It helps that he’s an hour late and his audience has spent the time getting into a keg of Shiner Bock, but when Steve Case walks into the Austin (Tex.) offices of the startup he’s just invested $40 million in, he gets a deafening welcome. More than 100 employees of Bigcommerce, a four-year-old company, are on their feet or perched on swings in its huge game room, with plate-glass views out over Hill Country. Case, overdressed from a meeting earlier in the day at the U.S. Capitol, is in a button-down shirt, pleated slacks, and tasseled loafers, looking a generation older than the scruffy dot-com workers he’s about to address. All he gets out is “Hey!” and then they’re chanting: “Steve! Steve! Steve! Steve! Steve!”
For any startup, a new round of funding is an ecstatic occasion. Getting the money from Case—billionaire co-founder of America Online, father of the consumer Internet—brings a sense of destiny: Maybe this company will become legendary, too. “Our vision statement is, we invest in people and ideas that can change the world,” Case, 55, tells the staff once they’ve quieted down.
A Bigcommerce executive steps up to speak next. “When you think about what Steve has done in the last few decades, it’s incredible,” he says. “I think back to AOL, we all had those CDs—” He’s cut off by laughter. Case is behind him, a huge grin on his pumpkin-shaped head, both fists thrust into the air at the memory of the promotional discs that overflowed from America’s mailboxes in the 1990s. A few minutes later, Case is working the room, regaling a cluster of star-struck staffers about the time AOL packed its free CDs into orders of frozen Omaha Steaks.
A decade ago, the notion that Case would be celebrated by businesspeople of any description might have seemed laughable. At the peak of the Internet bubble, he engineered a merger with Time Warner that, while highly profitable for Case and other AOL insiders, quickly became known as the most disastrous in corporate history, with more than $200 billion in shareholder value destroyed. Business school students still learn about it as a case study in hubris and magical thinking. Yet it’s now clear that Case not only survived a debacle that would have ruined the careers of other executives—and did—but is also thriving again, in a self-made role that in some ways makes him more influential than ever.
Case has a venture capital fund, Revolution, that aims to be the dominant VC firm east of the Mississippi. He launched it with some $500 million of his personal fortune in 2005, investing in companies such as Zipcar and LivingSocial; a $450 million fund with outside money followed in 2011, and a $150 million fund will go live this fall. He’s also an in-demand “cheerleader for entrepreneurism,” a gig that involves speaking at tech conferences, writing op-eds, and tweeting to 609,000 followers about #startups and #innovation. And perhaps most surprisingly for a figure who was once so radioactive, Case has become a genuinely productive figure in Washington—one of the few bipartisans who can take a meeting with the Obama White House one day and congressional Republicans the next, with actual legislation to his credit.
How Case pulled this off—how he went from corporate punching bag to tech industry role model and Washington wise man—is partly about America’s endless capacity to forgive entrepreneurs. It’s partly a reminder that billionaires write their own rules. But mostly it’s about Case’s refusal to internalize much, if any, fault for what went wrong.
“Given his psychological makeup, I’m not sure it really got into him that things didn’t go well, and that there’s some personal responsibility,” says Jerry Levin, Case’s counterpart at Time Warner, who fled the corporate world to start a New Age healing center in Santa Monica, Calif., and now lives in Maine. “That’s not a negative comment. It’s just that some people can kind of handle it, in a way that’s a Teflon thing. But I don’t know. I haven’t sat in on a therapy session with Steve.”
In 1983, Case was a 24-year-old marketer for Pizza Hut when his older brother, an investment banker, helped him get a job at a small company that was trying to make video games interactive. That venture failed, but another one sprouted up. Case survived lean years, advanced, and by 1993 was chief executive officer of a company with a mission to help ordinary people discover how to e-mail, chat, and surf a simplified version of the Internet. It had a name that spelled out its ambitions: America Online.
Case persuaded PC manufacturers to install modems in their products, wrote copy for dial-in screens, and fended off Microsoft’s rival offering. By the time You’ve Got Mail appeared in multiplexes in 1998, AOL was one of the most recognizable brands in consumer technology, with a subscriber count approaching 20 million. With search, buddy lists, instant messaging, and status updates, AOL was the equivalent of Google, Facebook, and Twitter all in one.
Its exponential growth hid problems. As faster broadband connections became available in more markets, AOL stood to lose both dial-up revenue and the proceeds from its “walled garden” of content, once that programming no longer had a captive audience. And there was the gnawing question of whether its ads and other offerings were worth anything at all.
