Policy is crucial to spread the AI wealth with Steve Case from Revolution

Hello and welcome back to found Tech Crunch's podcast that brings you the Stories behind the startups I'm your Host Becca scac and this week we have a Special episode for you dear Listeners today we are bringing you a Conversation I had with Steve case at Techcrunch's strictly VC event on June 11th case the former co-founder and Executive chairman of AOL and current Founder of VC firm Revolution talked About how it's imperative that the AI Wave isn't concentrated to the coastal Startup hubs and how VC's policymaker And big tech companies can work to Prevent that from happening it's a great Conversation so give it a listen and We'll be back next Tuesday hello everyone and just to Echo Aona thank you all so much for being Here as she also mentioned we are Sitting here with Steve case which is a Pleasure on our part so I know people Have probably heard of this little thing Called artificial intelligence and if You haven't you'll probably know what it Is by the end of tonight so I think one Thing we want to start off talking with You about is you have been here for a Few Market Cycles you've also seen a Couple boom and busts of different types Of technology so thinking back to the AOL days the rise of the internet and Thinking about what we're going through

Today with AI what do you think about When you look at the two of those Trends Together what's similar and what are you Thinking about watching AI now it's a Great question first of all I should to Say welcome to everybody it's great to See this turnout tonight when we started AOL almost 40 years ago here in the Washington DC area there was really no Venture capital in the Washington area We started Revolution about 20 years ago It was still pretty rare and it's been Developing nicely still obviously still Room for growth but it's great to see The VC Community developing and the Ecosystem around startups across a lot Of sectors developing and we're Delighted to be kind of co-hosting this With strickly VC and and Tech crunch so The backstory on a AOL that then ties me With your question on AI when we started It was 1985 only 3% of people were Online those 3% were online in average Of 1 hour a week so it's pretty early Days in terms of getting America Online Getting the internet to be part of Everyday life and there are a bunch of Policy decisions that ended up in Retrospect being pivotal one was a Decision a few blocks from here by judge Green to break up Mell the phone company And create Regional Bell operating Companies which Unleashed competition Lowered the prices another was a

Decision about 50 years ago to fund out Arpa then DARPA the creation of the Internet the investment in the core Technologies to build the internet Another also a few blocks from here at The FCC was a decision to force the Telephone companies to open their Networks was called open access it Allowed companies like AOL to kind of Ride on their rails and the final one Was actually a congressional decision The Telecom act that commercialized the Internet when we first started AOL in 1985 it was still illegal for consumers Or businesses to be on the internet it Was restricted to government agencies And educational institutions which Sounds crazy now but was true then so so Congress had to basically pass this Legislation to open up so those were Some of the things in retrospect as I Look back that were pivotal as we look At AI the interesting thing to me is the Internet is basically 50 years old AI is 75 years old right so actually AI is Older than the internet but it's having Its internet moment what some have Called its Netscape moment about two Years ago with obviously the release of Chat GPT and so it went from bubbling Rather slowly quietly for 75 years Before break into the you mainstream as A result now there's much more attention Obviously with companies and with policy

Makers here and Brussels other other Places trying to figure out what the Right policies are and what I argued When I was testifying at the Senate of The AI forums that Senator Schumer was Putting together that one area they Should look at there are obviously many Facets to it was this Open Access idea The building on what made the internet Possible how do you make sure you know This is not just about big Tech getting Bigger but it enables smaller companies Startups including VC back companies to Compete particularly as it's just from The broader horizontal platform plays Which you've seen in the last couple of Years to more vertical AI across a lot Of different Industries and we've talked A little bit about what is different This time and sort of what is the same But I'm curious what did we learn from The rise of the internet that we could Apply today to maybe make AI not Necessarily that the internet had a bad Roll out or anything like that but maybe Prevent some of the problems with AI Before they happen I think most people Obviously they different views most People thought it was wise in the early Days of the internet because it was so Nent as I mentioned for government once They took the steps that I just Mentioned the Open Access and the Breakup and things like that to have a

