Steve Case

AOL cofounder Steve Case has a new book entitled "The Rise of the Rest" about the startup scene outside Silicon Valley, New York and Boston. We discuss startup culture, the companies Steve has found and invested in, and his personal history and the history of AOL.

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Episode Transcript

Speaker 1 (00:08):
Welcome, Welcome, Welcome back to the Bob Left Sets podcast.
My guest today is Steve Case who's chairman and CEO
of the investment firm Revolution. You know him as co
founder of a O L and he has a brand
new book, The Rise of the Rest. Steve, thanks for
being on the podcast. Great to be with you, Bob.

(00:31):
What do you hope to achieve with this book? Well,
I've been working on this effort for about a decade,
trying to shine a spotlight on entrepreneurs all around the
country that are building amazing companies in the process renewing
their communities, creating job growth, economic growth. But their stories
aren't really told, uh and most people don't really know

(00:51):
what's happening in most of these cities. And so that
was the reason to write the book. It was a
long journey for me when we started a little over
a decade ago working on this, initially on a policy
kind of framework working for the President Obama and his
Jobs Counsel, also cheering at a White House initiative called

(01:12):
start Up America. And the more I looked at, the
more I realized there was a problem we need as solved,
but also an opportunity we should seize and so that's
led me to this effort over the last decade of
trying to help entrepreneurs in in these what we call
the rise of the rest cities outside of the normal
tech helps. For those who don't follow this, uh, if
you look at the data, the venture capital data, about

(01:34):
seventy of venture capital has gone to just three states, California,
New York, and Massachusetts. The other forty seven states, they're
kind of fighting over the remaining and we're trying to
change that dynamic, get more of the capital backing more
of those entrepreneurs and more of the cities around the country.
So how bad or good are things in the other

(01:56):
forty seven states. Well, it's a mixed bad and that's
part of part of what I tried to explain the book.
The bad is that for the last several decades, a
lot of people in the middle of the country who
wanted to be part of what we think of as
the innovation economy, the tech sector, the startup sector, concluded

(02:17):
they had to leave where they were to go to
the coast because the action terms of other people, the
action in terms of where the money was was in
places like Silicon Valley, so that actually led to a
brain drain in many parts of the other country. Um,
and you know what, what we were hoping to see
as a slowing of the brain drain and a kind
of a boomerang of people returning to some of these cities.

(02:38):
And some of that's been accelerated by the by the pandemic.
So the talent has always been there, but the opportunity
hasn't been there, and that's led to some of these
you know, these dynamics. What's encouraging to me is just
what's happened in the last few years. There's far more
focus on these cities, and there was a decade ago.
There's a lot of new venture firms that have started

(02:59):
up in these rising cities. Fourteen hundred new venture firms
have started in cities outside of San Francisco, outside of
New York, outside of Boston. In these in these rising cities,
there's a sixfold increase in the venture capital in those cities.
But perhaps most importantly, there's now a recognition that some
of the big potential opportunities for entrepreneurs and for investors

(03:20):
in this next decade are going to be as sort
of the Internet meets the real world. And big sectors
like healthcare or food and agriculture are reimagined and disrupted,
and in those sectors, expertise matters. Domain expertise matters, partnerships matter,
and that's actually an advantage I think some of the
entrepreneurs in these rising cities, even though they've been largely

(03:41):
disadvantaged for the past, you know, a couple of decades. Wait,
let's start with the framework. Let's start with the bus tours.
So you pick a city where a multiple cities, you
get people in a bus, you go and in each
city you give a hundred thousand dollar investment to what
you feel is the best startup. How did you come

(04:03):
up with the idea and what are the logistics of
the bus excursions? Well, the idea we started this a
little over eight years ago, and the original idea was
building on some of that work I mentioned with the
White House to start up America effort. Why don't we
just hit the ground and see what's happening in different
cities around the country and in the process try to
showcase some of the things that are positive developments in

(04:26):
in in those cities and also see what we could
do to help this next generation of entrepreneurs and so
Frank we didn't quite know what we're going to get
into what we did the first one, but we did
a tour that included cities like Detroit and Pittsburgh, Cincinnati, Nashville.
Those were the first ones we did, and we found
it remarkable to see what's happening on the ground, to

(04:48):
use the bus a little bit as a media prop
to get attention and and you know, local media to
pay more attention to the entrepreneurs, even getting national media.
A few years ago, sixty Minutes Falls Around did a story,
for example, So that was part of the reason to
have a bus. Yeah, there was just practically to get
between city and city and around the cities, visiting different
companies and universities and so forth. The bus was helpful,

(05:10):
but the thing was most helpful. And this was one
of the things I didn't really fully appreciate going into it,
was using the bus as sort of a platform to
bring people together, a platform for convening. And in the
cities we visited now it's it's dozens and dozens of cities,
we found it really is important to make sure people
in those cities are aware of what each other is doing.

(05:31):
There's not as much of the connectivity that that you
really need to have a thriving startup community. So the
bus has been a helpful way to bring people together
and within the community, as well as invite people from
other places, either journalists from the coast or investors from
the coast, to see firsthand what's happening in some of
these cities. Okay, we literally talking like a music tour

(05:54):
bus with sleeping bugs, etcetera. Now, not the bunks, not
the bunks. We we we get we do, uh you know,
least a tour of us that is generally used by
musicians or politicians doing campaigns and so forth. And and
we kind of wrap it with our logo of the
Rise of the the Rest logo and and images and and

(06:15):
so we do not sleep on the bus because we
we do bring We packed the bus pretty full. Uh
so it's not quite like a rock and roll tour bus,
but it's certainly within the city. We do use it,
as I said, to move around and also to bring
people together. So on one of these typical ventures, how
many people are inside the bus, Well, it's pretty full.

(06:38):
I'm not sure what the I'm not sure I want
to report the number because it probably breaks some fire codes,
but we pack them in pretty pretty pretty tight. Uh.
And as we're moving around, we have different people coming
and going, sometimes a governor, of the mayor and the
university president. CEO is a big company, you know, there
are some of the people that we try to invite
on So it's definitely does it's a dozen to people

(07:00):
that are that are on the bus, and over the
course of the time we're in a particular city, it's
it's probably upwards to a hundred people that join us
for some you know, some part of it. And then
the events we do in different cities, including you mentioned.
So we do a pitch competition. We invite companies in
the city to apply it to pitch generally get you know,
close to a hundred companies kind of putting their hands up,

(07:23):
and then we have a team that picks the best
date or ten to be on stage, and then we
have a panel of judges that joins me in deciding
which is the one that is most promising, and then
we do invest in in that company and have found
that others will because they're on stage and are telling
their story to a bigger audience. Generally, you know, somebody
three or four, five hundred people are at these events.

(07:46):
Uh that many of the other companies also get you know,
some some attention and sometimes some funding as well, but
not just the winner. It's sort of it's it's trying
to spotlight what's what's unique about some of these some
of these cities, and how many other professional investors would
be on one of these bus tours. Again, it depends

(08:06):
on the city, depends on how many people join us
in any particular time, but generally there for these tours,
there's you know, a couple of dozen coastal investors that
join us for some some part of it just trying
to see firsthand what's what's happening and in some of
these cities. Okay, you read the book and it appears
like I'll use the term underground because many people are

(08:28):
unaware of them. There's a startup scene everywhere you go.
Is there a startup scene in every city in America?
I wouldn't say there's a start up scene in every
city in America, but it was definitely a startup scene
in dozens of cities in America, and we obviously profiled
quite a number of them. Uh in the book. We
now have investments with our Rise of Rest Fund in

(08:49):
a hundred different cities. Uh, and so it is much
more widespread than people think. When I first started talking
started talking about Rise of Rest, people say, oh, I
got it. There's ttunities to back companies outside of Silicon
Valley or New York City or Boston, which are where
most of the action historically has been. But they assume
it's like one or Tuesday. Well, maybe Austin is doing,

(09:11):
you know, pretty well, or Chicago doing pretty well, or
you know that there's no sense that it's actually dozens
of cities that are showing real, real momentum in terms
of what's happening in in in terms of startups and
you know, the resulting benefits they can provide to the company.
So that's been the real AHA moment for me as
I've traveled around over the last decade, and that's certainly

(09:33):
been the most common kind of feedback I get based
on people who have read the book, as they are
surprised that so many cities, each doing it in their
own particular way, that really are emerging. So you're right,
it's kind of like a little bit of a underground
that is now becoming much more more visible now. You

(09:53):
talk about universities in the book being a generation of
talent and that talent staying in the city as opposed
to going to the coast. But generally speaking, you invested
in a hundred cities. What is creating the startup culture
or you just can't keep startup entrepreneurs down. Well, entrepreneurs

(10:15):
at the core see a problem and decide it's an
opportunity and decided to do something about it, and for
them that's starting a company. Um. And that insight in
terms of seeing a problem and and believing it's a
it's an opportunity, is something that's you know, pretty widespread,
pretty universal. Uh, it's just that in certain places it's encouraged,

(10:38):
in other places it's not. Some cases, actually it's discouraged.
You know, entrepreneurship. Startups are viewed as kind of too
risky in in some places. Uh. And that's what leads
to this this dynamic we talked about before where people
feel like they kind of have to get out of
dots and where where they're living is not really conducive
to starting a company. Uh, it is going to be
able to attract the the money they need. They are

(11:01):
gonna be able to track the talent they need to
build a team, They're not going to be able to
get the attention they need to really scale up, and
so they feel like they have to leave, and I
think that's sad. And so we're trying to create a
dynamic where people really can decide where they want to live,
decide where they want to you know, kind of build,
as opposed of feeling like they have to be in
a certain place where they really don't have kind of

(11:23):
a shot. And there's some parallels. Obviously, you've done a
great job over several decades obviously chronicling the music industry.
There's some parallels there that there there was a time
where if you wanted to be in the music industry
you kind of had to be in in New York
City or Los Angeles. So you're in the movie industry,
you know, similarly, you kind of Hollywood was the place
to be. If you're in the financial services industry, Wall

(11:44):
Street was the place to be. And now over the
last half century, while those cities still have a lead
and there's still reasons to be their benefits to be there.
You know, many ways you're creating music, many ways you're
creating movies and you're less tethered to a tickler plate.
That the tech industry is still largely tethered to Silicon Valley,
and that's starting to change, and I think that change

(12:07):
will accelerate in the next ten or twenty years. And
that's a positive because one of the things that really
surprised me when I first started working on this, as
I said over a decade ago, uh, it was a
two data points. One I mentioned that sevent venture Copita
goes to three states. The other is that most of
the jobs in this country are not created by small

(12:28):
businesses or by big businesses, but by new businesses, companies
under five years old, basically startups. That small business as
a sector accounts for a ton of jobs. It's very important,
but as a sector, it doesn't grow a lot of jobs.
And it kind of makes sense because if a restaurant
goes out of business, chances are some other restaurant will

(12:49):
take over that space and will probably hire about the
same number of people. Similarly, with the big companies of
fortune companies, some are growing, but some are declining, and
as a sector ends up being kind of, you know,
kind of balances itself out so if you're going to
create jobs, you've got to back new companies. And if
if in order to start a company, it's not always

(13:10):
required that you raise capital to start a company. Some
are able to boostrap those companies, but most of the
biggest companies that have had the most success, create the
most jobs, create the most economic you know, kind of
growth and vitality, do raise venture capital, well, then it's
kind of a disconnect if if that capital is not
available to most people in in in most places, and
so leveling the playing field so that everybody who has

(13:34):
an idea feels like they have a shot if they
want to starting a company and they feel like they
can do that wherever they are, as opposed to feeling
like they're kind of left out and left behind and
don't really have a shot at building and frankly a
shot out the American dream is something I think it's
important to address boast to maximize the number of innovations

(13:54):
that come out of this country, the new ideas that
that you know, kind of lead to the new companies
and even lead sometimes the new industries. Uh. And it's
also frankly the best way to maximize the likely of
the United States continues to be the most innovative entrepreneur
nation in the world. That's not you know, kind of guaranteed.
There's some risk to you know, the United States, based
on what's essentially been the globalization of entrepreneurship over the

(14:17):
last a couple of decades or venture capital years ago
was invested in the in the United States of global
venture capital, and now it's in so other countries have
figured out that innovation entrepreneurship is kind of the secret
sauce that's kind of made America America, and they're trying
to kind of kinta win the next industries. And so

(14:37):
we need to double down on innovation entrepreneurship, and we
need to do it in a more inclusive way, so
not just certain people in certain places doing it really
well and and other people in other places feeling kind
of left out and left behind. Okay, in Silicon Valley,
you had the transistory, had fair Child, so you grew up.