Nevertheless, AOL’s market value increased 100,000 percent in eight years. Case, sitting on a market capitalization of $172 billion, could have bought virtually any company he wanted. In Time Warner he saw a gilded old-media empire—it owned movie studios, HBO, record labels, and magazines—whose CEO, Levin, was starting to feel threatened by the Internet. Case began to feel him out about an ostensible merger of equals: AOL had twice the valuation of Time Warner, even though the latter had two and a half times the profits. Case had the future on his side. He persuaded Levin to agree that AOL shareholders would get 55 percent of a merged entity.
On Jan. 10, 2000, the largest merger in U.S. history was announced at a press conference in Manhattan. Case was ebullient, hugging and high-fiving Levin, as Time Warner board member Ted Turner compared his own excitement to the first time he’d had sex. To some Web true believers, the deal seemed to be a synergistic fusion of classy content brands and a digital juggernaut. Microsoft and Disney fought to block it. Skeptics warned all that had been married were Time Warner’s old-media problems and AOL’s vastly overpriced stock, and the market agreed. The companies’ shares slid 23 percent and 35 percent, respectively, from the day of the announcement to when the deal closed a year later, and the broad selloff after Sept. 11, 2001, made the situation worse. All the things that could go wrong with a merger did: The two corporate cultures grated, rival divisions undermined each other, and executives sniped at board meetings, as it became clear that the businesses were not compatible and never would be. AOL added an accounting scandal for good measure. Thousands of jobs were cut, and employee retirement accounts with company stock were annihilated. Turner later estimated he lost $8 billion.
Case resigned in January 2003. “I still feel pretty good about my first chapter, even though I know not everybody does,” he says today. He maintains that had he stepped away the day he announced the merger, “people would have said it’s an awesome success and a brilliant trade.” He’d essentially swapped an overvalued AOL for more than half of a diversified media conglomerate. Time Warner shareholders, and investors who bought after the deal was announced, go unmentioned in this reckoning.
Case did stay on, of course, but says that as chairman of the board he had little control over the running of the new business. “The execution of that merger was obviously not good,” he says. “I accept some responsibility for it, because I kind of put it in motion and for a couple years I was chairman of the board. But I think most people around the scene at the time would say, even today, that it would have been maybe a different case if I had been CEO and actually able to run it, vs. being up in the skybox.” When he quit as chairman, AOL Time Warner announced an annual loss of $99 billion, a record. Case was eventually able to cash in stock options worth hundreds of millions of dollars.
Jonathan Knee, a senior managing director at Evercore Partners (EVR), includes the deal on the syllabus of the course he teaches at Columbia Business School. “You can’t teach mergers and acquisitions, or the cautionary aspect of M&A, without teaching this transaction,” he says. And yet Case happens to be right about it working out fabulously for his original investors. “From a Steve Case point of view, the shareholders of AOL should build a statue to the guy, and the shareholders of Time Warner should light torches and chase him down the street,” Knee says. “There’s a phrase I use—Steve Case found in Jerry Levin the perfect mark for the con of the century.”
Case calls the years after he left AOL Time Warner his “getting back in the garage phase.” He spent zero time wallowing in doubt—within days of leaving, he was planning what would become Revolution, which today has investments in 33 companies and occupies two floors of a building in northwest Washington, D.C. The location meant that when the Obama White House came calling, he was just up the street.
Emerging from the 2009 recession, when politicians of both parties sought to associate themselves with job creation, it made sense to reach back to the roaring ’90s—AOL’s heyday. Case eagerly accepted the casting, agreeing in 2010 to co-chair a U.S. Department of Commerce committee on innovation and entrepreneurship. Panels like this often have token figureheads, but Case impressed the capital’s wonks with his tolerance for process and unshowy deference to lawmakers. Slightly Republican in his own politics, Case has been careful to donate the exact same amount of money to candidates of both parties, and he says he counts his tweets to make sure he’s not favoring one side.
In 2011 the White House asked him to chair the Startup America Partnership, a public-private body that aims to turn places such as Des Moines and Nashville into entrepreneurial hubs. Case started meeting with Obama administration officials and lawmakers more frequently. In 2012 he played a key behind-the-scenes role in locking up votes for the Jumpstart Our Business Startups Act, known as the JOBS Act, a bill few pundits gave a chance of passing in an election year. Case was rewarded with a spot in the White House Rose Garden, over President Obama’s shoulder, as the bill was signed into law.
