• Gabriel Hayward

Case in Point

The cofounder and former CEO of AOL talks about the food-tech crossover and how innovators are changing the industry for the better.

Steve Case, who helped foment the Internet age as AOL's co-founder, has crisscrossed the country the last few years championing a new revolution: the third wave of the Internet.

Just as the technology boom lifted the economies of Silicon Valley, New York and other coastal cities, its latest iteration will benefit the Midwest and other pockets of the U.S. as health care, energy, agriculture, education and other industries become ripe for disruption.

Case serves as chairman and CEO of the investment firm, Revolution LLC, which he also cofounded. Washington, D.C.-based fast casual Sweetgreen, nonprofit Revolution Health, and mobile ordering platform OrderUp are among the food-related brands in Revolution’s portfolio. A tireless entrepreneur, Case also started the philanthropic Case Foundation with his wife Jean and serves as chair of UP Global, which fosters entrepreneurship.

Q: What got you launched on this mission?

A: I was working more on the policy side. And then a little over three years ago, we decided to hit the road and do these Rise of the Rest bus tours. We have done five so far and we are planning our next one in October.

I concluded that while advocating for policies that are pro-innovation, pro-entrepreneurship, pro-start-up, it's something I continue to do, but there also was a role to play I felt in terms of trying to be a catalyst within some of these cities and helping to build more of a network effect and network density in these cities and shine a spotlight on what's happening with entrepreneurs in these cities to attract more media and attract more investor attention.

Each city is different but there are dynamics kicking in across all of them that are encouraging and ultimately will result in more start-ups in more places and will ultimately level the playing field so everybody everywhere really does feel like they have a shot at the American dream and so we are creating economic growth and jobs everywhere not just in a few places.

Investor and AOL founder Steve Case, second from left, poses with Sweetgreen founders Jonathan Neman, Nicolas Jammet, and Nate Ru (from left). Case counts Sweetgreen among the investments in his portfolio at Revolution LLC.

Q: Are you seeing people who have been traditionally in the food space meet technologists halfway more than ever before?

A: Yeah, I think that's fair. I think in some respects now, because of the ubiquity of the Internet, every company needs to be a tech company. With these first two waves, tech was its own sector. Now tech is starting to impact other sectors, including food.

With Sweetgreen, there are really two, maybe three, big trends that were driving them. One was the whole fast-casual segment starting to disrupt the fast-food segment, which we thought would continue over the next 10–20 years. The second was a push for healthier options that some have called "real food." And the third is the convenience that's made possible by technology, including smartphones. My bet is within three years, the majority of Sweetgreen orders will be done on smartphones and people will order as they're walking to the restaurant. When they walk in, they'll be recognized, and billing information is stored so they'll be able to be out of there quickly if that's their purpose. If they want to go have the experience of standing in line and getting their food and eating there, obviously that will still be there and be appealing to a lot of people, but technology does enable convenience for the consumer.

Technology also enables them to manage—in terms of the healthier food side of things—the supply chain, so they can work with local farms and create this farm-to-table, seasonal kitchen experience that would have been difficult, if not impossible, to do 10 years ago. It's not just the technology people see, like their smartphones and the convenience that's possible there, but it’s also how technology is really the underlying platform to allow some of these concepts to really take off.

Q: What is it about Midwest cities that makes them uniquely attractive to entrepreneurs and investors?

A: I'd say some general reasons. There are a lot of people who have a connection to these cities: they grew up there, went to school there, have some affinity and they'd rather live there and raise their families there. There are also some financial considerations. Money raised goes a lot further.

As for city specific reasons, each of these cities has an interesting history and some of that history and some of that perspective and some of that culture and some of that DNA is increasingly helpful as we shift to the third wave of the Internet, which is less about the software and the apps and more about integrating technology and the Internet in important aspects of our lives and disrupting big sectors of the economy. I think partnerships are going to become more important and being closer to some of the big companies, many of which are in the middle of the country, is important.

Q: A lot of people like you who come from the tech sector have a different mindset when approaching business. What kind of mindset or skills do you think are meeting a need in food that wasn't even realized before?

A: I think it requires a balance, a meeting of the minds, and a partnership mentality. I think technology is again an enabler for innovation, but there are other aspects that are important as well. In the case of the [quick-service] space, obviously the food is the main event. Technology is increasingly important, but people aren't eating the technology; they're eating the food. You've got to have the quality of food, you've got to have the right kind of operational focus, and you've got to have the right real estate.

