In recent years, entrepreneurship has spread outside of hotbeds like the Bay Area, with vibrant startups emerging in unlikely cities like St. Louis, Atlanta and Chattanooga.
Still, Steve Case, the former chief executive of AOL, insists that Silicon Valley remains the most powerful player in the start-up world.
“He 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 start-up scene in Silicon Valley dates back to the 1940s, when Frederick Terman, dean of Stanford University’s School of Engineering, began encouraging faculty and alumni to start companies. In 1951 he created the Stanford Industrial Parkwhich served as the headquarters for companies such as Hewlett-Packard (HP) and Varian Associates.
Further innovation occurred in the late 1950s when eight of Nobel Prize winner William Shockley’s leading researchers 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 center of technological innovation.
In the early 1970s, large amounts of venture capital began to flow into Silicon Valley with the founding of venture capital firms like Kleiner-Perkins and Sequoia Capital.
Consequently, venture capital money flows 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 1970s.
“Silicon Valley rose, various things came together. Certainly, great universities like Stanford, a sense of possibility. 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 also, that’s where the venture capital was really based. It started a little bit in New York, but the center of gravity really was in San Francisco. And then you created this dynamic of increasing returns where there was more and more money.”
Despite Silicon Valley’s rich history of business innovation, 2021 has seen a surge 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 looking for up-and-coming entrepreneurs and startups outside the Valley. His Washington, DC venture capital firm, Revolution LLC, has invested in about 200 companies in more than 100 cities. He argues that companies outside of traditional startup hubs should attract more attention from investors.
“I think it’s gone from something that people thought was a little bit on the fringes to now recognizing some really big companies that are being built in different parts of the country,” Case said. “And it makes sense to expand your opening beyond where you are, whether it’s San Francisco, New York or Boston, and look elsewhere for opportunities.”
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 startups from unexpected places. For example, he writes about Catalyte, a Baltimore-based software company that uses AI to find and train software engineers. It also highlights Appharvest, a sustainable food company in Kentucky that offers a more efficient alternative to traditional agricultural companies.
“It really is remarkable what is bubbling out there. And I really believe that over the next decade it will accelerate,” Case said. “And 10 years from now, we will recognize that Silicon Valley is still the leader, but it will have much more diverse innovation. economy, a 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 in 2003. Yahoo and AOL are owned by private equity firm Apollo Global Management.
Dylan Croll is a reporter and researcher for Yahoo Finance. Follow him on Twitter at @CrollonPatrol.