“He’s really become a very serious and effective advocate,” says Gene Sperling, director of the National Economic Council. “He is not a flash in the pan. He is focused. He is substantive. And he stays at it. There are not that many people who are willing to make a real ongoing commitment of their personal capital to learning the ins and outs of our sometimes crazy world.”
In Case’s political work, there are shades of how he built AOL—not with blazing charisma, but through extreme persistence, taking every meeting and being content with the good instead of the perfect.
The simplest reason for politicians’ embrace of Case may be that he does not hold them in contempt, the way much of Silicon Valley seems to do. In caricature, tech leaders are libertarians who like to “move fast and break things,” as Facebook’s credo goes, and who look down on people in Washington as their constipated opposites. “They have a total disdain,” says Mark Warner, the Democratic senator from Virginia. “It’s always good to have a healthy disdain for politics. But there’s almost this naive arrogance to it, in the sense that they don’t really want to know how hard it is to get from A to Z.” Because AOL was based in the D.C. suburb of Dulles, Va., Case has been absorbing the capital’s rhythms for 30 years. “Steve has seen that some of this stuff takes time,” Warner says. “He’s got a patience that’s rare in the technology community.”
“I share their frustration,” Case says about Silicon Valley types, “but we don’t live in a monarchy. The president has more limited power than people realize.”
Case’s new cause is immigration reform, which passed the Senate in June and is inching its way through the House. It’s not glamorous work. One afternoon in July, Case is pulling on a coat and tie in Revolution’s elevator, en route to the Capitol for yet another meeting, this time with Kevin McCarthy, the House majority whip. He’s asked what he hopes to accomplish. “Build bipartisan support to pass comprehensive immigration reform so our nation can win the global battle for talent and we can remain the most innovative, entrepreneurial nation in the world,” he says through gritted teeth, a sign that the man who envisioned an Internet connection in every home is still adjusting to the incrementalism of politics.
While he’s waiting in McCarthy’s office, Case pulls up the whip’s Wikipedia page to see if he’s remembering correctly that the California congressman used to own a deli. “I’m here to get the franchise rights to Kevin’s Hoagies,” Case says in greeting when McCarthy comes out, and the congressman laughs. In the meeting, Case promises to speak to the Republican caucus about how to frame immigration as an economic issue.
Case’s spadework has already paid off—reputationally, he is by some measures back at the level he left off in the late ’90s. He flew to a jobs forum in Cleveland with President Obama on Air Force One, deplaning just after the commander in chief. He sat directly behind Michelle Obama at the president’s speech about jobs to a joint session of Congress in September 2011, in front of American Express CEO Kenneth Chenault and General Electric boss Jeffrey Immelt.
“Take a step back,” says Ron Klain, Revolution’s general counsel and a former chief of staff to Vice President Joe Biden. “We’re at a time when there is a tremendous amount of interest in celebrating entrepreneurs. Big Business has lost some of its shine in Washington, and certainly the financial sector. And talk to anyone in college now—they all have their own startup idea. It’s a big concept in the culture. Steve is at the forefront of that.”
A grateful VC industry is on the receiving end of Case’s efforts. The JOBS Act contained multiple sweetheart provisions for technology companies: Startups are now allowed to have more private investors before going public, and they will soon be able to raise money through crowdfunding, which critics call a recipe for fraud. When they do file for an initial public offering, they can keep more financial information secret, including some measures of executive compensation. All of this helps increase the odds of big payouts to venture capitalists.
Case also has interests in the immigration reform bill now being considered by the House. He is a long-term investor in the hospitality industry, which relies heavily on guest workers. And tech companies have long complained about visa rules that keep them from hiring the best foreign talent.
Case’s wife, Jean, has experience in the political realm, too: She was appointed chair of a public service council by President George W. Bush in 2006 and co-chair of a U.S.-Palestinian business initiative the following year. She’s head of the Case Foundation, the couple’s philanthropic organization, which they moved from Virginia to Washington in 2003 to be closer to the center of the action. When Facebook’s Sheryl Sandberg and venture capitalist John Doerr joined Case on the 2011 jobs council, he joked with them about the hassles they faced making it to meetings from California. “For them to come to D.C., it’s two days,” Case says. “For me, it’s two minutes.” He lives across the Virginia border, in a house overlooking the Potomac River that was the childhood home of Jacqueline Kennedy Onassis. “Having our center of gravity in D.C. has worked out well. It’s actually helpful. I kind of have home court advantage.”
“I do get asked that question a lot: Why are you doing this?” Case says, sitting in his office on Rhode Island Avenue. “The implicit assumption is: If I was you, I wouldn’t be doing this.” His voice gets a little quieter. “So why are you doing this?”
