a desire to have it continue to play a role in influencing the dialogue in this town and others around the right policies and my real hope is that it will be helpful to a broader range of people much as that Alvin Toffler third wave was - to me because there are a lot of people who are confused with what's happening there the pace of technology is confusing the nature of jobs and work has changed 34% of people now are part of the freelance economy that didn't exist 20 years ago I grew up my dad like had one job for 60 years so when I had a few jobs in a few years they were kind of like freaked out well now some people have a few jobs with a few different companies in the same day and how do you think about that gig economy what some call the you know the flexible economy so I'm hopeful it will reach a broader audience and help people understand you know what's what's happening out there and how to position themselves in their own think of their own families their own careers for this this feature so my guess is the core audience will be entrepreneurs and sort of what is the handbook for the third wave and and that would be great but I hope it has as broader appeal what would you like to see is your legacy in the business world I mean you've obviously built a gigantic company you did one of the biggest mergers ever what would you like to see as your legacy what you're doing now what you did before Oh Maxim obviously will be proud and again many people in this room or key parts pyth of the role that a well played in making the internet part everyday life I think that has been a game changer and changed the world in a pretty fundamental way and I'm proud of that but I'm also proud of the work we're doing now and with revolution backing the next generational entrepreneurs who are trying to disrupt sim key aspects of our lives that can be improved we think in very significant ways and build significant companies and in the process I also want it on the more the you know broader you know got a level including what we're doing with the with the foundation but also some of the work on the Nepal sighs do what I can to make sure we remain the most innovative entrepreneurship which is not guaranteed it's not guaranteed that what's happening around the world as people have kind of figured out that the secret sauce that's Howard the American story is entrepreneurship so I remind people that 250 years ago America itself was a startup it was just an idea an hour the leader of the free world because we led the way in the agriculture revolution then the Industrial Revolution then the technology revolution and we can continually lead the way hopefully we will lead the way in the third wave but it's not guaranteed so how do you make sure and it's all the things we've been talking about how do you make sure capitals available the playing fields level opportunity is available to all that's compete cities outside of Silicon Valley in New York like places we visited like Detroit and Des Moines and Madison in Kansas City and Raleigh Durham and New Orleans become vibrant startup communities in this in this in this Third Way which will create jobs Detroit is a great example is it's sort of a 75 years ago Detroit was Silicon Valley right 75 years ago it was the hottest city in the world for the hottest tech now I'll do the time the car didn't lost its way it kind of lost its entreprenuer a lot of things happens not any one thing but kind of lost its way and the last half century Detroit has lost 60 percent of its population and went bankrupt and it was Silicon Valley so these things now they're fighting their way back what's happening with a downtown area is really quite exciting New Orleans got devastated by Katrina they're fighting their way back in part by backing a new generation of entrepreneurs mostly focused on education technology because they had to reinvent their their their school system their there they're on the rise these cities are on the rise and how do you make sure that innovation job creation economic growth is more broadly dispersed and not just in Silicon Valley or in New York or Boston or or a few places I want to do what I can to kind of drive that discussion or at least participate in that discussion well some people who are in the business world say the way to affect policy is to run for president or office would you ever consider running for office no I will pass on that because there are many people in the room who are skilled at that I kind of like my gig right now which is most mostly focused on revolution and and backing you know kind of great great entrepreneurs a lot on the you know the foundation trying to drive gene really runs it but trying to drive some of these initiatives like inclusive entrepreneurship impact investing and then try to play a role and part of my think by whatever limited success I've had on this is because it has been nonpartisan it has you know it's been focused on policy not politics I don't endorse candidates I don't give money to candidates I don't host fundraisers for candidates some some of those candidates don't like that but it's deliberate because I want to make sure that they view me whoever is the next president I want to be positioned to try to be a helpful force in bringing people together on the issues that I care about around innovation entrepreneurship immigration which is a big issue tied into innovation and I don't think if I had a if people thought I had any political interest I would be as credible as sort of this kind of behind the scenes policy wonk Steve I highly recommend to people this book I've read it several times and it's actually very very impressive well-written and I congratulate you on doing it in Korea Joe Jonas a very successful business and entrepreneurial and philanthropic career thank you all great to see you thank you David

Channel: The Economic Club of Washington, D.C.

Views: 14,353

Keywords: Steve Case, Revolution LLC, David M. Rubenstein, 2015 - 2016 Speaker Series

Id: kvTrWFx7R48

Length: 48min 48sec (2928 seconds)

Published: Tue Apr 12 2016