(14:58):
These businesses grew up around tech, the logical innovation to
begin with. To what degree is it a matter of
like COVID where people work remote being one issue, so
you can work anywhere, or do these locations actually come
with advantages that you don't get on the coast. Uh.

(15:19):
Both the first little backstory, even even if you look
at the the early days of the Internet, when companies
like mine AO all got started, we were in northern
Virginia outside of Washington, d C. But that first wave
of Internet, the first you know, kind of a couple
of dozen companies that ended up playing a key role
in building the Internet, building on ramps to the Internet

(15:41):
were fairly regionally distributed. You know, as I mentioned, we
were in the DC area. Hayes, the big modem company
was in Atlanta. CompuServe one of the early online services
with Columbus Ohio. IBMS PC operations were in boc Overton, Florida.
Sprend the communications company was in Kansas City. Uh, you know,
the Dell was in Austin. Microsoft actually started in Albuquerque

(16:05):
until you know, they moved to Seattle. So the a
lot of companies were all across the country. It was
only in the last twenty years where it shifted from
building the Internet to building software on top of the Internet.
That's really when Silicon Valley grew to you know, kind
of its prominence. Indeed, it's it's dominance I think in

(16:25):
this next era, This next wave what I've called the
Internet third wave. UH. It is sort of when the
Internet meets the real world, and that's when some of
these sectors that we've been talking about, like healthcare and
food and others start getting disrupted. And some of the
expertise you need and some of the credibility you need
to establish partnerships in those sectors are you know, in

(16:46):
the middle of country healthcare, for example, it depends on
to see when you're trying to build there. But if
you're trying to build a disruptive healthcare company, you're gonna
need partnerships with hospitals so they actually integrate what you're building.
And you know, you need to get doctors and nurses
to actually use it, you need to get health plans
to actually pay for it. Uh. And having some connection

(17:07):
to that industry, some insights into that industry, some relationships
with people in that industry likely will advantage you. If
you're trying to get a deal with Cleveland Clinic in Ohio,
or Mayo Clinic in Minnesota, or MD Anderson in Texas,
there Johns Hopkins in Maryland, some of the key companies
that could really help put your your company on on
the map. So there is some value to these rising

(17:29):
cities in this next era we're entering. But to the
other part of your question, there absolutely is something that's
happened during the pandemic where it has been a unlock.
The sense that you had to be in certain places
is less clear. There's clearly more flexibility in terms of
how you live and where you live and how you work,
and the whole idea of more hybrid work and remote

(17:49):
work is opening an opportunity for people to decide where
they want to live and not feel like they have
to be in a certain place, and for companies, and
as a result, you're seeing an acceleration of companies start
in these these rise of rest cities. So I think
it's it's both factors. This next era. There are certain
cities that give you an advantage, but also there is
this pandemic induced almost shake the snow globe moment where

(18:12):
we're as a society trying to figure out this next chapter,
and clearly flexibility is part of it. Okay, Historically the
image of an inventor was a lone guy tinkering in
the basement, But in the book you make a strong

(18:36):
statement about network effects community. To what degree today is
important to call on a team or does the loan
inventor still have a role. Well, it is that the
loan inventor is a little bit of a you know,
kind of figment of imagination. Most important thing. You know,
Thomas Edison a century ago was invented a lot of things,

(18:57):
but he wasn't really doing it on his own. He
always had teams that helped take those ideas and scale them.
And certainly we've seen that in the work I've done,
including with the with with a O. L. It required
a mix of skill sets and I provided a certain
kind of perspective, but I, you know, absolutely couldn't have
done it on my own. It required a team, and
I've learned that entrepreneurship is a team sport. As we

(19:21):
enter this new era where the problems you're solving as
entrepreneurs tend to be more complicated, more multifaceted, where partnerships
do become more important, Even understanding policy often becomes more important.
You've got to have a broader, broader skill set, and
so that that is I think can increasingly be the

(19:41):
story of entrepreneurship. Sometimes I think we celebrate the the
entrepreneur too much and not the team that really takes
that idea and turns it into something significant that that
team should get more more attention. And there's also something
which is part of your question to clustering of people.
And you know there's something too. When a company is

(20:04):
successful in a city, what we call a tent pole company,
that leads to other success in that city. And we've
seen that in the last couple of decades in Austin,
the success of Dell there has really been helpful. The
success to the south By Festival got a lot of
people visiting Austin that otherwise within the visit of Austin,
and as a result, it became a magnet for for

(20:25):
for people. And now there's hundreds of companies that startups
that have great success there and that was not the case,
you know, to three decades ago. And so this tent
pole company dynamic is critical. I mentioned Microsoft moving to Seattle.
The only reason Microsoft moved to Seattle is the two founders,
Bill Gates and Paul Allen, We're from Seattle and they

(20:46):
want to go home. That's fun. They moved to Seattle
at the time Seattle was struggling. It was overreliant on
some industries that were in decline, uh and didn't really
have a new act and you know, because Microsoft ended
up scaling there and became a tech hub because Microsoft
was there. Jeff Bezos actually got in a car left

(21:07):
New York City to drive to Seattle when he was
starting Amazon for one reason and one reason only. He
was he wanted to hire some Microsoft engineers. So I figured,
you can pick off some of those Microsoft people to
build to build Amazon. Now, Amazon, of course has become
a very successful company, also strengthened the Seattle startup ecosystem.
So what was a struggling city just a few decades

(21:29):
ago now is a thriving city. And the success of
some companies leads others, you know, companies to start up,
and some of the early employees at those companies, you know,
want to be part of some new companies, or they
had made some money on stock options want to invest
in new companies. And it creates that positive kind of
increasing returns network effect, kind of tipping point dynamic for cities.

(21:51):
And that's one of the things we're seeing more of
in recent years. And again that's part of the reason
I even wrote the book because I think people don't
realize what's happened in these cities, and I think they
will be surprised and frankly also encouraged that there that
this innovation economy in this next next chapter can be
more inclusive. And that really ties also in, you know,

(22:13):
at least a degree with some of the political dysfunction
we have in this country where where you know, there
were in these tribes and there are a lot of factors.
Obviously I don't want to make it overly simplistic, but
one of the factors is an opportunity gap where there
are definitely people that are doing really well in some
places and a lot of people, most people in most
places are feeling left out. They are feeling left behind.

(22:36):
They're not celebrating the disruption and Silicon Valley. They're kind
of angry about it. And you know, we need to
you know, kind of create more companies in their own
cities that can create more jobs in those cities and
create more opportunity and even more hope in those cities.
And if we do that, that will be good for
those cities, and also I think it can be good
for the country more broadly. Shark take Nipause dive or

(23:00):
negative for entrepreneurship in the kind I think and that
positive it it's it's really opened people's eyes to the
idea of starting a business and and you know, probably
inspired a lot of people who might not otherwise even
thought about it. And as people when I was growing up,
I didn't know what an entrepreneur was until I was
a little bit older. Uh, And so you know that
I think is is a is a is a net

(23:22):
positive just in terms of getting people thinking about things.
And as I said before, maybe next time they see
a problem they turned it into an opportunity. One of
the stories I love it, and it's in the book
as there's a mom living in a suburb outside of
Indianapolis who five or so years ago was kind of
worried about the water quality because in Flint, Michigan, there

(23:42):
was a well publicized crisis about water quality and safety.
And she said, I've got young kids. I want to
test my water to I want to make sure that
they're drinking safe water. So she called the water companies,
I want to test my water and they said, what,
we actually don't do that. I said, okay, and she
called some other company that specialized in and in sort

(24:04):
of industrial technologies. Uh and and said, I'd like to
get my water tests and it will do that, but
we're really set up to do that for big companies
and it will cost you a thousands of dollars to
test your water in your home, and so what makes
no sense? So she said, well, this is crazy. I'm
sure that other people like me or concerned about their
water quality. And she started a company called one Water
that created a very affordable way for people to inconvenient

(24:26):
way for people to get their their water tested, and
that outscaled. It's even providing some of these testing services
to cities, including cities like like San Francisco. That was
just somebody who saw a problem and and turn it
in an opportunity. And so hopefully things like Shark Tank
will open people's eyes that they see a problem rather
than just talking about it or complaining about it, they

(24:47):
maybe can do something about it by by starting a company.
And increasingly because of what's been happening, they have more
flexibility to do that anywhere they are as opposed to
feeling like why I have this idea, I want to
do something about it, but I really don't have any
ability to do it. Because I'm you know, living in
some part of the country that just is not well
known for for startups and innovation and entrepreneurship, and that

(25:11):
needs to change. Okay, let's talk about the basics on
your side of the fence. Obviously, there are legendary venture
capital firms in the Silicon Valley. They're well known ones
in New York. Then you read about somebody who's got
their own little fund. Tell me about the creation of
the venture capital firm, whether there's competition amongst you, how

(25:35):
the investment works, a revolution where you get your money
to fund your funds. A couple of parts of that. First,
venture capital as an industry as a sector is a
relatively modern phenomenon. It's really the last fifty years that
it emerged, and initially emerged in New York and then

(25:55):
in San Francisco, then in Boston. That's part of the
reasons why those cities have so strong in terms of
where venture capitalists have clustered and therefore where entrepreneurs have
have clustered. There's three ways people raise money for venture firms.
The first is they've made some money from some other
thing and start reinvesting. It goes back to this dynamic

(26:16):
of of of having a successful company leads to people
making money from that company, and some of them decided
to invest in the next generation of entreprenurs. That's actually
how I got started. After you know, starting a O L,
I started making some investments and then I wrapped it
up from there. So that's that's one way. They just
have some access to you know, to the capital. A

(26:38):
second way is in a more common way, is they
tap into institutional investors, so big pension funds, university endowments.
They're trying to maximize the return they get for those
endowments so they can do more programs for their particular
university or for the particular hospital. And so they are
sort of professional investors that have a whole series investments.

(27:01):
Obviously they have fairly diversified portfolio. But one part of it,
and recently it's become a more important part of it,
is investing in these private companies, uh, you know, the
by terms of venture capital in in in particular. And
there are also groups that are what are called fund
of funds that also might make raise capital from some
large investors and then kind of divate out to a

(27:24):
group of of of smaller funds, so there's different ways
you can raise that money. We did something a little
bit different, uh, for this most recent Rise the Rest Fund. Historically,
revolutions started initially where it was just money I was investing,
so essentially my capital. Than about ten years ago, we
opened it up to institutional investors and we have a
Revolution Growth Fund and Revolution Inventors Fund investing companies like

(27:48):
DraftKings and Sweet Green and Clear and and dozens of others.
And that's with the support of institutional investors who are
essentially investing alongside of us. For this more recent rights
Rest furred, we just reached out to individuals and so
we have very prominent successful entrepreneurs and investors executives who

(28:09):
have joined us as investors in our Rise of Rest
seed fund, which is investing in these cities all around
the country. People like Jeff Bezos and Howard Schultz, and
you know hedge fund people like Gray Dally, and private
equity people like uh Henry Kravis, David Rubinstein, you know,
venture investors like Jim Bryer and John Dorther, entrepreneurs like

(28:29):
Sarah Blakeley and Tory Birch, and you know, you know
Eric Schmidt Mike Milk and a great group of individuals
who basically believe in this idea of the rise the
rest believe that their entrepreneurs all across the country believe
there's a disconnect between no ability for most people in
most parts of the country to access venture capital. So
are co investors with us in that particular fund? Do

(28:53):
you personally know all those people or do someone on
your team reach out? Are you more of a cerebral guy,
you very social such that you have relationships with these
investors and could just bring them up just because of
what I've done over a number of decades, I've have
built a pretty good network, so you know, I wouldn't

(29:16):
say all there are a few people that invested. It
was part of Rise Arrest too. I didn't know personally before,
but the vast majority I didn't know personally, and many
actually were aware of what we're doing, and we're kind
of intrigued with what we're doing and express an interest
and and and being investors alongside of it. So we
structured something so uh, there's an ability for those people

(29:36):
doing it's and it's super helpful if we're going around
the country that you know some of these prominent successful
entrepreneurs and investors you know, are are essentially backing them.
When we make an investment in a company with our
Rise Arrest Fund, it's it's it's really the these these
dozens of other people are essentially investors in your company
as well, and I think that's helpful. I guess people

(29:57):
are some a little bit more more momentum when they're
hiring people that they're they're more likely to join the company,
and a little more momentum when they're they're trying to
attract customers or partners, a little more momentum when they're
trying to attract follow on investors. So having that that
network I think has been been been quite helpful. But
just me doing this personally, I don't think we've had

(30:20):
nearly the same level of interest or attraction than having
several other dozen people you're kind of joining us on
this effort. Let's talk about venture capital in general, and
revolution general is opposed to just the rise of the
rest fun they're different stages of when people invest in
recent horrowits another venture capital firm. It's famous for coming

(30:40):
in late, So there's early tell us about the different
stages you might invest in a company. Well, that the
very earliest stage. You know, some think of it as
sort of seed investment or angel investment, where you're raising
a relatively small amount of money just to kind of
get going, just to kind of get that idea on

(31:02):
the playing field, build a initial product or service, and
you know, hire a few people just to kind of
get going. So that's called the seed stage. Uh, I
think if it varies depending on what the company is,
but yet seed state, you know, the investments generally are
in the know, few hundred thousand dollar range. Sometimes it
can be more, sometimes it can be less, but generally

(31:24):
that's sort of the range that people are talking about.
And then there's sort of the venture stage, which is
the company is more developed and and the team is
more assembled and uh there's a little bit more clarity
regarding product market fit things like that. So there's still
risk associated with it still is still a fledgling company,

(31:47):
but at that point the company and the entrepreneur back
in the company really feel like they need to raise
more capital. Usually it's a few million dollars and that's
a whole other group of venture firms to specialize at
that stage. And then, as you said, there's a later
stage where people think of as the growth stage, where
the company really has you know, kind of got some traction.

