Homepage / Technology / From Bezos to Walton, big investors back fund for ‘flyover’ start-ups
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Technology

From Bezos to Walton, big investors back fund for ‘flyover’ start-ups

When Steve Case, the billionaire co-founder of AOL, first met J. D. Vance, author of “Hillbilly Elegy,” the best-selling book about the industrial decline of the Midwest, Mr. Case told him, “I really love the book but there is a part of it I don’t love.”

Mr. Vance listened patiently.

“It helped frame the problem but it didn’t really offer up a solution,” Mr. Case told him.

“Well, it is interesting you say that,” Mr. Vance replied, “because that’s really what my next chapter is going to be.”

For the past several months, there has been a torrent of press around how Mr. Case and Mr. Vance have teamed to try to revive entrepreneurship in what elites often derisively refer to as the so-called flyover states. As my colleague Steve Lohr wrote recently, Mr. Case and Mr. Vance have been barnstorming various cities in a painted bus, holding entrepreneurship competitions as if they were politicians on the campaign trail.

But until now, at least to some skeptics, it seemed like a do-gooder vanity project.

How could these two men significantly change the dynamic among serious investors on the coasts to reorient their focus on cities, many of them suffering from the erosion of manufacturing, in the Rust Belt and elsewhere?

It turns out that while they were publicly crisscrossing America, they were also privately holding meetings with some of the wealthiest individuals and families in the country, urging them to not only invest in a new fund but become partners with some of the companies that will benefit from it.

On Tuesday, the fund, called Rise of the Rest, will disclose its investors, which has turned into a Who’s Who of American business. Among them: Jeff Bezos, the founder of Amazon and now the world’s richest person; Eric Schmidt, chairman of Google’s parent, Alphabet; Howard Schultz, chairman of Starbucks; Tory Burch, the fashion mogul; Ray Dalio, founder of the hedge fund Bridgewater Associates; Dan Gilbert, the founder of Quicken Loans who has remade Detroit; Henry Kravis, the co-founder of KKR; David Rubenstein, the co-founder of Carlyle Group; Michael Milken, the financier and philanthropist; John Doerr, the venture capitalist; Jim Breyer, one of the first investors in Facebook; as well as members of three wealthy families: the Waltons, the Kochs and the Pritzkers.

Also on the list are Sean Parker, a former president of Facebook; Sara Blakely, the founder of Spanx; Jeff Vinik, the Florida billionaire and sports franchise owner; Byron Trott, Warren Buffett’s favorite banker; and Adebayo Ogunlesi, the lead director of Goldman Sachs and a large infrastructure investor. All told, it may be the greatest concentration of American wealth and power in one investment fund.

More from the New York Times:
How Valuable Is a Unicorn? Maybe Not as Much as It Claims to Be
C.E.O. Deficit Fears Dissolve With the Prospect of Corporate Tax Cuts
Trump Slashes Size of Bears Ears and Grand Staircase Monuments

The idea — far grander than the money itself, which is only $150 million to start, pocket money for most of the investors — was to assemble a dream team and create a network effect for entrepreneurs in the middle of the country to align with the biggest names in business.

The fund, said Mr. Vance, was meant to construct an ecosystem like the one in Silicon Valley that will provide support and connections to entrepreneurs in small towns.

“People tend to follow their networks,” said Mr. Vance, who was recruited to the effort by Mr. Case. “While the network in Silicon Valley is obviously something that is great, it can also have an exclusionary effect that prevents investors from looking at and finding opportunities that exist outside of their networks and outside of their geographies.”

Mr. Case and Mr. Vance hope to seed investments in start-ups in underserved cities and then bring in some of their big names to invest even more money in them. “We’ll be curating interesting companies,” Mr. Case said.

In other words, if they discover a nascent but promising e-commerce company in Allentown, Pa., they will not only invest in it, but they might also help it establish a relationship with one of the fund’s investors — Mr. Bezos, for example — who might invest even more.

Mr. Case was quick to say that the new enterprise should not be considered a social impact fund, which has become the hot nomenclature for investors seeking to do good. Some consider social impact investing a sort of pseudophilanthropy because the returns aren’t always the main goal.

Mr. Case said he would only succeed in changing the way investors think about the rest of the country if he can produce significant financial success stories.

“We’re fans of impact investing,” he said. “But we actually didn’t position this as an impact fund. First and foremost, our goal was to generate top returns.”

Mr. Schmidt of Alphabet said he was sold on the idea from the moment he first heard about it. “I felt it was a no-brainer,” he said. “There is a large selection of relatively undervalued businesses in the heartland between the coasts, some of which can scale quickly.”

And while it isn’t an altruistic investment, he said he hoped the effort creates “more jobs, more wealth, better products and helps our society deal with a lot of jarring employment changes.”

One of the great questions about American capitalism is why big investors, who are always looking for opportunities and are often willing to fly halfway around the world to find them in places like China and India, put so little effort into finding investment in the middle of the country. California, New York and Massachusetts attract 76 percent of all venture capital money, according to the National Venture Capital Association.

One answer may be that the nation’s top talent is drawn to the coasts, but Mr. Breyer said he has seen that changing.

“Entrepreneurs are now creating start-ups in lots of places,” he said. “The confluence of social networking technologies and cloud services makes it easier and less costly than ever before to develop and bring new technologies to market” for entrepreneurs outside of centers like Silicon Valley.

One example of a company that could be a model for the fund is one that Mr. Case has already invested in: 75f, located in Burnside, Minn., which works to make commercial buildings more comfortable and energy-efficient.

Critics may argue that the fund is a marketing exercise for elites trying to fix a problem of their own making. And there may be some truth to that. But like most great entrepreneurs, these investors have a genuine interest in finding the next Facebook or Google, and they get excited about the prospect of discovering a needle in the start-up haystack.

And they recognize that the next big idea may come from someplace totally unexpected — somewhere not on either coast or in one of the other pockets of entrepreneurship.

“There’s still more talent (engineers, execs) — and resources (funding), but the costs and competition for talent and housing are extreme” in Silicon Valley, Mr. Doerr wrote in an email, suggesting perhaps that it may be a less attractive location than before.

“In the end, don’t think of ‘the Valley’ as some ZIP codes in California,” he wrote. “It is a state of mind that can be anywhere, for everyone. Increasingly, for all of the rest of us.”

Source: Tech CNBC
From Bezos to Walton, big investors back fund for ‘flyover’ start-ups

Comments are closed.