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Silicon Valley has been `tone deaf' to the entrepreneurial potential of middle America: Steve Case

  • Three-quarters of venture capital goes to companies in three states.
  • Other parts of the country need funding to offset jobs lost by disruptive technology, Case said.
  • Health care, education and energy are industries that need innovation.
Steve Case
David A. Grogan | CNBC
Steve Case

The tech industry has widely ignored middle America, which is in desperate need of jobs in the new economy, said venture capitalist Steve Case.

"Silicon Valley has been a little tone deaf," Case, who co-founded venture capital firm Revolution, told CNBC's "Squawk Alley" on Thursday, from the Code Conference in Rancho Palos Verdes, California. "While people can appreciate what they can do on their smartphones, they worry about their future. They worry about their jobs. I think we need to do a better job of reaching out and have a more inclusive innovation economy."

Case, who co-founded and ran AOL, looks for companies all over the country, particularly in areas that aren't served by traditional tech investors. About three-quarters of venture capital went to California, New York and Massachusetts last year, he said.

While Case applauded executives like Facebook's Mark Zuckerberg for visiting the rest of the country, he said more needs to be done.

"When people in the middle of the country feel like they have been left behind, it's because they have been left behind," said Case, whose firm is based in Washington, D.C. "If you're only funding the outskirts of Silicon Valley or Boston or New York, not Detroit, Madison, Des Moines, New Orleans or those other cities, you're not going to be creating jobs in those other cities that are going to offset some of the job loss because of these disruptive technologies."

Tech innovators need to work on what he calls the "third wave" of the internet, which will improve health care, education, energy, transportation and other industries. Technology companies are going to have to work with hospitals and doctors and understand all the relevant regulations. It requires a "different mindset," he said.

"I'd rather be backing the entrepreneurs in the middle of the country that are trying to do interesting disruptive things, not the historical battles," Case said.