Relatively light touch in terms of Regulation they didn't quite know what Was going to happen he didn't even Things like e-commerce he didn't know How popular that would be and so they Kind of said let's this run a little bit Let's air on the side of a little more Innovation a little less regulation What's different about AI is how it you Know kind of became this overnight Phenomenon really a global phenomenon it Took us 9 years to get 1 million members It took open AI something like three Months to get 100 million so obviously They're smarter than we are but the Times also have have changed and so as a Result it does require more intervention The other thing I think most people Would say with the Internet is in Retrospect some aspects particularly Social media probably should have been Watched more closely some things that Have happened there that have been Pretty divisive and there are a lot of Challenges now people are trying to Figure out what to do about that which Is leading Congress and others to say With AI we shouldn't wait too long to Put you know kind of guard rails in Place and kind of a road map in terms of How this should develop in place at the Same time there is a recognition I think Appropriately goes back to what I said Before as America needs to lead with

This new technology we're we're coming Up on our 250th birthday in two years we Need to make sure we Remain the most Innovative entreprene in the world we Need to have the leading economy in the World so we need to lean into new techn Technologies new Industries new Opportunities with a bias towards not Just what might go wrong but also what Might go right so we don't want to Overregulation to AI not too little not Tooo big just right and I know you Mentioned how open source is super Important here with the rise of AI and Sort of looking at potential policy and Things like that and I want maybe double Down on that a little bit and why is a Focus on open source so important Especially when we're talking about the Rise of AI well first of all I don't Have anything against large successful Companies our next speaker Lena Khan Might have a slightly different View and I should say I I feel a little yeah I Feel a little old because Lena was in College the same class as my son so I'm Feeling a little bit old here but Lena Has done a great job in in framing some Of the challenges broadly in terms of The big getting bigger and obviously Taking action through FDC in a number of Cases many of which I support some I Think might have been a little bit of a Little bit of an overreach but the

Courts will will see that through I Think that is important I I am not you Know arguing in favor of big Tech I'm More in favor of little Tech my passion My focus like many of you is on startups The next generation of launchers that Can create the next companies and they Can only do that if they have a real Shot if they have a Level Playing Field AOL would not have existed if it had Hadn't been for that decision to open up The networks and and provide Open Access So if you don't have essentially open Source in the area of AI even though I Acknowledge there's risks associated With open source including National Security risks I'm not naive about that But I think the biggest risk would be Not enabling you know kind of this whole New generation of innovators and Entrepreneurs to participate and just Allowing the big tech companies to to Get bigger so it's important that we Support the bigger companies allow them To take actions that do maximize is the Likelihood America continue to lead but Not just rely on them we need to make Sure they have platforms that are are Open and the history of Technology Certainly the history I've seen is many Companies in the early phase of Innovation are open they're trying to Build you support for their platforms Build developer communities around their

Platforms that's what Facebook did That's what Twitter did that's what most Companies do but at some point when they Become leaders and maybe in some cases Even become dominant they tend to close Things down and put toll up and so right Now things tend to be more open although I would say open AI is not really open It has deals with a lot of companies Including obviously Microsoft and Yesterday apple and so they have a lot Of Partnerships but we need to make sure That the then broad platforms the large Language models are open now and in the Future we also need to make sure Venture Capitals including hopefully some in This room are backing some of these Companies focused in vertical areas and The last point I'll make is goes back to Another passion is how to what we call Rise of the rest how do we make sure the Innovation is not just happening in a Few places like Silicon Valley but Happening in many places all across the Country and with our rise the rest fund We've now invested in 200 companies in 100 different cities including a number Of companies in the AI space Tempest AI In in Chicago focused on healthtech Carbon Robotics and Seattle focused on EG Tech prion in North Carolina focused On Enterprise software catalyte not far From here in Baltimore focused on edtech These are all AI companies that are not

Just in the normal Tech hubs they in Other places around the country I think That's also important because I think Strategically and I worked on a report That just came out a couple of months Ago a national entrepreneurship strategy Was part of the Commerce Department I Co-chaired something called the national Advisory Council on Innovation and Entrepreneurship and the report and the Recommendations were really about how Does America continue to lead but do it In a more inclusive way that brings Along more people and more places so we Can be creating jobs and opportunity in Lots of places not just in a few places Which also might help at least in small Way bridge this divide we have in our Country where a lot of people do feel Left out and left behind and we have a Role as entrepreneurs as investors to Address that and not just be backing the Same people in the same places but cast A wider lens have a broader funnel Because some of these amazing companies Are happening all over the country more From this conversation right after a Quick Break and what you guys do at Revolution Definitely resonates with me as someone If anyone reads any of my work on Tech Runch you'll notice a lot of the Startups I cover are not in Sil Valley And they're not in New York and they're

