Silicon Valley will remain the ‘leader’ of the startup world

In recent years, entrepreneurship has spread outside of hotbeds like the Bay Area, with vibrant startups popping up in unlikely cities such as St. Louis, Atlanta and Chattanooga.

Still, Steve Case, the former CEO of AOL, insists that Silicon Valley remains the most powerful player in the startup world.

“It is the leader of the pack and will continue to be the leader of the pack, the most vibrant startup ecosystem in the world that will continue,” Case recently told Yahoo Finance. “We’re not talking about the fall of Silicon Valley, we’re talking about the rise of dozens of other cities to create this more dispersed innovation economy.”

The startup scene in Silicon Valley dates back to the 1940s, when Frederick Terman, the dean of the Stanford University School of Engineering, began encouraging faculty and alumni to start companies. In 1951 he created Stanford Industrial Parkthat served as headquarters for companies such as Hewlett-Packard (HP) and Varian Associates.

The late 50s saw further innovation when eight of Nobel laureate William Shockley’s top scientists resigned from his laboratory and founded Fairchild Semiconductor. The company would go on to build the first integrated circuit, a key component of modern electronic devices that helped establish the Bay Area as the hub of technological innovation.

In the early 70s, large amounts of venture capital began to flow into Silicon Valley with the founding of venture capital firms such as Kleiner-Perkins and Sequoia Capital.

Steve Case, chairman and CEO of Revolution and co-founder of AOL, speaks below

Steve Case, chairman and CEO of Revolution and co-founder of AOL, speaks during “Adjusting to the Tech Revolution: Surfing the Wave or Swept Away?” panel discussion at the Milken Institute Global Conference 2014 in Beverly Hills, California, April 29, 2014. REUTERS/Kevork Djansezian (UNITED STATES – Tags: BUSINESS SCIENCE TECHNOLOGY)

As a result, venture capital money poured into Silicon Valley with the founding of some of the world’s largest venture capital firms such as Kleiner-Perkins and Sequoia Capital in the early 70s.

“Silicon Valley rose up, a number of things came together. Certainly, big universities like Stanford, a sense of opportunity. A lot of people moved to California because it was kind of a pioneering spirit, even the gold rush and that mentality to help inspire, you know, people,” Case said. “But that’s also kind of where venture capital was really based. It kind of started in New York, but the center of gravity was really in San Francisco. And then you created this increasing return dynamic where there was more and more of the money.”

Despite Silicon Valley’s rich history of business innovation, 2021 has seen an increase in venture capital funding outside of the Bay Area. For the first time in a decade, less than 30 percent of total US venture capital has gone to Silicon Valley, according to a report produced by Rise of the Rest Seed Fund and PitchBook.

For the past decade, Case, who co-founded AOL in 1985, has toured the United States by bus in search of promising entrepreneurs and startups outside the Valley. His Washington, DC venture capital firm, Revolution LLC, has invested in almost 200 companies in more than 100 cities. He argues that companies outside traditional startup hubs should get more attention from investors.

“I think it’s moved from something where people thought it was kind of on the fringes to now recognizing some really significant companies that are being built in different parts of the country,” Case said. “And it makes sense to expand your aperture beyond where you happen to be, whether it’s San Francisco or New York or Boston and look for opportunities elsewhere.”

In his book “The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream,” which was published in September, Case profiles 30 innovative new companies from unexpected places. For example, he writes about Catalyte, a software company based in Baltimore that uses AI to find and train software engineers. He also spotlights Appharvest, a sustainable food company in Kentucky that offers a more efficient alternative to traditional agricultural enterprises.

“It’s really remarkable what’s bubbling out there. And I really think that over the next decade, that’s going to accelerate,” Case said. “And in 10 years, we’re going to recognize that Silicon Valley is still the leader, but will have a much more diverse innovation. economy, much more inclusive innovation economy, which I think will be good for those communities and frankly good for the country.”

Case oversaw the merger of AOL and Time Warner in 2001 and became chairman of the board. He resigned from the position in 2003. Yahoo and AOL are both owned by the private equity firm Apollo Global Management.

Dylan Croll is a journalist and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.

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