Leonsis, Case found $450 million fund to aid Washington area start-up firms

Washington entrepreneurs Ted Leonsis and Steve Case have assembled a $450 million investment war chest with the aim of rebuilding a start-up culture in the region that once gave rise to the company that made them rich, AOL.

For all its success, the Washington economy has a reputation for lacking the financial growth engines essential to entrepreneurial capitals such as Silicon Valley, New York and Boston.

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The region has been buoyed by a boom in federal contracting. But outside the business of the U.S. government, efforts to stir up a swashbuckling business ethos that spawns cutting-edge technology enterprises have come in fits and starts.

Now the two friends and business associates who rode AOL’s stock to dizzying heights and then watched it crash have ­established the Revolution Growth Fund, which will file papers with the Securities and Exchange Commission on Thursday after eight months of raising capital.

At $450 million, which is a significant amount for a first-time effort, the fund signals that the two entrepreneurs are putting their money — around $75 million between them — to work in an attempt to reignite the same culture that gave rise to local innovators such as MCI and AOL.

The late 1990s turned the Dulles corridor into a boomtown, filled with newly minted millionaires asking one another how much their net worth had increased that day. They bought big cars, flew their own airplanes and held lavish Christmas parties. The area quickly became home to scores of technology start-ups, and Washington became known as a hotbed for the emerging online world. Case was hailed on the cover of magazines as the next great tech visionary.

That all changed when the dot-com bubble burst in 2000, and the region has spent the past decade trying to rebuild its technology sector. MCI is long gone. AOL left for New York. And Case became associated with AOL’s disastrous merger with Time Warner in 2000, now viewed as one of the worst deals in business history.

“We know they are both brilliant operators, and we know that they have each made some reasonably good investments,” said Michael K. Farr, president of Farr, Miller & Washington, a D.C. money manager. But, he added, “it’s going to be a great challenge even for Case and Leonsis to differentiate themselves in a very competitive market.”

Allen Morgan, a Bay Area investor who has invested with both Leonsis and Case previously, said the pair have more than just money. They are “super-connected,” said Morgan, who predicts the fund will be very attractive to entrepreneurs.

Since the Time Warner merger, Case and Leonsis have reinvented themselves.

Case, 53, is one of the business community’s representatives on President Obama’s Jobs Council. He runs an array of businesses from his 10th-floor office overlooking Rhode Island Avenue.

Leonsis, 54, who sits on the board of American Express, has become a well-recognized business and sports figure. He owns Verizon Center, and his NBA Washington Wizards and NHL Washington Capitals are money losers, although the Capitals have routinely sold out games in the past few seasons.