Author, investor, and AOL co-founder Steve Case today announced a new $150 million venture fund aimed at pumping investment capital into tech companies in so-called flyover states. Contributing to the fund is an impressive group of some of the most successful entrepreneurs in the country.
Called the Rise of the Rest Seed Fund, it will be overseen by Case and Hillbilly Elegy author J.D. Vance, who joined Case’s VC firm, Revolution, earlier this year. The new fund shares a name with Case’s Rise of the Rest tours, the pilgrimages he has conducted since 2014 to highlight lesser-appreciated innovation hubs and tech startups in the middle of the country. Contributors to the fund include an array of iconic company founders and industry titans from all points on the political spectrum, including Alphabet’s Eric Schmidt, Amazon’s Jeff Bezos, Starbucks’ Howard Schultz, Spanx founder Sara Blakely, Quicken Loans chairman Dan Gilbert, BET co-founder Sheila Johnson, and members of the Koch and Walton families.
Over the summer, when we talked to Case during the Ann Arbor, MI, stop on the latest Rise of the Rest tour, he said he felt encouraged by the momentum he has seen building in middle America despite the fact that the vast majority of venture capital continues to go to just a handful of places, like Silicon Valley.
“I like to remind investors that it requires more work—you have to get on a plane—but the opportunities are there,” Case told Xconomy.
Case also told us that he felt that last year’s presidential election revealed the economic insecurities felt by a significant number of Americans and served as a wake-up call to many in the business world.
“A lot of people do feel left out and didn’t benefit from coastal innovation,” Case pointed out. “[Before the election], Silicon Valley was not paying attention, so for them, it was a wake-up call. Now, they’re more interested in having a discussion. J.D.’s book spoke to some of those issues and opened a lot of people’s eyes to what’s happening.”
According to Revolution, in 2016, three states (California, New York, and Massachusetts) received 75 percent of all venture capital funding, leaving the other 47 states to scrap for the remaining 25 percent. (Revolution has offices in Washington, DC, and San Francisco.) But Case believes recent demographic shifts and infrastructure growth have positioned Rise of the Rest cities for success, as indicated, he says, by the steady increase in accelerator and incubator programs, more startup-friendly public policies, and the institutional expertise and collaborative opportunities provided by the 85 percent of Fortune 500 companies that are located outside of traditional tech hubs.
The new fund’s strategy aims to build on the series of $100,000 investments—roughly $4 million in total—Case has made so far in the 33 cities he’s visited as part of the Rise of the Rest tours. The fund plans to make 20 investments per year of up to $1 million each, in partnership with each region’s local investors. According to a press release from Revolution, “the fund will not lead rounds or serve on boards, as it wants to work with other investors as an ally and catalyst.”
Revolution isn’t the only group of coastal investors to start a venture fund that backs startups based in smaller or lower-profile tech hubs. Another example is Ohio-based Drive Capital, a Midwest-focused fund started by ex-Sequoia Capital partners.
