Silicon Valley will remain the “leader” of the startup world

In recent years, entrepreneurship has expanded beyond hot spots like the Bay Area, with vibrant startups popping up in unlikely cities like 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’s the leader of the pack and it’s going to 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 decline of Silicon Valley, we’re talking about the rise of dozens of other cities to create this more dispersed innovation economy.”

Silicon Valley’s startup scene 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 Park, which served as headquarters for companies such as Hewlett-Packard (HP) and Varian Associates.

The late 50s saw further innovation when eight of Nobel Prize winner William Shockley’s top researchers quit his lab to found Fairchild Semiconductor. The company would go on to build the first integrated circuit, a key key component of modern electronic devices that helped establish the Bay Area as a center of technological innovation.

By 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, president and CEO of Revolution and co-founder of AOL, speaks during the course

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

Consequently, venture capital money flowed 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 has taken off, a lot of things have kind of come together.” Certainly, big 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 inspire, you know, people,” Case said. “But also, that’s where venture capital was really based.” It started a little bit in New York, but the center of gravity was really in San Francisco. And then you created this increasing returns dynamic where there was more and more money.”

Despite Silicon Valley’s rich history of business innovation, 2021 saw an increase in venture capital funding outside the Bay Area. For the first time in a decade, less than 30 percent of all US venture capital went to Silicon Valley, according to a report 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 venture capital firm, Revolution LLC, has invested in nearly 200 companies in more than 100 cities. He argues that companies outside of traditional startup hubs need to attract more attention from investors.

“I think it’s moved from something where people thought it was a little bit 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 broaden your horizons 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, published in September, Case profiles 30 innovative new companies from unexpected places. For example, he writes about Catalite, a Baltimore-based software company that uses artificial intelligence 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’s really remarkable what’s going on outside.” And I really believe that in the next decade it’s going to accelerate,” Case said. “And, 10 years from now, we’ll recognize that Silicon Valley is still the leader, but it will have a 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 2001 merger of AOL and Time Warner and became chairman of the board. He resigned from that position in 2003. Yahoo and AOL are owned by Apollo Global Management, a private company.

Dylan Kroll is a reporter and researcher at Yahoo Finance. Follow him on Twitter at @CrollonPatrol.

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