(32:09):
It's kind of a real business. It still needs more
capital to expand it's still not yet profitable, but but
it's clear that there really is an idea there, and
that's the growth stage. And generally people are raising tens
of million dollars in the in the growth stage, and
more recently sometimes a lot more people. You know, some
of the companies more recently have delayed going public and

(32:31):
be able to raise you very large kind of private
you know, late stage rounds before they go public. So
the way to think about it is it, you know,
kind of whether you're at the very early stage where
you need some of that initial seed capital to just
get going, or at the venture stage where you have
a little bit more attraction but but do need some
some capital and and also some expertise to help you

(32:52):
build a company, or the somewhat later stage where you
really do see a big opportunity and you really want
to kind of put a foot on the accelerator and
need the additional capital to hire more people or to
spend more on marketing or whatever whatever. The you know,
the focus might be and a revolution participated all those
different levels, whether it be with different funds. Yeah, we do.

(33:14):
We do, and then other firms do. There's some that
just focused on one stage. But we we really want
to be able to back entrepreneurs to kind of every
stage of the of the journeys and but way so
we have dedicated teams focused on that early seed stage,
another dedicated team focused on the venture stage, and a
third team focused on the on the growth stage. Okay,
so you go into one of these cities and you

(33:36):
start with X number of companies who would like to
gain the hundred thousand dollars uh, and then you win
to it down and then you ultimately award one company.
What are you seeing there? Are you seeing a lot
of you're an expert, are you seeing a lot of
viable ideas? Were you're seeing only a couple? What is
out there in the marketplace? Now, we're seeing a lot

(33:57):
of ideas that of course a lot of them are
are not great ideas. You get a mix. But by
the time we our team kind of talks to people
and filters it from the initial called hundreds in each
city to the best ten. You know, the ten are
are always pretty, pretty interesting, pretty compelling in some way
or fashion. But one of the things that that we've
learned as while the idea is important, obviously, it's it's

(34:20):
sort of the core of what you're building is you
need to understand what exactly you know is the is
the goal? What is the vision? What kind of what
what mountain are you trying to climb? What what you know?
What what battle are you trying to fight? So it
starts with that the vision, or it starts with the idea. Uh.
You quickly realize that it's sort of and there's a
Thomas Edison quote from a century ago. Vision without executionist hallucination.

(34:45):
You quickly recognize it's how do you take that idea
and really scale it? Which gets back to some of
the things we talked about before that what what is
the team dynamic and how does that really allow you
to scale that. So when we're talking to entrepreneurs, whether
it be in these pitch competitions and are just kind
of one on one, we understand the idea, we also
understand want understand the team that's going to turn that

(35:05):
into a real a real business. Uh. And then you
also need to have some evidence, particularly as you're looking
at these some of the later stage investments that there,
it really has competitive advantage with some people think of
as competitive moats or something that is unique about what
you're you're doing. And I also want to understand what
some of the partnerships are that are allowing you to
scale the business. So there are a number of different

(35:26):
different factors, but it's really it starts with trying to
understand what that big idea is and what's the what's
the dynamic of the team that's going to execute against
that idea and turn into a real business. Now they're
these accelerators, and one is tech Stars and tex Stars
Music started up a few years ago and they choose

(35:47):
like ten companies and they come in and they want advisors,
and I went in to advise, and just about all
these people were delusional. They did not have an understanding
of the landscape. They had a slight understanding of what
was going on, but it wasn't a practical understanding. And
there were one or two that I thought were could

(36:07):
possibly be viable, and then ultimately none has really broken
through on any big level. There's a number of questions here. One,
you know, to what degree to people know the landscape
and our sophisticated maybe, and then there's timing. There's a
lot of investment capital in vtric capital UH. In the

(36:28):
music business years ago, most people lost all their money.
As I sit here right now, I don't see a
ton of opportunity. So what is the landscape do? Is
it about choosing the right vertical? Is it about having
expertise in some area that you're matching with the vertical

(36:49):
or understanding that vertical? Look, I know that there are
no strict rules, but give us some insight. Well, I
think it's involving. I think it's an interesting, interesting, wait
your friend question, because in Silicon Valley there's sort of
this uh truism that the biggest disruptors often go into

(37:09):
a new industry knowing nothing about it, and as a result,
they see things that people in the industry don't see,
have insights in terms of different products or services, just
different way of doing things, and as a result having
that fresh perspective, having that almost naive perspective and asking
sort of basic kind of questions and looking for kind

(37:33):
of emerging opportunities, they're able to build some some very
significant companies. And there are many examples of that. That PayPal,
which twenty years ago was one of the first really
successful you know, you know, digital payment companies. Elon Musk
and others were part of that. None of the team
really understood the financial service industry or the credit card industry,

(37:55):
and they were able to do some things because of
that naivete that allowed them to to to be successful.
More recently, you know, ten fifteen years ago, a similar
dynamic happening with Airbnb. The you know, the founders there
didn't really understand the hotel industry, the hospitality industry, so
they came up with what most people thought was sort
of a crazy idea, but it turned out to be

(38:16):
a great idea. So there's definitely that thread, that that
stream where those fresh perspectives are are important. Those fresh
insights are important and can lead to great entrepreneurial success stories.
But there's also another dynamic, and this I think is
becoming increasingly important. It goes back to some of the
things we're talking about earlier that in industries, whether you're

(38:39):
talking about the music industry or the healthcare industry, or
the agriculture industry or the sports industry, there are many
industries where in order to be successful, you have to
go beyond having that insight and actually be able to
build partnerships to be be get real scale. Otherwise you

(38:59):
don't really have much success. Going back to the example
I mentioned in in health care, if you built really
cool software, but you couldn't get hospitals to partner with you,
what's the point. And so increasingly you need to have
the balance the blend of some of that fresh perspective,
but also have some real expertise in in the industry.

(39:21):
That's probably why in terms of tech stars, because you
have expertise in the industry, they said, let's bring some
people together that can help these entrepreneurs and complement some
of the perspectives they might bring by bringing some of
the real world insights that come from that that that industry.
I think that balancing act is going to become much
more important in the next ten or twenty years. And

(39:43):
and occasionally they'll still be companies that launch where the
people within the company know nothing about the industry they're
trying to disrupt, but more often at least some members
on the team will bring that perspective, bring that the
credibility that comes with that. That will result in some
of those companies being much more successful because they have
on their teams, or on their boards, or in their

(40:04):
investor groups, or somewhere in their in their network, some
of the people that really are able to to take
that idea and scale it, in part by building partnerships
with people in the industry that will ask some of
the basic questions that anybody industry would would not ask.
To what degree do you encounter headstrong entrepreneurs? Here's an

(40:26):
analogy between the music business. You find someone who says,
I want to be successful, and if you try to
give them any advice, say no, no, no, I gotta
do it my own way, and you end up rolling
your eyes. Do you encounter that in your ventures companies? Sure,
And it's a balancing act. We want entrepreneurs who are
you know, confident and passionate, and you know, have strong

(40:50):
convictions and and a strong perspective on how the world's
gonna change, how the market's going to change, why that's
going to create opportunities and and evangelists for their idea
and can recruit other people to their team and so forth.
So you definitely want that that that competence, But I
do think it's helpful to balance that at least a

(41:11):
little bit of humility, a little bit of listening, a
little bit of maybe I don't have all the answers,
and and but sure we've we've backed a whole mix
of entrepreneurs over the over the years and find the
ones that are at least the best fit for us,
and you know, usually the most successful. The ones that
are you know, have pretty strong views, but also recognize
that there's value to to listening and engaging with with

(41:34):
others and that helps them refine their ideas. Ultimately they
can be be more successful because of that, that that
team dynamic. Now, if I win and I get a
hundred thousand dollars, do you wave and take the bus off?

(41:55):
And that's the last they ever hear of you? Or
how involved are you in the company you invest? Now? Well,
first of all, I should say we started these bus
tours we talked about earlier eight years ago. We've done
eight bus tours and visited over forty cities and done
over forties pitch competitions. Uh, but I said earlier, we
also invested about two hundred companies and hundred cities, So

(42:18):
most of our investments are in companies we did not
meet via bus tours, and most of our investments in
cities that we haven't visited on our bus tours. So
initially it was about the bus tours and the pitch competitions,
but as we saw more and more opportunity, we kept
extending this. This network of over three hundred regional venture
firms we co invest with that has been a source

(42:39):
of more opportunities. But answer your question, I do get
involved with the companies. I get more involved with the
companies at the later stage, and I do at the
earlier stage. But we have a whole team here that's
focused specifically on working with the companies at the earlier stage.
We host regular summits who we call Rise of the
Rest summits, bringing the entrepreneurs together that we're back bringing
the investors we've how invested with, back bringing the community

(43:02):
startup community leaders in different cities altogether to to learn
from each other. So I'm certainly actively involved in this.
I'm working as hard as I was when I was
running a well twenty plus years ago, and it's it's
because it's a lot of fun. So you know, obviously
the cities should go to the uh you're there with
the bus there's other people who have you know, combed

(43:24):
through the companies, but the people ever just knock on
your door. And for those who have knocked on your door,
have any of them been good and you've invested in them? Yeah.
A bunch of I wanted to particularly read about in
the book is entreprene Jonathan Webb just showed up at
our office here in Washington, c kept kept pestering the
people to you know, get a meeting. You know, we

(43:44):
finally got a meeting. Uh. And initially, you know, we
thought what you had in mine was a little a
little crazy, But the more we've listened to them, the
more we became convinced it was actually a pretty interesting idea.
And that's gone to you know, create a company in
eastern Kentucky called app Harvest. UH. That went from an
idea on a napkin, and we provided some of the
initial you know, an initial hundred thousand dollars of capital

(44:07):
to get that idea going and now raised a couple
hundred million dollars and and have scaled. That's it's about.
It's in the egg tech sector, agriculture technology sector. They've
now built the largest indoor greenhouse in America and They
built it in eastern Kentucky outside of Lexington. Uh. They
picked that site in part because seventy of the US

(44:29):
population is with the twenty four hour drive, so that
fruits and vegetables can get the market quickly. They designed
it so it uses ninety less water, so it's much
more sustainable, good for the climate. And did it specifically
there because that area is known as Apple h a
coal country which for decades has been in decline and
it really seen some real challenges as the coal industry

(44:51):
largely disappeared. Uh. And so Jonathan had this idea for
creating a company that can could scale, but also creating
jobs in a community that has felt, you know, kind
of left left left behind. And so that was one
example of somebody just kind of knocked on our door,
heard about what we were doing, and wanted to be
part of it. And as I travel around, I spent

(45:11):
a good bit of time obviously not doing the pandemic,
but in the last year year and a half, been
a good bit of time traveling around the country meeting
people and you know, always like you know, people come
up to me with ideas and uh, you know, sometimes
they're they're really interesting and we have follow on meetings.
Sometimes you're less interesting and and I try to be
polite and figuring out a way to to to pass.

