Silicon Valley will remain ‘leader’ of the startup world

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

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

“It’s the leader of the pack and will continue to be the leader of the pack, the most vibrant startup ecosystem really in the world going forward,” Case recently told Yahoo Finance. “We’re not talking about the collapse 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 began in the 40s, when Frederick Terman, the dean of the Stanford University School of Engineering, began encouraging faculty and alumni to start companies. In 1951, he created the Stanford Industrial Park, which served as the headquarters of companies such as Hewlett-Packard (HP) and Varian Associates.

The late 50s saw further change when eight of Nobel Prize Winner William Shockley’s top researchers resigned from his lab and founded Fairchild Semiconductor. The company would go on to develop the first integrated circuit, a key component of modern electronic devices that helped establish the Bay Area as a tech innovation hub.

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

Steve Case, Chairman and CEO of Revolution and Co-Founder of AOL, speaks during the

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 2014 Milken Institute Global Conference in Beverly Hills, California April 29, 2014. REUTERS/Kevork Djansezian (UNITED STATES – Tags: BUSINESS SCIENCE TECHNOLOGY)

Because of this, venture capital money was flowing into Silicon Valley with the establishment of some of the world’s largest venture capital firms such as Kleiner-Perkins and Sequoia Capital in the early 70s.

“Silicon Valley rose, a lot of things came together. Certainly, great universities like Stanford, a sense of a possibility. A lot of people moved to California because it was kind of a pioneering spirit, even the Gold Rush and that, that mentality to help inspire, you know, people,” Case said. “But also, that’s kind of where venture capital really was based. It started a little in New York, but the center of gravity is in San Francisco. And then you create this increasing dynamic returns where more and more money is made.”

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Despite Silicon Valley’s rich history of business innovation, 2021 saw 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 went to Silicon Valley, according to a report produced by the 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 to find promising entrepreneurs and startups outside the Valley. His Washington, DC venture capital firm, Revolution LLC, has invested in nearly 200 companies in more than 100 cities. He believes that companies outside of traditional startup hubs should get more attention from investors.

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

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

“It’s really remarkable what’s bubbling up there. And I really do believe over the next decade, it will accelerate,” said Case. “And, 10 years from now, we’re going to recognize that Silicon Valley is still the leader, but there’s going to be a more diverse innovation economy, a more inclusive innovation economy, which I think will be good for those communities and actually 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 reporter and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.

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