A conversation between Kauffman Foundation Vice President of Public Affairs Larry Jacob and Co-founder of AOL Steve Case at the NationSwell Summit, 2018.
If policy and economic development favored entrepreneurs more than big business, and everyone got a fair shot to make their ideas a reality, America might just keep its competitive edge.
In the early days of America Online, the Internet was by no means "mainstream." Steve Case, co-founder of AOL, easily admits it was a struggle. He almost failed – a couple of times.
He received more than a couple calls from his parents. "Like, 'Steve, we love you. We’re proud of you, but it doesn't seem to be working. You have, like, a plan B to get a real job, right?'
And that is the story of most entrepreneurs."
That was 33 years ago. Only 3 percent of people were online – and of that 3 percent, they were only online an average of one hour a week.
Now, Case is billionaire. And, he jokes, most of us are online one hour an hour. Yet, for all that’s changed in the past three decades, the story of most entrepreneurs hasn’t.
In fact, for entrepreneurs who aren’t white, aren’t male, aren’t nestled in the hubs of California, New York, or Massachusetts – it’s not just that the entrepreneurial story hasn’t changed – it’s that the entrepreneurial struggle has. not. changed.
"If you look at where the venture capital currently flows, last year, 75 percent of venture capital went to three states – three states," Case said, referring to California, New York, and Massachusetts. "Big states like Ohio, Pennsylvania, Michigan? Less than 1 percent."
He said last year 50 percent of what California entrepreneurs got in venture capital every week is what entrepreneurs in states like Ohio and Michigan will get in a year. And he warns, it gets worse. While 90 percent of venture capital went to men, less than 10 percent went to women, and less than one percent went to African-Americans.
"The data does say that it matters where you live, matters what you look like, matters who you know, where you have an idea, if you have a shot at the American Dream and have a shot at creating companies that can create the jobs that lift up the community. So it's super important that we get our focus back," Case said of policy that can support entrepreneurial starts.
Case notes that entrepreneurship, specifically the start and growth of young businesses that create the majority of net job creation in America, was absent from the political discourse of the midterm elections.
"Hopefully this next election there'll be more focus on 'what are the policies that can enable us to continue to be the most innovative nation,'" Case said. "That we don't have this growing divide between the coasts where a lot of money and innovations are happening and the job creation and economic development is happening, and the rest of the country that does feel left behind – and why they feel left behind is because they are left behind.
"If we only back certain kinds of entrepreneurs who look a certain kind of way, and have to live in certain kind of places, and do certain kind of things, we are going to lose our lead – and other people in other parts of the world are going to fill that vacuum," Case said. "So it’s super, super important."
Despite everything, a recent poll shows entrepreneurs, not surprisingly, are still an optimistic bunch. "We went into the field right after the midterm elections with a call to talk to entrepreneurs," said Larry Jacob, Kauffman’s vice president of Public Affairs. "They think the future is going to be great. However, they also feel that the playing field is completely tilted against them and tilted toward big business."
Case said that for half a century, economic development has not been focused on young business, but on luring big business, which amount to short-term wins. "It’s way better to focus your economic development, dollars, and attention on the startups," he said.
Kauffman is supporting this type of economic model through the Mayors Conference on Entrepreneurship, the ESHIP Summit, and other initiatives, and why the Foundation helped shape Kansas City’s bid for Amazon HQ2. Case said he was pleased to see Amazon’s 20 finalists, from the 238 cities that presented bids, were cities like Pittsburg, Columbus, and Denver, and a little surprised that Amazon didn’t choose a city showing great momentum.
"It would have sent a nice and important signal that there is talent there, there's opportunity there," Case said. "And so, you know, that was a little bit disappointing.
"But the message I tried to carry forward with the 236 cities that applied and lost is if they take half of the energy they put in their Amazon bid and half of the dollars they put on a table for their Amazon bid and refocus it on their startup community, they can create the next Amazon," he said.
What Case, and Kauffman, are looking for is much bigger than another shuffling of corporate headquarters.
"I hope what comes out of it is not so much what happens in Crystal City, in Long Island City, but what happens in the 236 other cities that use this as a wake-up call saying, 'We should stop focusing on the big companies and focus more on the little companies,' some of which have the potential to be the big company and that can help launch a startup revolution all across the country," he said.
Skepticism, whether it comes from parents – or when Case got one of Amazon’s early pitches and thought an online book wholesaler didn’t sound like that big of an idea – seems to be embedded in the entrepreneurial journey. But, Case said, lack of skepticism is one of Silicon Valley’s greatest assets.
"One of the great things about Silicon Valley is a sense of possibility, a sense of fearlessness, a sense of anything is possible," he said. "And when you hear a pitch there, you focus on, 'Wow it's a great idea. I could see how that might work.' Most people, in most parts of the country, when they hear that same idea, focus on why it won’t work."
He acknowledges that there will always be negatives and risk, but he said there’s something to just believing, which ties into the importance of mentoring and connecting people.
"Even if you don't invest in the company, what can we do to help that entrepreneur? Maybe you can make an introduction, maybe you could just have coffee with them, and say 'keep going.'
"It’s something that we all can do," Case said. "Everybody needs to do more to figure out ways to support the people who are willing to take that risk – they're willing to put everything on the line to do something different."