Drive Capital investors hit the road • TechCrunch

Drive Capital was founded by two former Sequoia Capital partners looking to start anew in the Midwest. But investors in the Columbus, Oh.-based company. they’ve been on a bumpy ride lately and according to our sources, they’re not enjoying it.

It’s a dramatic turnaround for Drive, which announced $1 billion in capital commitments in June, a healthy sum for a 10-year-old company whose mission is to invest almost everywhere in the U.S. outside of Silicon Valley. In fact, in June, the company — founded by veteran VCs Mark Kvamme and Chris Olsen — appeared to be riding high, with some notable wins and capital news bringing Drive’s assets under management to more than $2 billion.

However, dating back to September — shortly after we spoke with Olsen about doubling down on VCs back in California — we heard rumblings of a rift, along with separate plans made by Kvamme. Then came the announcement last month that the team was breaking up.

At first, the story was that Kvamme, who had logged more than twice as many years at Sequoia as Olsen, was being made an “honorary partner” because, he told Columbus regional outlet Business First, 10 years and four funding rounds was longer. from the beginning he planned to lead Drive Capital. (This came as news to Drive investors.)

This week, the other shoe dropped. Columbus Business First reported that Kvamme, who races stock cars, is not coming out of retirement but is instead talking to potential backers about a new fund, the Ohio Fund, which will apparently invest in multiple asset classes, including mutual funds, public shares. private companies in Ohio and infrastructure. The idea is to “focus on Ohio’s future economic vitality,” said an unnamed source at the agency.

Olsen now says he is surprised by this development. We received a letter that Drive sent to its limited partners this evening, which states:

Dear Limited Partner:

An article was published this week indicating that our esteemed contributor Mark Kvamme is launching a new investment fund. All of us at Drive were surprised by this news, as we’re sure you were too. While we won’t be sending you a note every time a new article about Mark is published, we feel that in the spirit of being a good partner, it’s appropriate to provide you with a transparent update on this situation and our relationship with Mark.

After the article was published we spoke with Mark and learned that the prospect of raising a new fund was leaked to a journalist by an unknown source. According to Mark, he still hasn’t decided what he’s going to do next. Raising a new type of fund is something he’s considering, along with other options in public service and personal endeavors.

We have a formal separation agreement with Mark that prevents him from starting a competing company or fund to Drive. Please note that this was a heavily negotiated agreement to ensure that it effectively protects Drive, the interests of our Limited Partners and everything we aim for at Drive.

Again, we don’t intend to contact you every time a new article is written about Mark, but in this case, we thought it appropriate to provide clarification. If you have any questions please don’t hesitate to get in touch [contact information redacted by TechCrunch].

Sincerely,
The Drive team

Olsen declined to comment for this story. we contacted Kvamme and did not receive a response. But it’s complicated, to say the least.

According to our sources, part of the split trail is tied to the relationship between Olsen and Yasmine Lacaillade, who was Drive’s COO for nearly seven years before leaving the company in April to start her own investment outfit.

When asked about this, a representative for Drive downplayed any tensions that may have arisen from a romantic relationship between the two, writing: “Yes, you heard that right Chris and Yas are in a relationship. This has been known for a long time. No comment beyond that.”

Like most venture outfits right now, Drive is also finding its portfolio in rougher shape than it was a year or two ago. One of Drive’s largest exits to date was that of Root Insurance, a seven-year-old Columbus, Oh.-based auto insurance company that held a traditional IPO in November 2020. Although shares were originally held , they have since fallen, currently trading at around $7 each after a reverse stock split, down from $486 per share the day the company went public. Olsen stepped down from the board in November of last year.

The other big star of Drive’s portfolio right now — Olive AI — is trying to overcome its own challenges. Founded in 2012, the Columbus-based healthcare automation startup has long framed its extensive history of spin-offs (more than 30 to date) as an inspiring tale of trying and then trying again. Olive was rewarded by investors for its willingness to change gears. He has raised a staggering $902 million over the years and said last year that he was worth $4 billion.

But the outfit was never all it seemed, according to a series of damning Axios pieces, and by September, the wheels were quickly coming off. Most notably, the company’s CFO and chief product officer were abruptly fired, following out the door several C-level executives who also left this fall, including its president, a senior business manager, its EVP of operations and its SVP payer. product strategy.

Olive AI has since said it will sell a portion of its products and services to Rotera, a company created out of Olive’s own venture studio.

The limited partners are not happy with these collective developments, but as far as we know, they have not spoken of taking action and it seems unlikely that they will.

First, it is extremely rare for limited partners to organize against a venture firm to which they have committed capital, and only slightly more common for VCs to extend LPs courtesy of reducing their commitments.

Maybe they expected Olsen to land on his feet. He has 16 years of venture investment experience and a staff of approximately 20 people at Drive.

Additionally, there isn’t much interest in creating headaches for Kvamme, who borders on VC rights. (His father was a partner at Kleiner Perkins; his first wife is the daughter of another famous VC, former Sequoia Capital partner Pierre Lamond.)

Kvamme is deeply connected to Ohio, having been lured there initially by longtime friend John Kasich to take an economic development job. He may also have his own political ambitions. Indeed, a regional investor recently told Business Insider that Kvamme may launch a fund aimed at boosting Ohio’s economy as the basis for a future campaign.

There is a playbook if so. Investor JD Vance launched a venture capital firm in Cincinnati called Narya in late 2019 before announcing his Senate bid about 1.5 years later. In late September, according to Cleveland.com, Kvamme co-organized one of the fundraisers that helped Vance win that race earlier this month.

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