(45:34):
But you know, it's one of the great things about
entrepreneurship is is people having these ideas, these sparks of imagination,
and then wanting to turn them into something. And so
after many years, I was early years of a oh well,
and we just got started. I was still in my twenties,
you know, I would you go up to people at
conferences and start pitching my idea, and you know, most

(45:55):
people ignored me. A few people listened, and that sometimes
led to some partnerships ended up being very helpful to us.
And so having lived through that, I recognize I have,
you know, an opportunity and degree of responsibility to help
this next generation of entrepreneurs. So I'm always open to
getting pitched by anybody. Okay, this comes down to the money.

(46:17):
With money comes power. What kind of deals do these
entrepreneurs get when you invest money in UH and how
heavily is it negotiated. There's no such thing as a
standard deal, but are there general splits and things like that? Now,
they vary pretty dramatically, and it obviously depends on what
we're going back to before talking about the stage as

(46:38):
a seed stage, the venture stage, that the growth stage.
It varies on the earliest stage of seede stage. A
strategy there with with the Rise of Rest has been
the partner with other venture firms that are located in
these cities all across the country, so they really take
the lead in setting the terms of the deal, evaluation
and things like that, and then we're participating in in

(47:00):
in those rounds and then connecting the people were working
with together in the ways I talked about before. On
the later stage funds like the Revolution Ventures and Revolution Growth.
There we we do lead the round, we do get
more involved, including taking board seats of the companies were back,
so we really can help them terms of scaling those
those businesses, uh, and those tend to be more negotiated

(47:21):
based on kind of what the stat status the business is,
what the comparable companies, what valuations are of comparable companies,
particularly the public markets. So it's it's a little more
complicated to get to the kind of a win win,
you know, veal where where it makes sense for for
us as investors and also makes sense for the companies.

(47:43):
Our entrepreneurs born or they built a little bit of both.
I think early on, I think the general view was
they're probably born, but I've had and I was one
that I think in retrospect, I was kind of born
in entrepreneur and if I didn't know what it was
at the time, but I've also had the experience of
meeting lots of people who had great success and and

(48:03):
kind of came to it later in life, and so
you know, it was not something they really were you know,
familiar with, or not a path they were pursuing, but
they stumbled into some opportunity that where they were able
to turn into a company, including some of the most
you know, celebrated, you know, success stories in the last
you know, half century, things like McDonald's right Croc basically

(48:26):
was you know, took the idea of McDonald's when he
was selling milkshake mixers, you know, two different restaurants, and
as you know, a couple of McDonald brothers somewhere in
southern California were started ordering a lot of his mixers,
and they said, huh, why are they ordering so many
of my mixers? And so visited them and I saw
what was essentially the first or one of the first

(48:47):
fast food restaurant concepts, and that's why they were ordering
so many of them because they were they were designed
the restaurant to to basically do high volumes, and got
more intrigued and so eventually bought the you know that
you know, the rand and and sort of the some
of the core ideas and turned that into McDonald's. And
he was in his fifties when he did that. Sam

(49:08):
Walton started a little store in Bentonville, Arkansas, you know,
and just with the idea of providing you know, broader
selection to people, better prices and so forth. And that
little idea in Bentville is now Walmart, which is one
of the largest companies in the world. So, you know,
some I think are born with that sort of entrepreneurial

(49:29):
creativity builder you know, new ideas, you know, start businesses streak.
But there are also many who end up seeing something
that they just find uh, you know, fascinating and decide
to pursue it as a as a as a business opportunity,
as a as a startup, even if they're quite a
bit older, and if they never really saw themselves as entrepreneurs.

(49:52):
I realized every investment has a different amount of capital involved.
But generally speaking as a VC, what kind of hit
to ship ratio you're looking for your success ratio? Well,
it again depends on the stage that earlier you're investing,
when it's more the in the idea stage, it's going
to be you know, more misss than the later stage
where the company is a little bit more more developed. Uh.

(50:16):
You know, we try to minimize what's in the industry
called the loss ratio, where you basically you know, strike out. Uh.
And it's easier to do that with the later stage
investments because there's more to diligence. They're generally pretty significant companies.
We backed the company started in the Washington c area
almost fifteen years ago called Sweet Green, which was a

(50:37):
fast casual restaurant concept. And this really it was just
one place and there was a few places, and then
they started expanding, and so we invested in that to
help them expand other regions and that's gone to you know,
they're building now a pretty significant business and now it's
a public company with a couple of billion dollar evaluation uh.
And they were able to use that capital to to

(50:58):
scale up. We always new when we invested in them
that it would be successful. We just didn't know how
how success would be, how how big it might be.
But certainly in the earlier stage there's more risk. But
by co investing with other people were able to you know,
kind of hedge some of that risk. But for sure, uh,
you're always going to have as you say, and then
it's like in the music business or the movie business.

(51:20):
Some are going to work and some are not gonna work,
and and you just try to maximize the numbers that
are the ones that are working and minimize the ones
that that don't work. How many people work at Revolution
and how do they get their jobs and what do
they do? It's a mix of things overall, because about
seventy five people now, and some of them are focused
on each of these funds I mentioned. Some are focused

(51:42):
on sort of broader corporate functions, finance, legal, communications policy,
you know, things like that, UM, and they know they
get their jobs like anything, you know, sort of they
were looking for great people and always on the hunt.
And sometimes we know somebody because they work together in
some company or at some other venture fund, or had

(52:03):
some other role. Uh, And sometimes they just surfaced through
a you know, kind of a more traditional kind of
search process. Uh, but you know we have, We've been
able to build and build a great team. Okay, let's
go a little into the personal stuff. You grew up
in Hawaii. What do I know, even at this late
date living in Los Angeles, we're three hours behind, and

(52:24):
you frequently an afterthought and an elections, national elections, they're decided,
except for the last major one with a lot of
mail in votes out to be counted, were decided before
we even you know, the polls even closed in California.
So growing up in a y on some level, that's
all you knew. But what was it like, Well, it

(52:45):
was all I knew, and most of that I did
like it's a great place to grow up and for
a whole host of reasons. But you're right, I did
feel a little bit like I was, you know, out
of the swing of things, a little bit off the
beaten track. Even when I was up, and the television shows,
the sitcoms, everything would would run on in Hawaii week

(53:06):
after they ran on the main land. Basically the tapes
would get shipped over or flown over. We would watch
them a week later. So, you know, thankfully, back then
people weren't using the Internet or lots of phone calls
because there's been a big spoiler, you know, effact because
the reality of most people in the country already knew
what was going to happen before we we did, UH,

(53:27):
and so that was that was a little bit it
was a little bit strange. And also I write about
some of this the book Growing Up in Hawaii. It
was interesting to see how the economy was evolving because
for most of the previous century it basically had been
around agriculture, growing pineapples, growing sugar. That was really the
core industry of Hawaii. And then you know, competition and

(53:49):
global competition from other countries really decimated that industry and
they had to pivot. And thankfully we're able to pivot,
uh from and move out of agriculture and into tourism.
And particularly when the Boeing business jet came along and
the I think it was the early nineteen seventies, you know,
that really accelerated the amount of people visiting Hawaii, increased

(54:13):
the number of hotels being built and other other things
to cater to the you know, the tourism industry. And
I was able to kind of reposition itself UH and
benefit from from from from tourism, so there are lots
of benefits in in in growing up there. And I
went to a school, uh, I lived near, and it
was it was fun to you know, go to that

(54:34):
school and actually you know, and it's a small world department.
One of the people I met in high school was
President Obama. I was a senior when he was a freshman,
so he didn't have classes together, but he didn't. I
do remember playing basketball with him a couple of times,
and I do remind people when I'm speaking to two
younger folks that always be nice to everybody because you
never know who might be president United States controlling like

(54:58):
the CIA and the I R S all these other
other other things. It was kind of kind of interesting. Okay.
Basketball has mentioned multiple times in your book, as is
your competition with your brother? How how dedicated to basketball
were you? How good were you? Into what degree did
your competition with your brother ultimately inform and enhance your

(55:21):
career efforts? Oh, I think it's an ext that was
an average basketball player. It wasn't wasn't definitely not a superstar,
but but enjoyed it. Uh. In terms of my brother,
he was a really good tennis player, So that probably
led me to basketball, you know, wanting to do something
a little different than what my brother was doing. And
then he was definitely the one. It was a year
older and definitely was the one who was getting straight a's.

(55:43):
I was I was not getting straight a's. And maybe
that was another way I was going to differentiate him
if it wasn't necessarily, you know, something my parents were
or loving um. And then he ended up going to
college at Princeton and end up being a Rhodes scholar,
so really quite successful, and then went on to be
part of an investment banking firm that was one of

(56:05):
the storied firms and Silicon Valley firm called hambrogton Quist
took companies like Apple Public and gene Tech Public, and
he was a close advisor to people like like Steve
jobs Uh and the fact he was focused more on
the on the financial side of things, investment banking side
of things, and I was focused more on the entrepreneurial
side of things. That was a nice kind of balance.

(56:26):
And he could help me and I could I could
help him. Sadly, he passed away over two decades ago
from brain cancer. He was, you know, in his early forty's,
had a young family, and it just was a wake
up call that none of us can really control our
our destiny, controller or future. He was on the top
of his game and then you know, sell me. He
finds out he is brain cancer. Fourteen months later he

(56:48):
passes away. So that was a a just a reminder
of the fragility of life and and uh, everybody in
my family a reminder not to again any of her. Granted, Okay,
you end up going to school at Williams in western Massachusetts.
Was that culture shock or your father going to Williams?

(57:10):
But had you spent enough time on the mainland or
do you feel like a fish out of water in Williams? Uh?
I had not spent much time in the man was
mostly in in in Hawaii. Uh Uh, I didn't necessarily
feel like a fish out of water. I certainly had
to adjust to a rather sudden shift in terms of
seasons because you know, there's of course no snow in

(57:33):
Hawaii and or there's a little bit of snow on
one top of one mountain, but essentially no snow. Uh.
And there was quite a bit of snow and in Massachusetts,
as you know, Uh, so there's some some adjustments like that,
but I really enjoyed it. It was it was, you know,
an interesting place to be. And in full disclosure, at
that point in time, both high school and college, my

(57:54):
passion was not around UH technology or things like the Internet.
It actually was the music business. In high school, I
did a number of things that were related to writing,
you know, contra views and taking pictures and and UH
and UH. I worked with a bunch of people then
did a lot of interviews when I was a kid,
you know, Aerosmith and Wolf pan Jack and other bands

(58:16):
that were coming through town. And I was in college,
part of my little side hustle was promoting some some concerts.
So I was initially focused on the music business. A
couple of things happened that shifted my focus. The main
one was I started in in the late seventies UH,
when I was still in college, getting really fascinated with

(58:37):
the idea of well we now think of as the Internet.
I remember reading a book by a futurist, Alvin Toffler,
when I was a senior UH in nineteen seventy nine,
and the book was called the Third Wave, and he
was talking about, UH, this next wave was going to
be around digital technologies, and you know, the first wave
was agriculture and the second wave was industrial revolution. Third

(58:59):
way was going to be a dual revolution, and I
was smitten with that idea. So that was part of
what you led me onto a different path. But also
I had some stumbles in the in the music business
because my strategy, like Venture Capitel, was to back bands
when I heard their albums and thought they could be
hits and booked them for dates like six or nine
months later, with the idea that you know, obviously sometimes

(59:20):
to get it wrong and nobody would come to the concert,
but if I got it right, I would lock in
a band at a pretty good price. And that seemed
like a pretty, you know, pretty clever idea to me.
But what I didn't realize is is often you were
wrong and nobody would show up. But when you were
right and you were just a promoting college college concerts
in New England and had no cloud, the bands that

(59:42):
were successful would cancel on you. And I had two
examples of this, and I booked both Meat Loaf I think,
for one of their first dates and Cheap Trick Uh
for one of their early dates for five dollars each.
For our concert that were like six months down the road.
Both of them canceled on me a cheap trick. We've
got a deal with our offer to be on Don

(01:00:02):
Kirsha's rock concert or something like that. So I said, Okay,
this is not working for me. If I guess wrong,
nobody comes. If I guess right, they cancel on me.
I got to move on and thankfully was able to
pivot to the pivot to the internet. There are stories
of you being an entrepreneur in college selling different things.
Are those true? Yeah? Yeah, I was definitely. Uh. We

