AOL Co-Founder Steve Case Predicts the Cities and Industries That Could Create the Next Silicon Valley

Back in the 1990s, the area between San Jose and San Francisco wasn’t all that different from the rest of the U.S. Now it’s the country’s undisputed tech capital.

So what city might stand a chance of becoming the next Silicon Valley? AOL co-founder and Revolution founder Steve Case says predicting that is like trying to choose a favorite child–but he’s willing to highlight a few candidates. Case, whose Rise of the Rest fund invests solely in companies outside of the VC-saturated states California, New York and Massachusetts, gave his insights during a fireside chat at the 2020 Inc. 5000 Vision Conference, a weeklong virtual event celebrating this year’s Inc. 5000 list of America’s fastest-growing private companies.

Case said cities like Ann Arbor, Michigan and Pittsburgh are seeing startup success thanks to research institutions–the University of Michigan and Carnegie Mellon, respectively–that have been successful at retaining talent in recent years. “Before people would go to those great universities and leave as part of that brain drain,” he said. “Now more people graduating are staying, and some people are even returning.”

Case pointed out that local policy will have a major impact on which cities attract startups in the coming years. The city and state governments in Indianapolis, for example, for years have focused less on trying to woo large firms or open new factories, and more on attracting entrepreneurs who could start the big companies of tomorrow.

Case cited cloud computing company ExactTarget to show how one startup could positively impact a city’s ecosystem: The firm started up in Indianapolis, was acquired by Salesforce for $2.5 billion in 2013, and has since added 1,000 employees to make it Salesforce’s biggest office outside its San Francisco headquarters. ExactTarget co-founder Scott Dorsey has reinvested some of that capital into the local startup community, creating an accelerator, High Alpha, that invests in and nurtures young companies.

Case also mentioned Seattle and Austin as two examples of cities with booming startup scenes. And Chicago and Denver, he said, are enjoying a lot of momentum when it comes to funding and rates of entrepreneurship.

The startub hubs of the future, though, will likely focus on different industries than what we’ve seen in Silicon Valley, Case added. While companies like Facebook developed largely free-standing apps that could simply be built on top of the existing internet, the next wave of startups will focus on large legacy industries like health care, food and agriculture, and education–or, as Case put it, “Real world meets the internet.” Those industries will be harder to crack due to regulation and will likely require advocating for policy changes and partnerships with existing firms.