AOL co-founder Steve Case is looking to finance entrepreneurs who are trying to build technology companies outside Silicon Valley, just like he once did.
The startups will be bankrolled by a $200 million fund that Case's Revolution Ventures announced Monday. The Revolution Ventures fund plans to make investments of up to $10 million each in startups during the next three to four years. Like other venture capitalists, Case's fund will receive stakes in the startups in exchange for the investments.
Although ideas submitted from Silicon Valley won't be excluded, Case expects 90 percent of the money to be funneled to entrepreneurs living outside the San Francisco Bay Area. The national focus is similar to a $450 million fund that Revolution LLC launched two years. The older fund makes slightly larger investments of $30 million to $50 million in more mature companies.
“This is isn't any negative on Silicon Valley. We think Silicon Valley is awesome,” Case said in an interview. “But there are also a lot of great entrepreneurs in other parts of the country and there is not as much capital focused on them.”
About 40 percent of the venture capital invested in U.S. startups is concentrated in Silicon Valley, based on statistics compiled by PriceWaterhouseCoopers and the National Venture Capital Association.
The newly minted Revolution Ventures fund has already invested undisclosed amounts in four startups scattered around the country. They are: Chicago's BenchPrep, an online service that helps students prepare for academic tests; New York's Booker Software, an online business management service; Washington, D.C.'s Homesnap, the maker of a mobile residential real estate application for mobile devices; and Boston's RunKeeper, the maker of a free health and fitness app for mobile devices.
The Revolution Ventures fund is based in Washington, D.C., not far from the Virginia offices where Case turned America Online into one of the Internet's first success stories.
Case stepped down as AOL's chairman a decade ago, a few years after the company bought Time Warner Inc. and eventually moved its headquarters to New York.
The union between AOL and Time Warner turned into a monumental flop that saw the combined company absorb about $100 billion in charges to account for its diminished value. AOL Inc. was spun off from Time Warner in 2009 and now has a market value of about $2.7 billion.