Not in Boston because I think it is Interesting to kind of highlight the Stories and the companies growing Outside of those places because they do Often get overlooked but when thinking About that in the context of AI why is It so important to make sure that there Are companies outside the hubs in the Building in the AI space who are getting The support and are getting sort of the Resources they need to be successful Several reasons first of all the data Says that most jobs are created not by Small business or big business but new Business startups under 5 years old so If you're not backing new businesses Startups some of which will fail but Some of which will scale into being the Next big companies of tomorrow and doing It in a lot of places those places will Over time be hollowed out because the Disruption happening on the coast will End up essentially destroying jobs in Other parts of the country and Displacing a lot of people and hurting a Lot of families and you've seen that Play out over the last several decades Across a variety of different sectors so There's sort of an economic policy Focus Which is why down the street Congress in A bipartisan way has done a number of Things about place-based economic Strategy so it's some even call Industrial policy the chips and science

Act was part of that not just investing In chips not just investing in science But also investing in Tech hubs other Initiatives are also underway including NSF a program called engines to focus on On Tech hubs so that's one part of it But there's another part of it which is That AI is going to start shifting as I Said from these horizontal opportunities To these vertical opportunities and AI Will help reimagine it already is Healthc care and education and food and Agriculture and financial services all These different sectors are are up for Grabs and it's going to require Partnerships with a lot of the existing Companies to really get traction many of Those companies are in the middle of Country more than half of the Fortune 500 companies are in the middle of the Country yet 75% of the venture capital Is in three states on the coast and so Building a bridge is going to be Critically important my view and I wrote A book a number of years ago called the Third wave is in this next wave of Innovation place is going to matter more Which ties in with rise of the rest Policy is going to matter more which is Why you see more and more interest in DC Including strictly VC and Andre and Horwitz opening an office here this Month that policy aspect is going to be Critically important but Partnerships

Are also going to be critically Important almost all the successful Companies are going to need Partnerships Tempest I mentioned the the healthcare AI company has been able to aggregate a Lot of data from a lot of Partners That's what makes them a successful Clear another company that's focused on BI metric technology working with Airports and and Airlines needed Partnerships with the Transportation Authority TSA needed Partnerships with The airports and the Partnerships with The airplane otherwise their biometric Technology really had no real value and So the Partnerships are going to be Important and they some of the key Partners in these sectors that are up For grabs are in the middle of the Country so it's great that there is more Of a focus from investors from Entrepreneurs from policy makers not Just what's happening on the coast but What's happening all across the you the Country that will maximize the like well More shots of goal in terms of making Sure America leads in the AI Revolution And we we do it in a more inclusive way And something else that's going on this Year that I'm sure everyone in the room Is very well aware of is that we are an Election year and of course the big oh Well they already kind of picked the two Candidates I'll be honest I'm too young

To Run well the presidential election is of Course getting a lot of coverage and a Lot of press as it should be but there Are local races that of course play a Factor in some of these things too like Upcoming policy and regulation things Like Senate races and states that maybe We're not thinking about in this Conversation that will play a role so I'm curious of course not asking you to Share who you think will win or who you Want to win on any of these races but How much should people pay attention to The upcoming elections this year as it Relates to AI policy that would impact These potential companies well I do just As a policy matter I've chosen to stay Out of politics I said I worked on the On this National advisory Council I Worked on the jobs Act 11 years ago Worked on opportunity zones worked on The tech hubs legislation that I Mentioned I found that my passion is Innovation entrepreneurship job creation Kind of economic growth and so forth It's better I can accomplish more if I Focus on policy do it in bipartison way And stay out of politics so that's my my General View and I don't you know I'm Not a donor to campaigns I'm not you Know active in in the process but I do Think it's a very important election Nationally and locally for a whole host