(01:00:25):
had all kinds of different side hustle, some of those
concert promotions. Some it was one business we had was
called Williams Fruit Baskets and the pitch was went to
parents because we realized the parents had the money, the
kid didn't really have the money. That when it was
coming time for like to study for exam at the
end of the semester and send these letters to parents saying,

(01:00:48):
you know, don't you want your child to eat healthy
when when they're studying for exams, And why don't you
order a fruit basket and we will we will hand
pick the fruit and deliver it to your your student
just when they're in this uh, this challenging period. And
that business did did pretty well. And we also had
some other bus businesses things like that. So yeah, again

(01:01:08):
none of them were big successes, but I enjoyed starting
them and I got learned a little bit from each
of them. Well, so if I was on campus, not
that many people go to Williams would say, oh, yeah,
that's the guy who starts the businesses. That's the guy
who does that. That was me. That was me. Really
sad part is, at one point professor pulled me aside,

(01:01:30):
I think it was a junior at the time and said,
essentially they realized that I was spending less time in
class doing the work I should have been doing, and
more time on these businesses on the sides and said
sat me down, said you know, Steve, you know, we
know you're like super passionate about some of these ideas,

(01:01:50):
but you know, college is kind of a once in
a lifetime opportunity. You're only here for four years and
you have an opportunity to learn things and meet people
and really kind of ban your mind and so forth.
So it's it really encourage you to spend a little
less time of the business things, but you can always
do later and more time on on the you know,
the college things. And of course I recognized he was right,

(01:02:12):
but at that point I was, you know, too far
into my other things. So I did okay in college,
but nobody you know, thought I was gonna, you know,
kinda was gonna win any awards. Your father was a
lawyer that you grew up in a somewhat comfortable upbringing.
Were you forming these businesses to make money or to

(01:02:35):
have the experience of building a business? Yeah, I think both.
I dad was a lawyer and I'm a teacher, as
you said, and he was always lived a comfortable, kind
of upper middle class, you know kind of life, um,
and so I never had to worry about kind of
some of the basic things a lot of people have

(01:02:56):
to worry about. But my parents also really believed in in,
you know, people being independent and resilient, and so I
got a little bit of allowance, but not much and
had to do a lot of chores for it. And
if we really wanted to, you know, buy something, you
need to figure out some way to make some money.
So it was not you know kind of here's here's
our credit card. Uh, you know, you know, I guess

(01:03:17):
at back then the credit cards were not even a thing.
But but you know, you want to buy something, you know,
you know we'll pay for it. That was not the
the the ethots. It was more of a we'll give
you a little bit of money if you do a
bunch of chores. Uh. And but if you really wanted,
you know, you have any real flexibility to do anything much,
you know, you have to go get a job and

(01:03:38):
whether that. Sometimes it was just getting jobs, basic jobs
and doing different things um over the years. And sometimes
it was starting things, you know, to to also have
a path to you know, make some make a little
extra money. But as you said, also there was something
about the idea of starting the businesses that that also
was kind of intriguing to me. So you know, for
me it was sort of a two. When I was

(01:04:07):
going to college a few years ahead of you, Uh,
Williams was not co ed, And I said, no way,
what was the status of men and women when you
went to Williams? It had shifted a few years before,
not too many years, but just a few years before
I was there in seventy six through eighty. Uh by
then was co ed. It was still uh majority men.

(01:04:29):
But it was it was definitely co ed, okay. And
what kind of kid were you there? You have a
million friends? Were you ostracized? Were you popular? Unpopular? Sorry?
In the middle. I was involved in a bunch of
different things, including co chairing the entertainment committee that was
booking concerts to come to the college, worked at the

(01:04:51):
radio station, and and uh and so I had some
and at some of the side businesses that I that
I mentioned. Um, so I was involved in a bunch
of different different things. But I would say it was
sort of kind of the the middle of the pack in
terms of you know, friend groups and things like that.
So you applied to get an m b A and

(01:05:12):
you didn't get in anywhere? Were you just going through
the motions or did you really want to get an
m B A? And how did you feel when you
didn't get it? Yeah, that was kind of a bummer,
which is you know. Of course it's been made for
a fun story since because the two schools I applied to,
Harvard and and Stanford both rejected me and spoken on

(01:05:33):
their campuses a bunch of times. I'm always quick to
remind them of what In fact. One time it came
out with another book about six years ago called The
Third Wave. And I was uh in Boston going to
some television station to film something and drove by the
Harvard Business School campus and I said stop, stop, stop,
and we got out and uh, I did a little

(01:05:54):
quick I think it was a Facebook live thing or something. Uh,
some live video basic wandering are on the campus, you know,
to find the admissions office to ask why they turned
me down whatever a number of thirty plus years ago,
so it's kind of a yeah, fun So I answer
the question I was. I was not sure what I
was gonna do at that point. I thought that was
a good path at least pursue. And at the time,

(01:06:18):
most of the business schools didn't really accept them many
kids right out of school. They wanted to get some
few years of work experience first. So I didn't really
have a high expectation that I get in, but figured
if I did, that at least would be an option
I would consider. Meanwhile, I was interviewing for a bunch
of other jobs and New York and other member of
interview and HBO and some ad agencies and so forth,

(01:06:41):
just trying to figure out what what I was gonna
do at the time, I really knew I wanted to
the old a company like an A O L. I
knew it even back in when I was graduating that
I believed the idea of the Internet was a big
idea and I wanted to figure out some way to
pursue that path. But when I was graduating, since the
Internet was still mostly a research technology, it was still

(01:07:03):
limited to government agencies and educational institutions. Consumers and businesses
weren't able to use the Internet when I was graduating
from college. Uh, there really wasn't an Internet industry. I could,
you know, inter act in the Internet company I could
could join. And back then when I was graduate college,
venture capitalists, you know, weren't backing twenty one year old
kids coming out of college. They were they were They were,

(01:07:25):
you know, looking for more seasoned people with more experience.
And so that's what led me on the path. We're
working for some big companies, Procter and gam once Cincinnati.
Well before you before you get there, so you talk
about reading the Toffler book and having an inspiration. Did
you learn anything about that in college or was it

(01:07:47):
all self education? And did anything you learned in college
help you as you went down the line or it
was just a contained experience. Uh, well, it's it's it's
a complicated question. Break into a couple of parts. Uh.
The interest in essence the Internet technology, uh was inspired

(01:08:10):
in part by the top of the book. But even
before I read the top of the book, I was
spending a lot of time doing my own research in
the college library, reading all kinds of newspapers magazines, because
back then, in the late seventies, there was some of
these new technologies that were being trialed, things like mini
tel in France and Prestel in the UK, and concept

(01:08:31):
like video text and teletext and interactive TV warrant amics
at a system called cube and being tested in since
saniel Hio and Columbus, Ohio. So there are a bunch
of things that were bubbling even the late seventies that
I found really intriguing that in retrospect were kind of
a really early days first experiments and what then ultimately

(01:08:51):
led to, you know, the Internet. Uh. So I was
learning a lot, but it was not necessarily classes I
was taking that we have related to to you know,
things that I was focused on then. But I would say,
and this is true, I think for any uh, you know,
kind of liberal arts education. I think the value, at
least the value to me was learning a little bit

(01:09:13):
about a lot of things, which gives you a broader
perspective on life and broader perspective on the world. Learning
how to aggregate and synthesize information and come up with conclusions,
points of view, learn how to communicate you know, those conclusions.
So I think there are a bunch of things that
that did end up serving me well, even if any

(01:09:34):
the specific course material, uh you know one specific things
you could connect to what I ended up you know,
later doing. So I'm actually bullish on the value of
a liberal arts education, uh, while at the same time
recognizing that that entrepreneurs will end up being passionate about
a particular idea and likely will pursue that idea in

(01:09:58):
a lot of different ways, and and many of them
are uncoupled from what they might learn and while they're
in in college. Although it might also would say it's
changed quite a bit. I have visited, uh dozens of
dozens universities over the years, including related to our work
with rise Rest, and even saw him in the last
month since the Rise of Rest book came out and
it's amazing to see how many universities really are leading

(01:10:21):
into entrepreneurship. And in Phoenix a couple of weeks ago
is at Arizona State University. They have a whole dorm
focused on entrepreneurship and makers and builders and so forth.
So there's a lot more happening on campuses now than
we're when I was there. You were there in the
in the in the in the seventies. Uh So I'd say,
you know that I did learn a lot kind of
self taught around the The ideas of that ultimately for

(01:10:43):
me became you know, kind of a o L and
more broadly, you know, the Internet. And do think looking
back that I've benefited, you know, considerably from that that
kind of broad liberal arts education. So you got rejected
by PNG, but you showed up then they gave you
a job. Yeah, I'm this line of questioning, Bob. It's
really kind of it's gonna kind of making a little

(01:11:05):
PTSD for mere. Yes. Yes, every every school, in business
school I applied to reject the man. Yes, the companies
I really wanted to work for, not just P and G,
but HBO and many others rejected me. So thank you
for pointing out that out no, no, no, when I
kept fighting and I kept fighting, and and I think
the second part of that PNGNG story, as you know,

(01:11:25):
was they did reject me. I just didn't did an
interview on campus, and you know, they just you know,
weren't interested in a follow on interview. But I really
was interested in P ANDNG. There's something about the company
and their training program for marketing people that I thought
would be really good fit for me. So it basically
appealed their decision. That wrote to Lennon said I'm sorry.
I don't remember exactly what it was, but something like,

(01:11:47):
I'm sorry that interview that goes so well. I really,
you know, I think P ANDG would be a good fit.
Here's two or three reasons why I think it would
be a good fit. Please give me another chance. I'd
like to have, you know, a second bite at the
Apple if you will. Um And so they said, okay, well,
if you'll get to New York City, you know, in
a couple of weeks, um on, thus in such a

(01:12:07):
day that we will have somebody who will meet you.
And I think they're just kind of testing me. When
I was a little bit of a hassle. I had
to you know, kind of take the you know, the
bus to the city and figure out some way to
kind of get there. And with the middle of winner,
so it wasn't exactly the easiest time to be getting around.
And the fact I just showed up, I think I
think I passed the persistence test and the passion test,

(01:12:30):
and that was a better interview. So ultimately I did
end up, you know, getting that job and moving to
to Cincinnati. Well, you're talking about the PTSD. I guess
the reason I'm asking these questions is not to point
out the bumps in the road, but to ask how
did you maintain your optimism? Well, I understand that, and
I appreciate that. The the um I don't know this

(01:12:52):
is this is part of uh, the entrepreneural journey. You know,
you're gonna you're gonna have a lot of setbacks. Even
the early days of A Oh well, we struggle a
couple of times. We had to go through layoffs. Many
people thought we wouldn't survive, you know, the company would
just kind of hit the wall. Uh, we had many,
you know, many challenges there. Remember one point we had

(01:13:12):
a deal with Apple worked on for months and months
and months and the licensed their brand name is create
something called Apple and Personal Edition, and they decided to
not long after we launched, to cancel it and and
uh tear up our contract. And a lot of people
then thought, you know, company would would hit the wall.
We had all kinds of you know, challenges, and that

(01:13:32):
that is the entrepreneur journey. There's very few overnight successes.
Most of them are kind of a slog and eventually,
you know, things kind of you know, if you stick
with it, things you know kind of turned out. So
I think that gave me that if you believe it's
a you know, idea worth fighting for, a business worth building,
that that you know that you keep keep fighting, you
keep persisting. And I think some of that may have
been you know, kind of some of those early days,

(01:13:54):
maybe even some of those rejections as you noticed and
noted and you know, continuing to fight to get what
I thought was was at least for me, the right,
right next step. I think you just learned the importance
of persistence and keep fighting. Even frankly, when I started
the the the A O. L and we you know,

(01:14:15):
struggle to raise capital in those early days, and most
people did not believe the Internet would ever be a
mainstream phenomenon. It seems crazy now, but most people would
say things to me like, what you really think people
are going to buy something called a personal computer and
and then sit down in front of a keyboard to
type a message to somebody when they can just pick

(01:14:35):
up the phone and call somebody. That feels like a
crazy idea. Said no, I actually do think that that's
gonna happen. Uh, and others. You know, a few years later,
when things around home shopping and electronic commerce started developing,
people said, well, do you really think that average people,
like normal people, would be comfortable buying a product from
somebody they don't even know, and and you actually think

(01:14:57):
they'll be comfortable with this internet thing to type their
credit card in that somebody might some hacker might steal.
I said, yeah, oh yeah, I think I think people
will be interested in that. So there was a lot
of skepticism, and it really was a decade of struggle
before finally, you know, we we broke through. And when
we first started Rise the Rest ten years ago, it
was a little bit dejabu all over again. When I

(01:15:17):
started talking about the idea of backing entrepreneurs all around
the country. What would happen with these rising cities, How
we could slow the branger into people leaving boomerang people back,
more capital and more people, more places, you know, things
we talked about earlier. Most people were skeptical. Most people
kind of didn't necessary roll their eyes, but they thought
it was a mission that likely was gonna end up unsuccessful.

