AOL Co-Founder Steve Case Says Bitcoin Mania Reminds Him of the Dot Com Boom

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

Steve Case, the billionaire co-founder of AOL, wrapped up his sixth Rise of the Rest tour this fall — a nationwide tour to 33 emerging tech hubs between the coasts. “It was time to take this whole effort to the next level,” he told Term Sheet.

Case, who is now the CEO and chairman of investment firm Revolution, teamed up with J.D. Vance, the author of “Hillbilly Elegy,” to form a new seed fund focused on startups located in the so-called flyover states of America. Several weeks ago, Case announced that the fund has raised $150 million from an iconic roster of backers including Amazon CEO Jeff Bezos, Starbucks chairman Howard Schultz, and KKR co-founder Henry Kravis. The New York Times said it “may be the greatest concentration of American wealth and power in one investment fund.”

Fortune caught up with Case to discuss the fund, the state of American innovation, and the nation’s obsession with Bitcoin.

FORTUNE: Why did you decide to create the Rise of the Rest seed fund and what is your investment thesis?

CASE: The fund came out of our work around Rise of the Rest over the last four years where we’ve visited 33 cities, completed six different tours, and met a lot of entrepreneurs and regional investors. It was time to take this whole effort to the next level. That led us to create the seed fund. We decided to reach out to some of the most respected, iconic individuals in the country. We wanted not just their capital to invest, but also the credibility they could bring that would shine a spotlight on entrepreneurs in the middle of the country who are building great companies.

We’re investing outside of Silicon Valley and New York City and Boston. As you know, the data shows that 75% of venture capital went to three states — California, New York, and Massachusetts — so we’re trying to invest in other places. We won’t lead rounds and we won’t take board seats. We want to be a catalyst investor, so our $150 million ends up being over a billion dollars as it gets invested in these companies. And some of the LPs in this fund are interested in making direct follow-on investments, so they’re looking to us to not just generate good returns from the fund but also interesting deal flow that might be of interest to them down the road.

The fund’s backers are a Who’s Who of American business. How did you get those entrepreneurs and investors on board?

CASE: I knew virtually all of them from things we’ve done over the years. As the visibility of Rise of the Rest grew, some people called and said they were interested in what we were doing and would like to co-invest. Rather than doing it in a deal-by-deal or city-by-city kind of way, we decided to create this fund.

In general, there were three motivations that led to people committing. One was they believed in the investment thesis that there were great entrepreneurs building great companies everywhere, and they recognized that the valuations of the companies in these Rise of the Rest cities tended to be lower. The second was about deal flow — a number were interested in investing in these cities but didn’t have the networks. The third was that people generally resonated with the idea that this would have impact and would drive more startup creation, and therefore job creation, in more places.

You went on your sixth Rise of the Rest tour this fall. What are some hubs of innovation investors should be paying attention to?

CASE: They should be paying attention to the rest of the country. It’s crazy that so much capital goes to so few entrepreneurs in so few places. A lot of investors, frankly, have blinders on. There are still investors who believe all the great entrepreneurs are in Silicon Valley and that all breakthrough companies are going to be based there. The reality is that’s not true.

In the first wave of the Internet, it was regionally distributed. Microsoft started in Albuquerque, N.M., IBM was in Boca Raton, Fla., Dell was in Austin, Texas. It’s only in the second wave of the Internet where it was mostly about software, and that’s when Silicon Valley rose to prominence and then dominance. But in the third wave — which is about disrupting important aspects of our lives like healthcare, farming, and education — the domain expertise will be important again. Being close to partners will be critical. And that’s what we’re seeing across the country. We’re seeing health tech innovation in cities like Baltimore because of Johns Hopkins University and Cleveland because of the Cleveland Clinic. In terms of ag-tech, there are interesting things happening in St. Louis, Mo., in Lincoln, Nebraska, and in Louisville, Ky.

My main message to investors is to start getting on planes and visiting these entrepreneurs, not just getting in their cars or getting on their bikes to drive to the founders nearby.

