Back when this fall’s college freshmen were still in their mothers’ bellies, Steve Case’s America Online was so valuable that it could afford to pay $182 billion for media giant TimeWarner and its TV, movie, and magazine empire.
That deal didn’t work out so well, once rivals started offering services like free email. But Case is still rich, and still thinking about how to spread startup ideas, tech, and wealth.
For the last three years, since he wrote a book called Third Wave and began recruiting national and local investors for what is now his $150 million Rise of the Rest investment fund, Case has been traveling the nation, promoting the idea that venture capital and tech know-how don’t exist just in the three dominant tech markets of Silicon Valley, New York and Boston, but can now be achieved in Indianapolis, Baltimore, Detroit, and even Philadelphia, building on surviving local industries that need better technology.
For a crowd of over 100 filling the assembly room at the newly renamed 1776 (formerly Benjamin’s Desk) tech sublet center on 41st Street near the University of Pennsylvania and Drexel University campuses, Case acknowledged that despite fast-increasing communications speeds and connectivity, success is not as easy as downloading a magical venture-capital app to your smartphone. Most venture capital still goes to companies founded by well-connected men, and little to African American- or Latino-owned firms: “The reality is, it does matter where you live. It does matter who you look like. It does matter who you know.”
All the more reason to go looking for smart people and ideas outside the usual centers, Case added.
He claimed to see progress in Philadelphia since he started his tour. “There is more work getting done around Penn,” with its new Pennovation Center hosting large and small corporate partners alongside Penn scholars. “Comcast has started to engage more with entrepreneurs, in building the framework of its infrastructure platform.” Maybe there is, as city Commerce Director Howard Epps had told the crowd, less of a “brain drain” among recent college grads, Case said.
Case rattled off the names of entrepreneurs who sold their companies and went home to invest the proceeds in new enterprises. “But this is a movie, not a snapshot,” he added. “Most people in most parts of this country wake up in the morning and are anxious.” Despite low unemployment rates, “things aren’t going well for their family. They worry robotics and driverless cars will make things worse. Well, if we are only backing entrepreneurs in a few places, of course they are anxious. They are being left behind.”
Case has signed up a Who’s Who of American investors to back his nascent fund — David Rubenstein of Carlyle Group, clothing mogul Tory Burch, Jeff Bezos of Amazon, Meg Whitman of Hewlett/Packard, hedge fund mogul Ray Dalio, David Rubinstein of Carlyle Group, Howard Schultz of Starbucks, and the chemical Koch brothers. “Some of the greatest investors are interested in places like Philadelphia but don’t know where to start,” he said. “They don’t have the networks you do,” he added, flattering the start-up founders in the crowd. He says his fund’s $150 million will leverage much larger investments.
Case took questions through his host, Anthony Maher, a partner in the former Benjamin’s Desk, whose centers, home to 2,700 small and tech-based businesses, have now merged with the rival 1776 chain under the 1776 brand. Maher and his sister-in-law Jennifer (who is married to Houwzer founder Mike Maher, Anthony’s brother) are co-CEOs, under 1776 boss Evan Burfield, the new executive chairman.
1776 now has centers spread across the New York-Philly-Wilmington-Baltimore-Washington corridor. Philadelphia has concentrations of life-sciences and food-related start-ups, Maher told me. Financial and media tech are big in New York, defense and compliance startups in Washington.
Epps, serving as Mayor Kenney’s commerce director in what he called ” my first and last public position,” told the crowd that “Philadelphia is having the best economy that it’s had” since at least the 1980s, despite persistent high poverty. The city has one rare commodity: room to grow. Unlike Boston or Washington, “we can put 200,000 people in Philadelphia and not break the backs of our infrastructure,” he added, whether or not “the company with a smile” in its logo — Amazon — picks Philly for its second headquarters.
By 2026, when Philadelphia will be celebrating the 250th anniversary of U.S. independence — real estate developer Dan DiLella was named head of its organizing commitee last week — Epps predicted “at least 100,000” additional residents for the city, with continued redevelopment in West Philadelphia, more towers along the Schuylkill, hotels and homes spreading from the new office buildings at the Navy Yard, and continued growth around Temple University up Broad Street. Philadelphia’s proximity via Amtrak’s Acela to New York “will further drive demand in housing and people and businesses choosing Philadelphia,” though more needs to be done to make sure all Philadelphians are in position to participate in the growing economy, Epps concluded, echoing Case’s message.