(01:15:40):
And you know, it's been great to see the progress
we made in the last decade, and particularly the momentum
in the last couple of years, which ultimately loved me
to write the books. To me, it is around persistence,
But I don't think it's unique to me. Most of
the entrepreneurs I've known who ended up being successful had
to deal with, you know, setbacks, but they just keep fighting. Okay,

(01:16:01):
let's bring it up to today. Since you've been a
seer technologically in the past, what is your view on
the metaverse and Facebook's pivot to the metaverse. Well, I'm
a believer in the metaverse. We actually launched one of
the first metaverse products in the late nineteen eighties. We

(01:16:21):
did a partnership with Lucasfilm to create essentially a virtual
world with avatars. This was very rudimentary technology actually was
a common or sixty four computer with a three bod modem,
but essentially was in the early version of the metaverse.
Since I've always believed in that idea with gaming. I
think some of the more recent applications in terms of

(01:16:43):
kind of business use terms of creating much more immersive
experiences for people, including things like video conferencing really feels
like you're you know, sitting with somebody and it's really
like a real room. All those things I think hold
a lot of potential, but these things tend to take
a while before they really are ready for prime time.

(01:17:03):
And I think what Facebook now you know, meta is
struggling with is have been making very very significant investments,
you know, ten billion plus a year, and these metaverse
technologies they're a little slower to to take off than
they thought, while they're seeing some challenges in their their
core business and so they likely will you know, kind

(01:17:24):
of you know, pull back at least a little bit
on some of their their their efforts. So they probably
are right in the long run, that's an important new platform,
but they might have gotten a little ahead themselves in
terms of the pace at which they were pursuing that
the timing is certainly key. We certainly saw that with
music being the canary in the coal mine for digital disruption,
as I say, twenty odd years ago. But if we

(01:17:47):
look forward within our lifetimes, will the public at large
never participate in the metaverse? Or is augmented reality more
the thing? What's your prediction there? Well, I think I
think metaverse is one of these concepts like kind of
like Web three, which is a basket of ideas and

(01:18:10):
so you have to kind of parse it a little bit.
I think I think, uh, augmented reality, virtual reality are
are parts of the you know, the technology suite that
make things like a metaverse possible and other things like that,
and I do think they'll get broader adoption. Additional running
a revolution the investment company, I'm currently the chair of
the Smithsonian Institution. We have the twenty museums in Washington,

(01:18:33):
d C. And research operations around the around the world,
and a big focus there is how do you to
not just assume people are going to come to d
C to visit our physical museums, how do we take
the Smithsonian to them? How do we take the Smithsonian
to every home in every classroom, and obviously digital technologies
are key part of that, and some of things including
a virtual reality, augmented reality, or some of the things

(01:18:54):
that we're testing out because it is a way to
expand our kind of educational mandate. And I do think
these technologies will get you know, get get broader adoption.
But you say, sometimes there are these things are just
take a little while. In fact, it reminds me the
first time I think we met in person was twenty
years ago and backstage at an Eagles concert not long

(01:19:15):
after a Will merge with Time Warner uh And and
even then when we did the merger, which was in
two thousands of twenty two years ago, we talked about
at the time what was going to happen with streaming
technologies for for movies and and television. We talked about
what was gonna happen with music being digitized, things like Napster.

(01:19:36):
We're just bumbling bubbling at the time, but there's a
lot of nervousness in the in the music industry about it.
The things that we we identified twenty years ago is
being likely to happen, uh and likely happened soon did happen,
but they took longer to happen and salally that company
well in time, Warner together weren't able to capitalize on

(01:19:56):
some of those opportunities. In retrospect, you know, we really
should have lad the charge, not not the Apple with
the iPod or or Spotify or or or Netflix or
other things that really were the ultimate successors. It was
clear even twenty years ago what was going to happen.
We just didn't get organized to be able to pursue

(01:20:17):
those opportunities. In a way, I wish we had some
of them. Sometimes it's timing sometimes to just execution, not
having the right people focused on the right priorities and
working together in the right right kind of ways. And
so that was one of the lessons from that that merger.
You know, it could have been this dominant company ended
up kind of shooting itself in the foot. Okay, let's

(01:20:37):
go back to a o L. So the stories your
brother talks about, an opportunity, you get a job that
ultimately morph into a O L. What is the special
sauce that you bring? What is your skill that allows
you to be successful and allows the companies you're working
with to be successful? No, it it's hard to say.

(01:21:01):
I think it's a it's probably like most people, mixed
of things. I think I do have a certain sense
of the future, certain sense of what's possible. I think
I think that that that's helpful. I do bring a
certain passion and persistence to it. We talked about, you know,
some of that before. I think that's that's helpful. I
think I do bring up particular, uh, particularly early day

(01:21:23):
to day well in particular skill set around marketing, you know,
and some of the things that we did to really
build the able brand and even distribute these free trial
disc to the world to get people that you know,
try out some of those marketing things. I think we're
also kind of in my in my wheelhouse and thinking
pretty good at building teams and getting people to work
together on a on a shared mission and make it

(01:21:47):
something that is aspirational, kind of a battle worth fighting.
I think those are some of the dynamics. But I
also would point out that none of the things I've
been able to do I could have done on my own.
It really is about the the team and even those
early A O L days. I brought some of that
marketing sense to the other co founders. Mark Sarah brought
the technology sense. Jim Kimsey brought them more of the

(01:22:08):
business financial sense, and you know, none of the three
of us could have done that without the other the
other two. So it's just always a reminder to me
about this notion of off. We talked earlier about entrepreneurship
really being a team sport. I have certain things I
can contribute, but there are many other things I'm not
good at and need to make sure the overall team

(01:22:29):
has the right mix of skills and a shared sense
of purpose and passion. Okay, I remember getting a free
subscription to a O L via Warner Brothers Records. They
had I think they had like ten free subscriptions. Had
to give me one in nine two, and then I
started to hear from college students based on an article

(01:22:50):
I wrote in the Tower Records magazine saying, you know,
can I connect with you via the Internet? But I
really did not become Although I had a modem bud
at the time and I was connecting, it wasn't really
till the summer of ninety five that I became to
say it was an active user. Was ultimately a gross understatement.

(01:23:11):
When did you know on the inside that you reached
a turning point the either gaining traction or traction was imminent. Well,
it was about that time. We started in eighty five,
but as I said before, it was really ten years
of of slog to stay alive, tried different things to

(01:23:31):
ultimately get successful. Uh. You know, we did go public
and was the first Internet company to go public, so
that was a little bit of a rite of passage.
But even then there was a considerable skepticism in our
I p O. We raised ten million dollars and the
value of AO all that day was seventy million dollars,
and nobody knew or cared about this little company. A well,

(01:23:53):
that was you know, going public. It was kind of
a you know, a non event um and for a
few more years it was still the struggle. Most people,
you know, weren't really believers in the idea of the Internet.
But it was about where interest started accelerating and people
started hearing about this thing called the Worldwide Web. People
started hearing about some of the services available on this

(01:24:16):
Internet thingy and and started wanting to get online. Thankfully
at that point in time, because we've been at it
for so long, you know, I always kind of the
right place at the right time, and that really drove
our our growth in the late nineties UH and and
uh our peak about half of all the Internet traffic
United States went through a well. So it was to
me an example of believing early in the idea, sticking

(01:24:40):
with it even though it took a decade and there
were a bunch of near death experiences there. Even my
parents one point called and said, like, Steve, it's like
it's not working. It's you know, maybe it's time to like,
you know, give it up and get a real job.
And no, I think, I think, I think it will work,
and give me think think I'm gonna stick with it,

(01:25:00):
and eventually eventually we we we broke through. So it's
a to me, it's sort of revolution sometimes happened in
evolutionary ways and you have to you know, kind of
take the long view and and kind of be able
to you know, kind of live to fight another day.
But to answer your question, it was sort of inn
were things really accelerated. I also remember I think it

(01:25:21):
was probably seven we moved to you know, from charging
per hour to unlimited use. Not surprisingly, you should skyrocketed
and our systems went down. There was so much demand
that basically systems crashed. I it's for twenty three hours,
AO was was inaccessible, which obviously was a problem because

(01:25:42):
we had tried to get people to rely on us
and we were not not providing the service they understandably expected.
So in that sense, it was kind of mortifying, but
also was it was It was in one way gratifying
because it had gone from this thing that nobody cared
about too suddenly it was this national story. It was
lead story on the TV network, the lead headline most

(01:26:03):
of the newspapers A well down and even a few
years before, nobody even cared about it all. I who
cares whether ails up or down? That's not that's not
a story. So that to me was at one point
where it felt like the Internet had arrived, Ail had arrived,
had gone from being ignored to being essential. Okay, meanwhile,

(01:26:29):
you get married and start a family, and frequently being
an entrepreneur a musician, which is almost like being an
entrepreneur requires all your time. Income is low. Uh did
you hesitate saying, well, it's like telling your parents calling
you know the job or joys feel that maybe I'll
land on my feet. What were your thoughts going through

(01:26:52):
your head then? No, I think there were there are
some tough moments. Uh. It was it was still in
my twenties that we're when we got started at mid twenties,
and so when we went public, uh, I was early thirties.
So this was kind of the real difficult years. We're
kind of late like twenties, and and I think there
were some moments where I wondered if I should do

(01:27:14):
something else, but I really believed in the idea, and
thankfully he was able to kind of you know, kind
of get get by and kind of, as I said before,
kind of lived to live to fight another day. Again.
That's not you know, just my story. It's pretty common
entrepreneur stories, you said, pretty common story, and other industries,
including music, where people are you know, struggling For a

(01:27:35):
while Springsteen was playing a whole lot of clubs, did
nobody cared about until finally he was able to to
break through. And I think it's a little bit of
a test. You learned some things about yourself thing that process.
You also have some experiences that probably do make you
better and stronger ultimately. But you know, there was some
difficult periods of time, but thankfully I I stuck with it.

(01:27:58):
And eventually, even though sometimes it felt like the light
at the end of the tunnel was the light was
far away and flickering, you know, I kind of stay
with it, and eventually the tunnel got a little shorter
and the light got a little brighter. Okay, so a
O L is marching along. In tech, you have to

(01:28:20):
be ahead of the game or you die. Whereas like
other industries talking about Internet, in intellectual property industries, they
have a catalog, They have a back list which keeps
them alive. So alll starts to roll. To what degree
were you focused on where we're going next? I was
mostly focused on where we go next, and then secondarily

(01:28:43):
focused on continuing to build a team to scale. Always
started with a couple of dozen people. By the time
we went public, it was less than two hundred people.
Uh six seven years later at ten thou people. So
it really it really scaled up pretty pretty dramatically. So
I had to, like many entrepreneurs, you know, learned to
to not do certain things I had been doing and

(01:29:05):
build a team that I could empower and trust to
do them because I needed to focus on some things
that I could perhaps uniquely do, and some of it
was trying to understand what was next and positioning a
company for it. So was you know, building the team.
Some of it also was being kind of a spokesman
evangelist for the medium. I had to do a lot
of things in the particularly the late nineties to educate

(01:29:27):
people around about the Internet, the press, you know, Congress,
other other other other folks, to other people in other countries.
Even that, because all was visible, I became kind of
a a spokesperson, not just very well but in many
ways for the for the industry. So I had to
focus on those things. I had to spend less time

(01:29:48):
on some of the things I had done, including some
of the marketing things, or some of the product things,
or some of the technology things that I spent more
time on in the early early years. Okay, so from
my perspective, once a again I had a free subscription
when you charged by the hour, never mind a free
subscription through the nineties I was living on the service
was a big education. I remember vividly in the summer

(01:30:11):
of nine six you could launch a browser on AOL.
But for me, the real breakthrough moment was in the
summer of two thousand. I went to visit my sister
in Minneapolis where she had a high speed connection, which
of course led you to Napster. Now, in this particular case,

