DealBook: Steve Case Raises $450 Million Venture Fund

Larry Downing/ReutersSteve Case was a guest on Air Force One for a flight to Cleveland in February.

The AOL co-founder Steve Case and two former AOL colleagues, Ted Leonsis and Donn Davis, have raised $450 million for a new venture capital fund.

The Revolution growth fund will operate under the umbrella of Revolution, Mr. Case’s investment firm based in Washington, D.C. The team will make investments of $25 million to $50 million in later-stage, consumer-oriented technology companies, largely located on the East Coast.

It is a notable shift for Revolution, which was founded in 2005 and has mainly focused on smaller investments financed from Mr. Case’s personal fortune.

Now, through the Revolution growth fund, the firm has brought on its first institutional limited partners, including the Hillman Company, a major investor and an early backer of venture firm Kleiner Perkins Caufield Byers.

The connection, Mr. Case says, is no coincidence.

“We concluded earlier this year that we wanted to take the next step and really institutionalize the firm, and make it like a Kleiner Perkins,” he said in an interview on Thursday morning. “We want to be a leading investment firm, on the East Coast.”

The team will focus on start-ups that have some revenue but have not reached mainstream adoption. Although the fund plans to concentrate its capital “east of the Mississippi River,” Mr. Case says it is still open to investments across the country, including Silicon Valley. He says he believes there is more opportunity in places like New York, however, because California attracts so much capital and investor competition.

“We’re seeing a rise of the rest, in terms of entrepreneurship around the nation,” he added.

Mr. Case and his partner, Mr. Leonsis, have been active technology investors for several years. Mr. Case is an investor of LivingSocial and ZipCar, while Mr. Leonsis is an investor and board member of Groupon. Mr. Davis, the third partner, is also a co-founder of Revolution.

Mr. Case, who helped found AOL in 1985 and spent several years as its chief executive, said he was willing to be patient with his portfolio companies. It is a lesson he learned from AOL, which took almost a decade to take off. But he has little patience for passivity.

“As we watched AOL grow, we’ve seen it go from an attacker to a defender,” he said. “It became about managing and containing risk. We’re looking for ideas and companies that are attackers.”

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