There are a lot of aspects to it that are important and will continue to be important. If people bring too much of a tech-centric focus to this, they'll miss out. Technology is a new enabler that will drive and accelerate some of these trends around real food, some of these trends around convenience—particularly for this growing, younger demographic, what some call Millennials, who are tending to be a little more foodie oriented, a little more adventurous in terms of their eating, a little more experiential in terms of what they're looking for, and driven by convenience and having grown up as sort of digital natives. They're very comfortable with technology and expect things to work in a certain kind of way. You've got to use technology as an enabler for broader innovation, whether it be on the food side or the convenience/delivery side, as opposed to thinking that suddenly you just sprinkle some magical technology pixie dust and you can independently do it.

Related to that, I think it's going to require more partnerships between people who understand the restaurant industry and people who understand technology. If you don't have both, I think you're going to have an iffy challenge in the future, and in many cases it's going to require partnerships between technology companies and major companies in the restaurant space as opposed to everybody going it alone. I think strategic partnerships will be more important in this space.

We've also invested in companies like Revolution Foods, which started eight, nine years ago by two moms to create healthier school lunches, and that's already scaled over $100 million of businesses on the school side. They then launched to the consumer product side. How they use technology to then manage that whole process of getting the right ingredients from the right places and then delivering them to the right schools in the right kind of way, and now also delivering consumer products to Safeway and others—technology enables that.

We also invested in a company called OrderUp; it's in the delivery business, particularly in the second-, third-tier cities. The major cities like New York, Boston, etc., have GrubHub and providers like that, but they generally are not available in the medium-sized, smaller cities. So OrderUp is focused on that, using technology. But again, they had to partner with restaurants in different regions to be able to create the complete consumer experience.

Q: After the election there has been a lot of soul searching in Silicon Valley and the tech industry about automation, AI and other technological advances leading to job losses and feelings of dislocation. Is it important for the tech industry to help get people the education and training they need to get jobs in this industry?

A: I think it's important. There is no question that these new technologies are going to destroy a lot of jobs and displace a lot of jobs. It's always been the case. Two hundred years ago over 80%, 90% of us worked on farms, now it's 2% because technological innovation made it possible for land to be farmed with fewer people. That will continue to be the case. You can't debate that. You can't slow that. But you can say, what are the new jobs that are going to be created in the future and frankly what are the new industries that are going to be created in the future.

When we started with AOL 30 years ago, no one believed the Internet would amount to much, let alone be a big industry, but these things come out of nowhere and surprise you. What you do is back more entrepreneurs with crazy ideas in more places and in more sectors of the economy. Some of those things will end up surprising you. I don't think we are going be solving that problem or have a path to solving that problem if we only invest in people we happen to know who live closer to where we live, mostly in places like Silicon Valley. And it's not just a place issue.

The current data says that last year 90% of venture capital went to men and only 10% went to women. Only about 1% went to African Americans. Obviously there's a fairness argument but beyond that how do we have more shots on goal. But also it's an issue of economic opportunity. Some of those people are going to have the ideas and the companies that end up being the next big successes. How do we try to maximize our efforts to back as many people as we can in as many places as we can from as many diverse backgrounds as we can.

STEVE'S Parting Wisdom for Young Entrepreneurs'

Looking to get ahead in the Third Wave? Steve Case advises young entrepreneurs.

  1. Tackle bigger problems and challenges. Instead of wondering how to get rich as an entrepreneur, try to solve the problems we’re facing. How can we solve the health of our communities? How can we improve education? Or the food system so everyone eats healthier? It’s the big problems that offer the biggest opportunities for the entrepreneur. Taking on hard challenges will take more time, but they’re worth it. So pick a battle worth fighting; pick a mountain worth climbing.

  2. Have a long term, ‘change the world’ mindset. That means building things to last. Some entrepreneurs want to build a company to flip it; to create an app or service, build it up, then sell it. That’s fine, but my own preference is to take a longer term view and actually make a difference.

  3. Remember that revolutions happen in evolutionary ways. No amount of success happens overnight. Perseverance is crucial. You want to build the next multi-billion-dollar company, you need to be willing to put in a decade of work before you see it take off.