Q&A With Steve Case About Ron Klain, LivingSocial & Venture Capital

Bloomberg News
Steve Case, co-founder of America Online Inc., and chief executive of Revolution LLC

Ron Klain, chief of staff to Vice President Joe Biden, is leaving the White House to become the new president of Case Holdings, the investment company of AOL co-founder Steve Case. Klain is leaving his current position later this month and will oversee Case’s various holdings including investment firm Revolution LLC, investments in Hawaii including Grove Farm and Maui Land Pineapple, and Steve and Jean Case’s Case Foundation.

We spoke with Case to talk about Klain and the direction of Revolution LLC, which has invested in hot start-up companies such as LivingSocial Inc., which recently raised $175 million from Amazon.com, Zipcar Inc., which is in IPO registration, Everyday Health Inc., and Revolution Money Inc., which was acquired by American Express Co. in 2009 for $300 million.

Q. You already know Ron Klain well, correct? What will be his role now at Case Holdings?

Yes, he worked as our general counsel for four years before he left two years ago to work for Vice President Biden. This is a broader role overseeing finance, communications, and helping manage our 20 companies as well as work with the rest of our team.

Also Donn Davis is president of Revolution and takes the lead on growth equity including Zipcar and Everyday Health. Tige Savage focuses on the venture side of things such as LivingSocial.

Q. What are you plans for Revolution LLC now with Klain on board?

We’ve really been focused on investing in consumer companies where there’s some disruptive angle, some new technology or business model to get consumers more choice, more control or somehow conceive of and build an iconic business.

Q. You’ve been investing your own money so far. But you’ve also worked with many venture firms. Have you considered getting into the venture business?

In most of the companies we invested in, we had (venture) co-investors. That’s been the strategy. We’ll be evaluating what we’re doing going forward.

A number of people have suggested that we launch several (limited partner-backed) funds focused of different parts of the investment spectrum. We’re looking at whether it makes sense to do funds in growth equity or venture or to continue what we’re doing. That is something Ron and the team will evaluate over the course of the year. We want to see how we can continue to build on the momentum we’ve got and back even more entrepreneurs across the spectrum. We’re really trying to scale up everything we’re doing.

We’re evaluating everything including what’s the best way to access capital going forward, whether on a one-off basis as we’ve done, or to institutionalize it in a fund structure or another approach. No decisions have been made yet.

Q. What’s the outlook for LivingSocial, which just raised $175 million from Amazon as it faces Groupon?

They really have cracked the code to this new approach to social commerce. I spoke at their company meeting a couple weeks ago. It’s amazing: they had 30 people a year ago and now have 600 and may have 2,000 a year from now. They’re really on a growth tear. It’s the bottom of the first inning in that whole sector. They’ve done a good job establishing themselves as the clear number two to Groupon and in some markets they have even closed the gap (with Groupon).

The partnership with Amazon is not just an investment but a partnership which will help propel LivingSocial’s growth and will enable LivingSocial to move into the lead position.

Groupon and LivingSocial both show this great idea that strikes the right balance between empowering consumers with offers in local communities and giving merchants a much more predictable way to attract new customers, while at the same time providing a great business model for those companies themselves.

Q. This type of e-commerce didn’t exist back when you were heading AOL?

We did some things, and some other companies started trying to do the same thing, but it didn’t quite take off. The world wasn’t quite ready for that opportunity, but now it is. It’s exciting to watch.

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