Announcing the $150 Million Rise of the Rest Seed Fund

I still remember trying to launch AOL from Tysons Corner, VA in 1985. It was hard to raise capital, and hard to lure people to join a fledgling startup. But eventually we broke through and had great success, and our success (and that of other companies, such as MCI) helped the DC region rise as a tech hub.

In that First Wave of the Internet, when we were trying to get the world online, that story played out all over the country. IBM was in Boca Raton, Microsoft started in Albuquerque and later Seattle, Sprint was in Kansas City, Dell was in Austin, Gateway was in South Dakota, CompuServe was in Columbus, and Hayes, the modem maker, was in Atlanta, GA.

But as we shifted from the First Wave (building the Internet) to the Second Wave (building on top of the Internet), that changed. Over the past decade, the breakout successes have typically been in a few places, and mostly in Silicon Valley. And the venture capital has centered there as well, as that’s where most VC firms are located.

As a result, innovation is no longer dispersed around the country; instead, America has most of its eggs in a few baskets. Seventy five percent of venture capital flows to just three states: California, New York, and Massachusetts. With that distribution, we shouldn’t be surprised that lots of people in lots of places feel anxious about the future.

When we started Revolution over a decade ago, it was with the philosophy that great companies can start and scale anywhere. We believed that Silicon Valley did not have a monopoly on creativity. We still believe that today, and our two funds, Revolution Growth and Revolution Ventures, have invested nearly $1 billion in companies outside of Silicon Valley.

In 2014, we took this idea a step further and started Rise of the Rest road trips, our bi-annual bus tour through cities in the middle of the country. We’ve visited 33 cities and logged more than 8,000 miles on a bus. We visit with entrepreneurs, elected officials, and ecosystem builders and at the end of each day, we host a pitch competition where I invest $100,000 in a local startup. As investors, we have learned an enormous amount on these tours — what makes each startup community unique, what are their challenges, and what are they doing better than others. Through this platform, we have developed an exceptional network of partners who have their finger on the pulse of what is really happening — and what is really possible — for entrepreneurs across America.

Over the last year, I’ve spent a lot of time talking with other investors and executives about what we’ve seen and learned. People know that the future of America is tied to more than just three cities, and there is an eagerness, now more than ever, to address the investment gap. So we’ve decided to launch a new fund, called the Rise of the Rest Seed Fund. The fund will be led by Hillbilly Elegy author J.D. Vance, who recently left Silicon Valley where he was working for a venture capital firm started by Peter Thiel, to join Revolution. Partners Anna Mason and David Hall will round out the investment team.

The Rise of the Rest fund will make initial investments of up to $1 million. We seek to partner with regional investors, so we won’t lead rounds (indeed, we’ll typically invest 10–20% of rounds). Our hope is that our involvement will bring momentum to help spur growth and further investment capital. We will also work to build a network of regional investors and entrepreneurs, to create the kind of syndicates and network density that makes Silicon Valley so successful.

And many of those investors and executives that I’ve spent time talking to this year are joining as Limited Partners. We have brought together an extraordinary group of iconic investors and entrepreneurs to invest, and by extension learn about the great companies and opportunities in cities across America. Investors in the new fund include legendary entrepreneurs Jeff Bezos, Sara Blakely, Tory Burch, Dan Gilbert, Ted Leonsis, Sheila Johnson, Joe Mansueto, Sean Parker, Eric Schmidt, Howard Schultz, Romesh Wadwhani, and world-class investors and executives such as Jim Breyer, John Doerr, Ray Dalio, William Davis, Henry Kravis, Michael Milken, Adebayo “Bayo” Ogunlesi, David Rubenstein, Byron Trott, Jeff Vinik, Meg Whitman, and members of the Koch, Pritzker, and Walton families.

If it’s not already clear, we are bullish on rising cities. We believe that in the Third Wave entrepreneurs seeking to disrupt major sectors will reap the biggest dividends by moving to cities where historical industry expertise resides. Over the last ten years, we’ve seen demographic shifts and infrastructure growth that positions them for success. We’ve seen the steady rise of accelerators in at least 35 states. The low cost of living in rising cities continues to attract talent. And we’ve witnessed local startup-friendly public policies on the rise.

I’m thrilled so many successful leaders see the same opportunity we do: that investing in the future outside of the coastal tech corridors isn’t just the right thing to do, it’s the smart thing to do.