Of reasons but also Al in terms of AI Specifically and some of this is what's Motivating some of the big AI companies And more broadly the tech companies to Be at the table here in Washington or in Brussels trying to work on legislation Because I think it's now 700 and Something laws are been proposed on a Variety of different states which will Create a a patchwork of regulations will Be very difficult to manage so almost Every company while they might prefer Less regulation would rather have a Clear sense of what the playing field Looks like and not have different states Do different things we saw that in the Early days of of the internet there was A real you know push to have kind of Unified Federal policies on key things As opposed to have you know states do Different things that made it much more Difficult and some of that happened with Tax policy other things but as much as Possible the core policies that we Driving the internet and I think the Core policies that are are driving AI It's better to have a more integrated National view of them but there will be Some more action in different states You're seeing almost every week new Legislation kind of introduced and I do Think more broadly it goes back to what I said before about the themes of place And partnership and policy I think those

Are the three PS that will dominate this Next 10 or 20 years of innovation Economy it's going to be critically Important for all of you to be engaged On policy and make sure that people Understand policy makers understand the The issues and they strike the right Balance they get the things right you Can't sit on the sidelines and then Complain if something else happens You've got to be in the game you have to Be engaged which is why you see more and More you know technologists investors And others spending more and more time Here that will become even more common Over the next decade I think you'll see More firms opening up Venture firms on In Silicon Valley Opening Up Offices Here in Washington and a note on that With people being here and people having A part in helping to write and helping To sort of sway sounds much heavier than I mean it to be but helps sway potential Policy and regulation smaller companies Don't necessarily have the resources to Do that how can larger companies both Work to get their own interests forward While working on this potential policy Or talking with people working on it While still being able to find that like You said you keep saying balance find That balance where small and large Companies will be able to succeed well I Think I certainly understand that and as

I said we backed a lot of companies we Have a seed fund a venture fund a growth Fund and we backed you know a lot of Companies a variety of stages of Development obviously at the earliest Seed stage they basically focused on Survival trying to figure out product Market fit get their first customers get Hire their first team and they don't Have the same level of of time to engage On policy matters but as they start Getting a little larger and get the Venture stage certainly the the growth Stage they have more time and they Recognize it's more of a imperative to Be engaged and it's really on multiple Levels some of it it's the broader Policy where you're often just trying to Educate people about what's happening And then there's specific issues that Address specific problems or Opportunities either your company or Your sector have and I should note on That front that most people look at Policy as a problem as something that's Going to slow down Innovation as Something you have to jump through hoops In terms of you know kind of you dealing With regulations around drug development Or what have you and there's definitely That aspect to it but we've also seen Many examples where policy changes have Unleashed opportunity and accelerated Growth we saw that with one of the

Companies we backed a number of years Ago DraftKings which initially is Focused on fantasy sports but when a Supreme Court made a decision that Allowed states to decide whether they Wanted gaming or not it actually Unleashed a growth opportunity for that Company we've seen that with other Companies as well I do want to make one Other point we started rise the rest 10 Years ago this month that was the first City we went we had these bus tours we Went to 50 cities and as I mentioned Earlier we ended up investing in 100 Different cities and that started in Detroit and we're back in Detroit next Week to celebrate the progress they made Which is remarkable that the year before We arrived the city of Detroit went Bankrupt it lost 60% of its population Over a half century then went bankrupt And the downtown was largely abandoned Now the downtown is largely filled Mostly with startups cranes are building New buildings and Detroit still has Challenges for sure but it shows what's Possible if you're betting on Entrepreneurs you're helping create jobs In these communities and we've seen that All over the country so it really is Remarkable to see the momentum and I Hope the Venture capitalists who are are Here first of all as I said at the very Beginning it's great to see them in DC

As opposed to in other cities but I hope They also hit the road and see what's Happening in different parts of the Country because there still is an Arbitrage Venture capist investing a Company in Nebraska or in Ohio or in Minnesota the valuation still Particularly at the seed and even a Little bit at the Venture stage there Tends to be an Arbitrage which starts Closing at the growth stage and is Completely closed by the time companies Go public so there is an opportunity to Generate great returns by backing Entrepreneurs in these places are Reimagining industries that are Important aspects of our lives and the Process not to generate great returns But also be a catalyst for the next wave Of job creation economic dynamism in Many parts of the country And we are out of time so join me in Thanking Steve for coming With found is hosted by myself TechCrunch senior reporter Becca scac Alongside senior reporter Dominic madori Davis found is produced by Maggie stth With editing by Kell our illustrator is Bryce Durban founds audience development In social media is managed by Morgan Little Alysa Stringer and Natalie chman Tech crunch's audio products are managed By Henry pikovit thanks for listening And we'll be back next week

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