Cryptocurrencies, blockchain technology, and initial coin offerings are rising in popularity within the tech community. Are you seeing this in Middle America?

CASE: We are. One of the companies that won our pitch competition last month was a company using blockchain for real estate around titles called SafeChain.

Our view is that blockchain is a core fundamental technology that will end up having a profound impact on many industries, not just the financial service industry. The boom and mania around Bitcoin in recent months reminds me a little of the Dot Com boom and mania 20 years ago. I think there will be some winners and losers and we’ll need to separate the core technologies from some of the current implementations. We need to be a little more cautious around things like ICOs — some of them will work out but many of them won’t. It’s not surprising to me that the SEC has started to look harder at them because using some of these new technologies to raise capital in a less regulated way with fewer consumer protections is not sustainable.

Having been through the Dot Com bubble, what advice would you give to entrepreneurs raising capital through ICOs and to the people participating in them?

CASE: At the core, it’s about focusing on building durable, sustainable businesses and not being as focused on the capital-raising side. Sometimes the focus is too much on raising capital and announcing some big round, but ultimately, it’s about building a durable business.

Twenty years ago, there were many companies that went public with little in the way of revenue and generally no profits. Some of them ended up moving on to be great successes, but many fell by the wayside. You have to be enthusiastic by the possibilities, but with eyes wide open about the risks. It should be about investing in great entrepreneurs building great companies and less around speculating on cryptocurrencies and certain financial instruments.

The last time we talked, you mentioned the need to institute a “Startup Visa Program” to open the door for immigrant entrepreneurs. Are you seeing a lot of immigrant entrepreneurs starting companies between the coasts?

CASE: We are. As I mentioned then, I am worried about our current immigration policy, which creates the specter that we will be less of a magnet for talent than we have been in the last century. There’s now a global battle for talent, and some of the recent changes to the immigration policy — making it harder for people to come here and stay here — are unhelpful and will ultimately hurt America’s innovation economy. We need to win the battle for talent, and when people want to come here, start companies here, and create jobs here, we should encourage that instead of scare them away. We need to make sure we continue to have policies that enable us to continue to be that magnet.

Based on all the pitches you have heard since the beginning of 2017, what are some trends or key areas you think Term Sheet readers should be paying attention to?

CASE: One trend to pay attention to is the regionalization of entrepreneurship. I think people will be surprised by some of the companies that pop up in the next few years all across the country. Another mega-theme is the whole idea of the third wave and how the next wave of the Internet will be more integrated with our everyday lives. Technologies will be more seamless and more invisible, and they have the power to disrupt some of the largest sectors of the economy. In this next wave, partnerships will become critical to doing business, government policy and regulation will become more important, and there will be an added focus on perseverance.

It’s estimated that 400 million to 800 million of today’s jobs will be automated by 2030. What do you think automation means for the future of work?

CASE: I share the concern about the pace of technology disruption. I do think that AI and robotics are going to displace a lot of jobs, but this is not a new concern. Two hundred years ago, over 90% of us worked on farms, and now less than 2% of us do. I don’t think you can really debate whether new technologies will disrupt jobs. The only question is, are we going to be creative enough to create new jobs to offset the jobs we’re losing?

If we’re only backing startups in places like California, New York, and Massachusetts and not in Ohio, Pennsylvania, and Michigan, we shouldn’t be surprised that there are a lot of people who feel left out and left behind because there are people who are left out and left behind.

It was pretty sobering when we did the sixth Rest of the Rise tour. We visited five states — Pennsylvania, Michigan, Indiana, Ohio, and Wisconsin — and each of those states got 1% of venture capital last year. One percent. California last year got 50% of venture capital. So essentially California gets every week what some of these large states get every year. Therefore, the job creation engines in those other states are sputtering, and that’s why people in living in those states are frustrated and anxious about the future. That’s why it’s so important to level the playing field and have a more inclusive innovation economy.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.