AOL founder Steve Case says Silicon Valley's dominance is coming to an end

steve case

(Bill Pugliano / Getty Images)

AOL founder and current venture capitalist Steve Case has words for Silicon Valley: you won't be the only game in town for much longer.

"Last year 75% of VC went into 3 states, California, New York, and Massachusetts, and that's not going to be the case 10 years from now," Case told Business Insider in an interview at Vanity Fair's New Establishment Summit, where he is speaking.

The reason: it's no longer enough for a young tech company to specialize in software alone. To thrive, tech startups need to partner with a wide range of companies with specific expertise in the areas they want to conquer, he believes.

"This next wave of entrepreneurship, what I call the third wave, is going to require more partnerships," Case said. "The Facebook-Snapchat-Twitter wave is basically about the software and virally spreading it. But if you're trying to impact health care, education, food, energy, transportation, smart cities, driverless cars, they're all going to require partnerships."

Those partnerships are more likely to happen in cities with companies that already compete in these industries. As cities to watch, Case pointed out:

• Omaha and Lincoln, Nebraska, and St. Louis, Missouri, for farming and agriculture tech. "St Louis is particularly interesting because Monsanto is there, it's now in the process of doing a big merger, I'll bet you there'll be dozens of people, maybe hundreds of people, who leave and do some startup thing, and St Louis will be a hive of activity around ag tech."

• Albuquerque for water technology. "They have some national labs there, Sandia and Los Alamos, so some of the technology transfer [will be] coming out of those labs."

• New Orleans for educational tech. "They restarted their school system post-Katrina it's all charter schools, so much more open to innovation. It's attracted a lot of young people, Teach for America people in particular. Some stayed and are now opening up companies that are focused on improving learning in K-12."

• Pittsburgh for self-driving cars, thanks to Uber. "Uber started in San Francisco, but they're kind of betting their future on Pittsburgh. Partly because of Carnegie Mellon, partly because Pittsburgh is the steel capital — making stuff, that's part of their legacy and culture and history."

He also pointed to the example of Florida-based virtual reality startup Magic Leap, which has raised more than $1 billion in venture capital, as an example of how big tech companies no longer need to be started in traditional tech hubs like Silicon Valley.

"The conventional wisdom was you could never build an engineering-centric company in Ft. Lauderdale, Florida, you had to do it in Silicon Valley, or maybe you could do it in Boston. They've proven that wrong," he said. "Talent is ready to move, capital is ready to flow, we just need more of these tentpole breakout stories that will help accelerate."

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