(01:30:31):
I maintained, I don't think we had to pay for
a while my A O L and the high speed connection,
I got quite a way right away. But for me,
what killed A O L or put a dent in
it was more just the fact there was a high
speed connection sold by the cable company or a third party,
and that was twenty dollars right there, and people didn't

(01:30:52):
want to spend multiple as opposed to it being the
Web that put a dent in AO. Well, what do
you think from your inside view, Yeah, I think that
that's fair. The way AOL when it first launched, it
as other competitors at the time, was separated from the
Internet because at the time and when we started, it's

(01:31:15):
hard for people to believe us. But it's true it
was actually illegal for consumers or businesses to be on
the Internet. A few years later, Congress passed some legislation
to commercialize the Internet, but the early years it was separate.
When the Internet got commercialized, that actually accelerated A A
Well's growth because people wanted to be on the internet.
We integrated a very fast web browsers, so actually you

(01:31:37):
could get the websites through a well faster particularly with slow,
slow modems, and you could with most of the other
Internet service providers. And in addition to that, we provided
a whole suite of services that were exclusive to well
people connection and a lot of exclusive content and and
other services, so sort of the Internet and a whole

(01:31:58):
lot more for about the same price as the Internet only,
and that's really what drove our our hyper growth in
the late nine nineties. You're right, the transition to broadband
was was more challenging. We actually argued in Congress to
pass legislation to open up the cable broadband networks so
it would work like the dial up narrowband networks. The

(01:32:20):
phone companies were required to allow other people to operate
on their their networks. The cable companies were not required
to do that. Uh, And that effort did not succeed,
and so essentially the broadband networks remained closed as opposed
to being opened, which was one of the reasons that
led to our merger with Time Warner, because the part
of the reason to do that was Time Warner at

(01:32:40):
the time had Time Warner Cable, which was the largest
cable system with the largest broadband footprints, So we knew
the market was moving to broadband. We couldn't on our
own get there, and so by merging with Time Warner
would have a clearer path the broadband as well as
obviously all the other businesses that were part of Time Warner,
including some of the media business, Warner Music, Warner Brothers,

(01:33:02):
you know, CNN, HBO, you know, Time Ink, you know,
many many other things that were part of that. So
it was sort of the obvious thing to do in
terms of ensuring our path the broadband, as well as
having a broad suite of really great brands that would
be more valuable in a in a digital world. So
that really was the motivator doing. Unfortunately, once we did merge,

(01:33:24):
uh that some of the synergies that struck me as obvious,
we're not really pursued integrating a Well and Time Warner Cable.
So it was one bundled offering, which is what you
mentioned before, never happened, ended up really competing with each
other as opposed to benefiting from each other, and ultimately
that led to you know, not capitalizing on some of

(01:33:45):
these opportunities, which which led to the a well going
from the leader of the pact of being kind of
irrelevant now, which is which is sad to see and
it's sad to say, but that that that's the reality.
I think the takeaway from me goes back to some
of the things we talked about before getting the you know,
the vision right is helpful and important, but that's really

(01:34:08):
just the starting point. If you look at the initial
press release we wrote when we merged ale on Time
war two years ago, it was largely accurate and predicting
what was going to happen over the next ten or
twenty years. But our inability to organize the company to
capitalize on those opportunities and some of the friction between
different divisions basically hobbled our ability to execute against that

(01:34:31):
vision and ultimately lead to you know, the company being
broken up. So at what point, if the merger happened
in two thousand, at what point did you have the
idea it was Time Warner always the target or were
there other companies in the mix. There are other companies
in the mix. In in nineteen you know, the when

(01:34:55):
the internet really was you know, growing dramatically in popular
already and a Well's growth rate was accelerating dramatically. Also,
our stock market valuation accelerated dramatically. We went from mentioned
we went public in seventy million by late ninete it
was on sixty billion dollars. It was actually the best

(01:35:16):
performing stock of the decades, something like eleven thousand percent
increase from the time we went public. And so we
did see the value of having more diversified mix of businesses.
So we did want to use our our stock our currency,
if you will, to merge with other companies. We considered
a lot of different options, including some communications companies that

(01:35:37):
you know, discussions with A T and T about merging
for example. We also talked to a number of of
internet companies, email, electronic arts, you know, others around merging.
But but we always kept their eye on the prize,
which we did believe was time warn't for the reasons
I said before. It was unique in being able to
you know, provide what at the time at least I

(01:35:58):
thought was uh path the broadband that we couldn't get
on our own and couldn't get with any other other company,
which is why I pursued that in particular, and indeed
the first conversation I had with Jerry Levine, who was,
as you know, the CEO of Time Warner at the time,
proposing the idea of merging our companies. Within the first
minute of explaining why I thought we should merge our companies,

(01:36:19):
I said, and if we can do this, I will
step aside as CEO and let you run the combined company.
Because I knew it would be hard to get a
deal with with Time Warner had done. Our value was
quite a bit higher than their value, and they're all
kinds of other issues that we're going to be complicating issues.
But since was the only path to get it done
was to basically propose that the Time Warner side essentially

(01:36:44):
run the combined company. So that's why I did. And
when we when we did close the merger, I did
step aside as a CEO, even a well didn't no
longer reported to me. I was chair of the board
for a couple of years, and then uh, you know,
on the board for another year or two, and finally
decided it was time to move on. We just had
a difference of opinion of what to do, and I

(01:37:05):
think they were getting tired of me saying let's go
left when they wanted to go right, and I was
tired as well, so it was time to to kind
of part ways. And and even though it's obviously a
big disappointment, and that ultimately led me on this path
that had been on for most of the past two decades,
instead of starting in their company, starting revolution a company

(01:37:25):
to invest in many entrepreneurs with a particular bias, as
we've discussed around investing in entrepreneurs outside of the usual
hubs like like Silicon Valley. So the legend is that
ultimately the time Warner side of the company became resistant
to the A O L people in the A Well
ideas set an accurate description, Yeah, I think that's accurate.

(01:37:47):
I think in retrospect we could have handled it better.
We probably were a little toned depth diplomatic as we
could have been. There. There's definitely a sense that these,
you know, new kids on the block that haven't been
around long are coming and telling us you know what
to do. And I'm sure there was more of that
than I was even aware of, which was which was
a mistake, But there also was a reluctance on the

(01:38:08):
part of a lot of parts of the was then
time Warner to really fully embrace the Internet, fully embraced
the idea of digital convergence, fully embraced the reality. That
also meant it would challenge some of the existing business models.
You have to involve some of the interesting business models,
and I think there was just a reluctance to do that,

(01:38:29):
and in a sense that might take longer for some
of those innovations to to happen. I again sort of
remember a meeting probably at least twenty years ago with
some of the folks UM on the Warner Music side
and talking about was likely I thought it conda happen
around streaming, and what likely also going to happen around um,
you know, kind of how music companies might be structured,

(01:38:52):
and over time maybe it's a little bit more like
you know, venture capital, where they're investing in a new
artist and and share in the upside across multiple, uh,
you know, parts of the artist's career what then became
known as three sixty deals. That seemed like it was
a pretty obvious thing that was going to happen, but
there was a lot of resistance to that because the time,
as you know, the way that business was organized, as

(01:39:14):
you know, the music companies just put out the music,
and you know, somebody else did the concerts, and somebody
else had the publishing, and somebody else did this, and
somebody else did that, and having a more integrated view
of it was just not something most people either believed
in or just believed you practically they could get everybody
organized and headed in that, you know, that direction. So
again it goes back to I said earlier, it's sort

(01:39:35):
of a lesson around you know, the idea is important,
but ultimately it's putting that idea into action. Uh. And
the fact that we had some of the right ideas
around what was going to happen with broadband, I was
going to happen with streaming, or what was going to
happen with many many different things is sort of irrelevant
because we weren't able to be the company that actually

(01:39:57):
made that happen. And so that apply that lesson to
the work we're doing now at Revolution, including Rise of
the Rest. And part of the reason they even wrote
the book on the Rise of the Rest is I
really wanted to tell the stories of these these entrepreneurs,
these companies that were doing amazing things that really inspired me.
And and also surprised me in many ways, and I

(01:40:21):
wanted to make sure that people understood what was happening
with these with these companies, and particularly understood what was
happening in these cities that we're kind of being renewed
and revitalized because of the work of those entrepreneurs. So
it goes back to this issue of of trying to
make sure, you know, we don't just say we think
the rest surprize we hit the road, whether it be

(01:40:42):
bus tours or launching a fund or writing a book,
to actually do everything we can to make sure the
rest rise, to make sure we kind of level the
playing field for entrepreneurs in America. So in business books
and in media, the A O L Time and our
merger is portrayed is the worst in history of business.

(01:41:06):
To what degreed is that effect? And usually people writing
that have no vision, no knowledge of the inside. Is
that something that has emotionally hurt you? Is that something
on your back or is that something those people just
don't understand what's going on. And I've moved on well
about that because you don't love the fact that it's
it's you. It is the worst merger in history. I
understand why it is. It was the largest merger in history,

(01:41:29):
and it was the execution of it was flawed in
the way as I mentioned, So I think it's fair
to characterize it as that I of course have a
slightly different view, maybe more than slightly different view of
exactly what happened and why it happened. UH, and also
have the view of the CEO a O Well, which
might be different than the view of the CEO of

(01:41:49):
Time Warner, because for for us and our shareholders in retrospect,
turned out to be a good thing to do. But
but certainly understand some of the the the dynamic that
just in terms of the economics that I just did
quickly you know, cover it. When when we did the
you know, the merger, as I recall, the numbers were
something like the combined company UH would do about forty

(01:42:12):
billion of revenue and ten billion of profits something in
those that magnitude. UH and UH A Well contributed about
a billion of that ten billion of profit. But able
shareholders ended up with fifty of the combined company. So
for the able shareholders, it was a way not just
to have this what we thought would be this great

(01:42:32):
path to broadband, but also with more diversified mixt of businesses,
and we concluded the better for the able shareholders instead
of owning a well of this much larger, much much
more profitable, much more diversified company. I get it that
the people on the Time Warner side, you know, in retrospect,
did not view it the same way. I understand why

(01:42:53):
people were frustrated and when the stock market crashed after
the merger, not just for our company, but from many
other company's. Obviously a lot of people got hurt by that.
I also understand that. But but do bring the lens
of of you know what I was charged with doing
a CEO? H Well, okay, Time Warner was ultimately destroyed
as a company, broken up, pieces sold off. Presently, David

(01:43:17):
Zaslav runs has all the content with Discovery with an
amazing amount of debt, and keeps cutting costs and programs.
Rupert Murdoch sold the Fox other than the channel and
the uh TV stations, I believe, sold all the library
and the production of Fox to Disney. What should these

(01:43:40):
people be doing and what do you view the future
of this big time entertainment going forward? I don't know.
I think others have a more informed view I've been
largely out of it for for two decades and focused
on this, this next generation of entrepreneurs. I think some
of the things that Disney is done recently are consistent

(01:44:02):
with the kind of things I thought all time Warner
could do in terms of really driving some of the
streaming doesn't think we have done with Disney Plus in
particular is really quite impressive and uh and and because
they really got the whole company behind that initiative. And
and so I think when companies really get organized and
have strategic priorities and need strategic imperatives, and Disney basically said,

(01:44:24):
we now recognize the future is is streaming. We need
to control our destiny. We need to have more direct
control of our customer and not just rely on Netflix
or others is sort of intermediaries. They put kind of
everything behind that, and that ultimately led to the success.
I think that's hard for big companies to do, but
that's what they need to do. One of the reasons
I'm so excited about backing entrepreneurs across a variety of

(01:44:47):
sectors is having lived that. I kind of know how
the big companies, the big companies in the industries that
are up for up for grabs. Now outside of the
entertainment business, music business, that publishing businesses, that the digital
businesses that were associated with Ale and Time Warner, but
some of the things we've talked about before, like a
healthcare industry or or other other industries, I understand kind

(01:45:10):
of the plays that the big companies are going to run.
And those plays are even clear when the economy is tougher,
the markets are tougher, inflation is rising, what's gonna likely happen.
Many of those companies will pull back on their long
term innovation initiatives because they cost a lot of money
and they have an uncertain future, which actually creas even

(01:45:31):
more of an opening for the entrepreneurs. They're trying to
challenge those incumbents and and bring on new ideas. And so,
having lived through that watching little companies that were just
around the fringes, when when we did the deal with
the Able and Time Warner, I stepped aside companies like
Google and Amazon. We actually had a deal with Google
early on where we were able at five percent of

(01:45:52):
the equity and Google because they wanted to help us
use their search engine for our audience. You know, those
companies have risen over the last in a year as well,
uh well has has been in decline, and now are
these new powerhouses. That's going to happen in industries all
across the economy, and it's going to happen in cities
all across you know, the country. And so that's really

(01:46:13):
why the sort of some of the work I'm doing
now around rise the rest and backing these entrepreneurs and
supporting these cities and partly informed by that that experience
and a belief that most of the innovation will come
from uh, these these entrepreneurs with with with new ideas,
new business models, new perspectives that can move more quickly
and and uh try things in a more kind of

(01:46:37):
agile kind of way than big companies that big companies generally,
you know, play defense when young entrepreneur companies are are
playing offense. You know, the big companies generally are are
are just more short term oriented. You know, younger companies
are kind of take the long term view. So I
think it's very exciting time for innovation entrepreneurship in the country,

(01:47:00):
and it's going to impact every aspect of our lives.
You know, how we learn, how we eat, how do
we stay healthy, how do we move around, how do
we invest, etcetera. Uh, And you know, a lot of
that innovation is going to come from this next generation
of entrepreneurs and a lot of that innovation is going
to happen and these dozens of rides the rest cities
I write about in the book, and you know, Silicon

(01:47:21):
Valley will still be strong, will still be the most
innovative startup hub in the country, indeed probably in the world.
But we hit peaks Anilicon Valley a few years ago,
and the rise of the rest is accelerating. The pandemic
has been a tipping point, and so I think people
are should pay more attention to the people and places
that have generally been left left out of the innovation discussion.

