Summary

Steve Case, the founder of AOL, recounts his journey through the first wave of the internet and extrapolates those learnings into a series of predictions and pointers for entrepreneurs in the third wave of the internet. He describes the third wave as “the internet of everything”, describing the importance of strategic partnerships and working with government, the rise of the rest, and impact-driven companies.

Key Takeaways

• Rise of the rest: Rising prevalence and relevance of “other” cities
• Industry expertise hubs, lower cost of living, unique local circumstances
• Impact-driven companies will increasingly be a focus due to aging investor demographic
• Partnership, policy, perseverance
• Don’t be afraid to disrupt yourself: startups are taking more shots on goal than established players are

Notes

Introduction

• First wave: Settled agriculture humanity
• Second wave: Post-industrial revolution
• Third wave: Information Age
  • Where people can access an endless array of information and services and build communities based on common interests
• Waves of the internet:
  • First wave: Building the infrastructure for an online world
  • Second wave: Building on top of the Internet (SaaS)
  • Third wave: Internet stops belonging to internet companies
• Barriers to entry for entrepreneurs are higher now, much like first wave, need to embrace strategic partnerships

1:

• Steve Case’s early adventures through school (highly entrepreneurial), big corp jobs, game startup, failed Apple partnership

2:

• Settled after Apple reneged deal to strap cash for pivot
• Renamed to AOL, rapid adoption
• Became CEO at 32, heavy focus on marketing
• Forced to VP role due to age before going public
• AOL connected people to internet, built largest online community

3: The third wave

• “The internet of everything”
• More personalized and data-driven
• McKinsey: value of individual health monitoring data could be $1T by 2025
• Other sectors: education, food
• Third wave is creating, be on top of it

4: Startup? Speed up

• Worried about competitors, particularly Microsoft where Paul Allen snatched over 15% of AOL shares
• Microsoft threatened with MSN, offered to acquire AOL
• Price war of $19.95 a month

5: The 3 Ps

• Partnership, policy, perseverance
• eg. Apple forming partnerships with record labels when unveiling iTunes (only 2% mkt)
• Partnerships provide credibility
• Policy / regulation risk higher in 3rd wave
• Perseverance: come in with a gritty mindset

6: Pardon the disruption

• Startups are taking more shots on goal than established players are
• Don’t be afraid to disrupt yourself
• Partner with smaller, disruptive companies

7: The rise of the rest

• 75% of all VC money to CA, NY, MA
• Rise of the rest: Third wave will result in rising prevalence, relevance of other cities
• Startups account for almost all job growth: engine of the economy
• Reasons: industry expertise hubs, lower cost of living, unique local circumstances

8: Impact investing

• Impact investing is on the rise
• Result: different set of startups get funded

9: A matter of trust

• AOL most successful stock of 1990s
• Seeking merger to lock in shareholder gains and expand reach
• Worried internet mania might end (bubble)
• Quiet deal with Time Warner to get access to cable (net neutrality)
• Case had to step aside as CEO despite AOL being much larger company in merger
• More like AOL acquiring Time Warner
• Lost 80% of value 2 months after during dot com bubble bursting
• Two companies incompatible in structure, culture, and mission
• New CEO of AOL didn’t like the internet

10: The visible hand

• “Government defines - either through action or inaction - the environment in which entrepreneurship operates”
• Governments almost always have a hand in research / new innovations (internet)
• Easier to work with government than around government

11: America disrupted

• Startup: a company that can scale quickly and disrupt an existing category
• Gazelle: top 1% of high-growth startups (20%+ growth per year / 4 years)
  • Account for 40% of US job creation
• Government has too many cabinet members, needs to be trimmed / rethought
• R&D spending by gov’t at 0.7%, needs to be a bigger focus
• 1/2 startup founders in SF are immigrants
• Startup visas should be instituted to encourage influx of entrepreneurship

12: Ride the wave

• Uncertainty isn’t necessarily a bad thing (risk / reward delta)
• Companies will be focused on impact and purpose
• Regionalizing and globalizing