Drive Capital was based by two former Sequoia Capital Companions trying to begin anew within the Midwest. However buyers within the Columbus, Oh.-based agency have had a bumpy experience of late, and based on our sources, they aren’t having fun with it.
It’s a dramatic flip for Drive, which introduced $1 billion in capital commitments again in June, a wholesome quantity for a 10-year-old agency whose mission it’s to speculate almost in all places within the U.S. outdoors of Silicon Valley. In actual fact, in June, the agency — cofounded by veteran VCs Mark Kvamme and Chris Olsen — gave the impression to be using excessive, with a few obvious wins in its portfolio and property beneath administration that had grown to greater than $2 billion.
But courting again to September — quickly after we interviewed Olsen for a story — we heard rumblings a couple of rift, together with separate plans that Kvamme was making. Then got here the announcement final month that the workforce was splitting up.
At first, the story was that Kvamme, who logged greater than twice as a few years at Sequoia than Olsen, was transitioning to “companion emeritus” as a result of, as he advised the regional outlet Columbus Business First, 10 years and 4 funding cycles was longer than he initially deliberate to steer Drive Capital. (This got here as information to Drive’s buyers.)
This week, the opposite shoe dropped. Columbus Business First reported that Kvamme, who races cars, isn’t zipping off to semi-retirement however as a substitute speaking with potential backers a couple of new fund, the Ohio Fund, which can apparently put money into a number of asset lessons, together with different funds, public shares, non-public corporations in Ohio, and infrastructure. The thought is to “give attention to the long run financial vitality of Ohio,” stated an unnamed supply to the outlet.
Olsen now says that he’s shocked by this improvement. We obtained a letter that Drive despatched out to its restricted companions tonight that reads:
Expensive Restricted Associate:
This week an article was printed indicating that our Associate Emeritus Mark Kvamme is launching a brand new funding fund. All of us at Drive had been shocked by this information, as we’re certain you had been too. Whereas we won’t ship you a notice every time a brand new article about Mark is printed, we really feel that within the spirit of being an excellent companion, it’s applicable to offer you a clear replace about this example and our relationship with Mark.
After the article was printed we spoke with Mark and discovered that the prospect of him elevating a brand new fund was leaked to a journalist from an unknown supply. In keeping with Mark, he has not but decided what he’s going to do subsequent. Elevating a brand new kind of fund is one thing he’s contemplating, together with different choices in public service and private endeavors.
We now have a proper separation settlement with Mark that forestalls him from beginning a aggressive agency or fund to Drive. Please know that this was a closely negotiated settlement to make sure that it considerably protects Drive, our Restricted Companions’ pursuits, and every thing we’re constructing towards at Drive.
Once more, we don’t intend to speak with you every time a brand new article is written about Mark, however on this occasion, we thought it applicable to supply clarification. Ought to you might have any questions, please don’t hesitate to succeed in out [contact information redacted by TechCrunch].
The Drive Staff
Olsen declined to remark for this story; we reached out to Kvamme and didn’t obtain a response. But it surely’s difficult, to say the least.
In keeping with our sources, a part of the break up traces to a relationship between Olsen and Yasmine Lacaillade, who was Drive’s COO for almost seven years earlier than leaving the agency in April to launch her personal funding outfit.
Requested about this, a Drive spokesman downplayed any tensions which will have arisen from a romantic relationship between the 2, writing: “Sure you heard proper in that Chris and Yas are in a relationship. That’s been public data for a while. No feedback past that.”
Like most enterprise outfits proper now, Drive additionally finds its portfolio in rougher form than a 12 months or two in the past. One in every of Drive’s greatest exits to this point has been that of Root Insurance coverage, a now seven-year-old, Columbus, Oh.-based insurance coverage firm that focuses on automotive protection and that staged a standard IPO in November 2020. Although the shares carried out initially, they’ve tanked since, at present priced at roughly $7 every after a reverse inventory break up, down from $486 per share the day the corporate went public. Olsen stepped off the board in November of final 12 months.
The opposite huge star of Drive’s portfolio at present — Olive AI — is attempting to beat its personal challenges. The Columbus-based healthcare automation startup, based in 2012, has lengthy framed its intensive historical past of pivots (greater than 30 to this point) as an inspirational story of attempting, then attempting once more. Olive was rewarded by buyers for its willingness to shift gears, too. It has raised a staggering $902 million through the years and stated final 12 months that it was valued at $4 billion.
However the outfit was by no means all that it appeared, based on a sequence of damning Axios pieces, and by September, the wheels had been quick loosening. Most notably, the corporate’s chief monetary officer and chief product officer had been abruptly fired, following out the door quite a few C-level executives who additionally left this fall, together with its president, a senior director of operations, its EVP of operations and its SVP of payer product technique.
Olive AI has since stated it is going to promote a portion of its services and products to Rotera, an organization constructed out of Olive’s personal enterprise studio.
Restricted companions aren’t comfortable about these collective developments, however so far as we’re conscious, they haven’t talked about taking motion and it appears unlikely that they’ll.
First, it’s exceedingly uncommon for restricted companions to arrange towards a enterprise agency to which they’ve dedicated capital and solely barely much less uncommon for VCs to increase LPs the courtesy of scaling again their commitments.
They could additionally anticipate that Olsen will land on his toes. He does have 16 years of enterprise investing expertise and a workers of roughly 20 at Drive to help him.
Additional, there isn’t a lot curiosity in creating complications for Kvamme, who borders on VC royalty. (His father was a companion at Kleiner Perkins; his first spouse is the daughter of one other famed VC, former Sequoia Capital companion Pierre Lamond.)
Kvamme could be very related in Ohio, after being lured there initially by his longtime buddy John Kasich to take an financial improvement job. He may additionally have political aspirations of his personal. Certainly, one regional investor not too long ago told Business Insider that Kvamme could also be launching a fund meant to bolster Ohio’s economic system as groundwork for a future marketing campaign.
It’s a playbook that’s been used successfully earlier than. VC and writer JD Vance arrange a enterprise agency in Cincinnati known as Narya in late 2019 earlier than saying his bid for Senate roughly 1.5 years later. In late September, based on Cleveland.com, Kvamme co-hosted a fundraiser for Vance, who gained his race earlier this month.