(01:47:44):
I think that's where the action as, that's where the
puck is going. Okay, so you spoke in both the
book and earlier about three waves. Could briefly, could you
delineate the first and second wave and expand upon the
third wave where we are now? Well, the first wave
of the Internet was goes back to some of the the
things we talked about before with companies like A Well,

(01:48:05):
but obviously there were many others. It was taking it
what was just an idea and turning into a reality,
building the automaps, building the servers, building the content, and
other reasons that people should get online. Uh, And so
that really was the eighties and nineties, and and you
know that was really you know when the Internet when
exactly what you said before sort of arrived. And you know,

(01:48:26):
it took ten, fifteen, twenty years for you before it
really kind of arrived, but eventually it did. That then
set the stage for the second wave of the Internet.
And because at that point the Internet was built and
everybody was connected, you didn't have to focus so much
on the building phase or the infrastructure phase. You could
focus essentially focus on building on top of the Internet.

(01:48:47):
And it's particularly building software and apps on top of
the Internet. And a lot of the big innovations in
the last couple of decades have basically been that you know, apps,
whether it be you know, Facebook or Twitter or Google
or other things. It's basically software writing on top of
the Internet. And that's been super important obviously created some
super valuable companies. The third wave of the Internet, which

(01:49:08):
is the phase we're now in, is and we talked
about some of this before is sort of when the
Internet meets the real world, and that's when it really is,
you know, disrupting some of the big industries like healthcare
and the important aspects of our lives. And that's going
to require, I believe, a different entrepreneurial playbook. It's not
just about the software, not just about the apps, not
just about trying to get the idea spread you know,

(01:49:30):
you know, kind of you know, viral e and then
figuring out ways to monetize it. It's going to require
more systems level change to really change sectors like like healthcare,
So partnerships will become more important, policy will become more important.
These tend to be regulated sectors and entrepreneurs don't like
dealing with regular but the reality they have to if
they're going to innovate in this in this third wave. Uh.

(01:49:53):
And it's also going to play to the rise of
rest in place. It's gonna advantage the cities that have
some of the domain expertise, send credibility, and in some
of these sectors that are up for grabs. So I
think even though the first wave was certainly exciting and
taking the Internet from being an idea to being a reality,
and the second wave also was very exciting because all
the things that we've had been built on top of

(01:50:15):
the Internet that we're particularly doing the pandemic, we're able
to take advantage of in ways that seemed inconceivable just
twenty years ago. I think the third wave, when it
really is, you know, the Internet meeting the real world,
is where the most interesting and most successful and most
valuable companies will will be created, and it will have
a very uh substantial impact in terms of of America's

(01:50:38):
leadership in innovation entrepreneurship. And I hope, which is why
we're working so hard on the Rise of Rest. I
hope it will be a more inclusive approach to innovation
entrepreneurship that does include more people, does include more places
they are. More people can therefore be optimistic about the
future as opposed to anxious about the future. We can
maximize the shots on Goald max My is the ideas

(01:51:01):
we try by backing more more entrepreneurs and in more
cities around the country, and hopefully people reading the Rise
of Rest book will see why I'm so enthusiastic about
this and so optimistic about it. It's it's something that
I've had the privilege of having a front row seat
literally a bus in some cases over the last decade

(01:51:21):
as he developed. And I'm excited about the rise of rest.
I was in that those early days of the Internet
when it I believe in the idea even when others didn't.
To me, the rise of rest is sort of deja
vu all over again. And sectors other than healthcare that
are right for integration with the Internet or to be disrupted.

(01:51:42):
I mention them basically, if you look at the most
important aspects of your lives, they've changed a little bit,
uh in in the last ten thirty years. They'll change
a lot more in the next ten years. And that's
this acceleration of digital technology, acceleration of the internet. Uh.
And you know healthcare, for examples one six of the economy,

(01:52:03):
it doesn't work all that well, you know, and there
are ways to provide better care and better outcomes, greater
convenience and lower costs that new uh. You know, people
with new ideas. Many of those will come from young
companies led by entrepreneurs, are gonna kind of you lead
the charge on where you're reimagining our food systems, which
generally are too industrial and not particularly healthy and companies

(01:52:25):
that that were back there, like like a Sweet Green
or and many others are really leading the charge. There's
a lot of things happening around reimagining education, both the
K twelve education as well as you know kind of
colleges and universities, you know, lifelong learning. Digital technology will
play a key role, you know kind of there. So
it really is, you know, just all across the you know,

(01:52:47):
the landscape in terms of really big industries that are
likely to change a lot, and really important parts of
our lives that are likely to change a lot. Yeah.
That what I would encourage people to do, which again
is probably reason I wrote the book, is don't you
be a spectator watching this. If you have a particular
passion or you have a particular insight, jump in, do
something about it. And the great thing about what's happening

(01:53:09):
now with the Rise to rest and goes back to
what we said before, four hundred new venture firms in
these rightsrous cities that didn't exist ten years ago. There
are now existing backing companies in in you know, dozens
and dozens and dozens and dozens of American cities that
historically didn't have venture capital. You can now do that anywhere.
You shouldn't feel like you're in Ohio or Wisconsin or

(01:53:30):
Iowa or Tennessee or something. And so therefore you don't
have the ability to participate in the start up sector,
participate in the innovation economy. You're left out because you're
not in Silicon Valley or some other players. No, you
can be in the game. Uh, and you can do
it now. Uh. You just have to get started, and
you just have to say instead of just looking at

(01:53:52):
the problem and wondering if somebody else is going to
solve it, I'm gonna solve it. I'm going to do
that by starting a company. I'm gonna do it now,
and I'm gonna do it from wherever I am. Okay,
just a couple more things then we'll go. Big point
in the book is about immigration. The HB one visas.
Certainly has been stories in the news about a lot

(01:54:12):
of people foreign countries who would have stayed in the
United States ended up going back greatly to India and
starting the businesses there. Are we going to see a
change in this what's going on? Yeah? We we we
we must see it changes. I've been working on as
sadly unsuccessfully for the last decade. Actually testified the Senate
about nine years ago around immigration reform. And the reason

(01:54:35):
is because the data is pretty clear that immigrants have
played a central role in driving the American economy. About
of the successful companies have been immigrants or children of immigrants,
and part of what's made America so so, you know,
so compelling as this pioneering spirit, this is being a
magnet from talent all around the world wants to be
part of the American story, wants to build the next

(01:54:55):
chapter of the American story. But we have made it
more difficult for people to come. We have made it
more difficult for people who are here, perhaps at a university,
to stay. And as a result, we were losing some
of that that that talent ward to other other countries.
And we need to we need to reverse it. It
almost happened this past Sumber. Some legislation past Congress, any

(01:55:16):
one bill called the Chips and Science Act, had some
good things in and around you're reshoring some conductors and
funding the development of war these regional hubs, you know,
ties in with our rise of rest of work. But
also there was a startup VISA provision that was at
one point part of that when the final bill got done,
it got kicked out, which is unfortunate. If if we

(01:55:36):
fast forward, you know, a number of years in America
ceases to be the leader of the pack, ceases to
be the leading and common in the world, ceases to
be the most innovative entreprene nation in the world. Uh,
it's like very likely will be we got this wrong.
We lost that that edge we had globally as this
as this as magnet. So I'll continue to do whatever

(01:55:57):
I can to try to, you know, support uh kind
of reform around immigrations, so we can when this when
this battle for particularly around some of the talent that
you know likely could be the entrepreneurs of the future,
building some of the companies of future and creating lots
of jobs for for for Americans in the process. And

(01:56:17):
we've covered a lot of the viewpoint of the entrepreneur
that location is not that important now you can do
it anywhere. But in conclusion, any other advice for entrepreneurs, Well,
first of all, I recognize, uh that entrepreneurs are choosing
a path that most people think as a risky path,

(01:56:38):
and so it requires a certain boldness, a certain fearlessness
to take that path. I think we should understand that
and and respect that. We also should recognize that sometimes
people who try things stumble the first time. You know,
it is the first yet that doesn't work, uh, you know,
but you kind of keep having to take shots. And

(01:57:00):
Ruth was the home run king. He had more home
runs anybody else. Guess what. He also was a strikeout king.
He had more strikeouts than ab Els. If you're swinging
for the fences, you're not gonna always get it. Sometimes
you'll you'll end up with a strikeout. We also need
to understand that. So if an entrepreneur try something and
it doesn't work, that doesn't mean they're a failure. That
just means that particular idea is a failure. So just

(01:57:22):
getting more people to realize that the importance of it. Uh.
And even though if you go back to what we
were talking about just a bit ago, that America itself
was a startup two fifty years ago, America was an idea.
Most people around the world didn't think America would succeed,
just as most people don't think startups will succeed. There's

(01:57:44):
a lot of skepticism in the first couple of decades
of that American story. Somehow we powered through, somehow we survived,
and then we thrived and we went from this fledgling,
you know, almost hit the wall startup nation to the
leader of the free world. And so how do we
keep leading? We can't do that unless we're leading around innovation.

(01:58:05):
We're leaning in the future, we're trying new things, we're
taking risk, and we need to celebrate that as a
core part of the American story and celebrate the entrepreneurs
out there. Perhaps I'm listening to this right now that
are you know, taking that shot? Are the ones we're
thinking about taking the shot? And maybe now is the
time they'll step in into the game. So that again,

(01:58:25):
that's my you know, my real passion here is making
sure I can do what I can to make sure
America continues to lead. America continues to be a magnet
for talent, America continues to be this innovative, pioneering nation.
But we do it in a more inclusive way that
we do bring along more people, we do bring along
more places, and we can inspire the next generation to

(01:58:47):
start here, build here, scale here, create jobs here, drive
economic growth here. So for those entrepreneurs out there, or
those potential entrepreneurs out there. Thank you for taking the
risk you're taking. Thank you for taking a shot. Keep
fighting and hopefully ultimately you'll you'll be successful in that
one and then strengthen your community, the community you care

(01:59:08):
about by creating more jobs and opportunity in those communities,
and collectively that can also strengthen our nation. Yeah, that's
what I've been telling people for years now. There is
no flyover country all in America. Obviously their pockets that
don't have broadband, but essentially all of America has broadband.
Everybody has hundreds of channels. Everybody is hip, everybody is informed.

(01:59:32):
It's not like you're talking earlier. It takes a week
to get the TV show in Hawaii. But I must
admit your book really fleshes it out. It really talks
about the different locations and what is happening, and it's
eye opening, especially in an era where living costs may
be much cheaper in between Boston, New York and Silicon Valley, California.

(01:59:57):
In any event, Steve, I want to thank you so
much for taking the time talking about your history and
explaining your investment strategy across the country. So thanks again,
Thanks Bob. Great to reconnect. Love your writings, love your podcast,
keep it up. Thanks so much. Until next time, this
is Bob less sex.