We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Business Report

Why the Father of the Consumer Internet Invests in E-Commerce

Steve Case brought the Internet to Main Street. Now he wants everyone to open an online store.

Technology is making it easy for any merchant to sell online.

You might remember Steve Case. He was CEO of America Online and became a billionaire by selling subscription Internet access.

Now Case, 55, has come out of semiretirement to create Revolution, a Washington, D.C., venture capital fund that he says will become the largest startup investor east of the Mississippi River.

Case is no buzzword-dropping futurist. He’s practical, with a sharp eye for Main Street’s needs and, he says, “big ideas that are still small companies.” So it’s significant that his fund has bet most heavily so far on e-commerce startups. Its largest investment, $40 million, went to BigCommerce, a company that brings “Amazon-like capabilities” to any merchant. The pool of potential customers is huge: 95 percent of retail establishments in the U.S. consist of a single store.

This story is part of our January/February 2014 Issue
See the rest of the issue

MIT Technology Review spoke with Case about his search for the next big idea in e-commerce.

How big are your funds? And do you have a special focus on e-commerce?

Two years ago we created a growth fund of $450 million, and a few weeks ago we closed a $250 million venture fund. In the growth fund we have made half a dozen investments and three of them are e-commerce. That’s just in the last year. It’s not the biggest commitment by design. We have a broader vision than being an e-commerce fund, but it turns out it’s a growing category where there is still a lot of innovation to come, including in areas that are a little off the beaten path.

Can you give me an example?

We invested in a company in the D.C. area called Optoro. They do something I hadn’t even thought of until we talked to them. But basically, if you go to Staples or Best Buy, 10 to 15 percent of everything that gets bought gets returned. What happens to that stuff? It goes into a kind of black hole. This company has figured out a way to use software to handle that and sell those items online. So here are offline bricks-and-mortar businesses that are using the Internet to improve their yield.

You’ve been talking about a “second Internet revolution” that will affect areas where the government is influential, like education and health care. Is e-commerce the lever to make those changes happen?

It’s not the only lever, but it’s a lever. The government spends a lot of money. So we’ve invested in a company called FedBid that runs reverse auctions with 50,000 sellers. The government can save 10 percent on most of the stuff they buy. If we can make government more efficient, that is good. It helps the government, helps the country, and we make a transaction fee.

When you started AOL, only 3 percent of Americans had Internet access. Now everyone does. Yet e-commerce is still less than 6 percent of retail sales. Why has it moved so slowly?

In some categories e-commerce has been disruptive; a lot of bookstores have gone out of business. But malls are doing pretty well, because shopping is fundamentally a social experience, and it’s not just about buying things. But the trajectory of e-commerce is that it’s just going to continue to grow. It just doesn’t happen overnight.

It seems services can be one of the next big areas for online commerce. It’s about 40 percent of the economy, but not really affected by online buying.

I agree. There is a company called Open Table that has done a good job of impacting how restaurant reservations are made. We invested in a company called Booker that is trying to do that for the rest of the services in our economy. If you want to book a massage, or have your pet come in for a grooming, it’s creating a more transparent marketplace where people can see what times are available. I think it has tremendous potential.

What other forces do you see shaping online commerce?

There are something like 10 million independent e-commerce merchants on places like eBay and Etsy. There is a lot more opportunity for a lot of folks to hang up their shingle digitally and play a role. That’s not to say the big consolidated plays like Amazon won’t continue to have advantages. But it’s just like if you walk around you’ll see there are big restaurant chains but most are still mom-and-pop restaurants. There’s always going to be a mix. But it’s been hard up until now for small companies to play in e-commerce.

We have invested pretty heavily in BigCommerce, which essentially has the power of Amazon’s e-commerce tools that you can set up in minutes. Five years ago, you’d have spent six months and hundreds of thousands of dollars to build an e-commerce site. Now you can do it in 30 minutes for 30 bucks. I think that is pretty cool. It completely democratizes e-commerce for everybody.

AI is here.
Own what happens next at EmTech Digital 2019.

Register now
Next in this Business Report
Beyond the Checkout Cart

Technology is blurring the difference between online and offline retail.

Want more award-winning journalism? Subscribe to Insider Plus.
  • Insider Plus {! insider.prices.plus !}*

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus the digital magazine, extensive archive, ad-free web experience, and discounts to partner offerings and MIT Technology Review events.

    See details+

    Print + Digital Magazine (6 bi-monthly issues)

    Unlimited online access including all articles, multimedia, and more

    The Download newsletter with top tech stories delivered daily to your inbox

    Technology Review PDF magazine archive, including articles, images, and covers dating back to 1899

    10% Discount to MIT Technology Review events and MIT Press

    Ad-free website experience

You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.