Presiding over policy roundtables, prowling the corridors of Capitol Hill—this isn’t penance for the Time Warner-AOL merger, he says. After all, he doesn’t think he did anything wrong. “I still think it was the right thing to do.”
To old Time Warner shareholders, or anyone with a rudimentary sense of shame, that impenitence may be frustrating. It might be more satisfying if Case were in exile with Levin on the shores of Maine, brooding on how it all went wrong. But the economy is better off with Case’s millions recirculating into new startups, and with his odd political currency helping the deadlocked Congress to act. One of America’s enduring strengths is its willingness to grant second chances, and Case’s comeback suggests that short of criminal fraud, there may be no corporate failure too epic to walk back from. It took him a decade, but now Steve Case is off probation.
Ted Leonsis, a longtime lieutenant at AOL, may know Case better than anyone besides his wife. He resigned from the company in 2006, then reunited with Case on a venture, Revolution Money, that they eventually sold to American Express. Now he helps run Revolution’s $450 million growth fund. When Leonsis first went to work for Case in 1994, they took a Myers-Briggs personality test together. Case scored an INTP: introverted, intuiting, thinking, perceiving. Case retook the exam recently, Leonsis says, and this time came up as a light extrovert.
“He’s mellowed,” Leonsis says, “in that he’s so smart and so quick, and his level of empathy for realizing that not everybody is as smart and as fast and as quick as him, his tolerance of that has dramatically enhanced, which I think has made him more a man of the people.”
Case and Levin keep in sporadic touch. I told Levin about Case walking into the Bigcommerce offices in Austin with an entourage of one and asked him if he thought Case missed the corporate world they were once at the pinnacle of. “It may not be the material trappings he misses,” Levin says. He recalled a day in the ’90s when then-Treasury Secretary Larry Summers convened a panel of CEOs, and Case was fawned over as the most dynamic. “This is just an armchair analysis, but I think that is what he misses. He has the money. The money isn’t important; it’s just a symbol.” Acceptance in the circles of power is “psychologically what he misses, and why he’s trying to carve it out now.”
In announcing the Bigcommerce investment that brought Case to Austin, a Revolution press release described him as “Steve Case, the iconic entrepreneur.” Does he deserve that appellation, given how disastrous the AOL-Time Warner marriage turned out to be? (AOL (AOL) was spun back off in 2009 and is still searching for an identity. It continues to get all of its profits from dial-up fees.)
“I’m laughing because we all want to rewrite our own history,” Levin says. “What does he want to be known for? As the kind of initiating entrepreneur for the Internet? Well, AOL has been succeeded by lots of things now. So what does he want? Inside his mind and his memory bank, what’s his legacy? The combination of a political agenda, particularly when the nation needs it, and being associated with entrepreneurship and jobs and innovation—that’s probably a preferable legacy from his point of view.”
Legacy or no, Case sees a huge opportunity at the junction of his two passions, entrepreneurship and policy. He recognized, when few others did, that the Internet would become part of everyday American life, remaking everything from personal finance to advertising. Now Case argues that the last few industries on the brink of being revolutionized by the Internet—health care, education, transportation—happen to be ones in which the government plays a gigantic role in purchasing and rulemaking.
The first investment by Revolution’s venture fund, in January 2012, went to Fedbid, a company that brings online auctions to the federal procurement process. A few months later, Case invested in Echo360, a company that digitizes lectures and aims to reach half of all U.S. college students by 2017. This summer, Revolution filed to raise a $150 million fund that will focus on early-stage startups.
The bulk of Revolution’s portfolio companies are based in and around Washington, where Case plays a VIP role in the local startup scene. A few blocks from Revolution’s building is an incubator called 1776, where 145 dot-coms share work space. On a recent afternoon, 10 entrepreneurial hopefuls file into a flag-decorated conference room to practice their 60-second pitch and to ask Case about starting a company.
“I should start with an apology,” says one. “I used to pirate so much software off AOL.” Case tells him that Mark Zuckerberg confessed the same thing when they first met a handful of years ago.
The group peppers Case with questions about hiring, contracting, seed capital, and growth, growth, growth. Later, on his Gulfstream IV, I ask him if the younger generation ever asks him about the part that came after AOL’s rise—the long shadow that Case has only now managed to escape.
“It comes up occasionally,” he says, his sock feet propped up on the seat opposite him. “But it’s actually—I think most of them would say, ‘Boy, I’d love to have that problem.’ ”
