Drive Capital was based by two former Sequoia Capital Partners seeking to begin anew within the Midwest. But buyers within the Columbus, Oh.-based agency have had a bumpy experience of late, and in response to 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 practically in every single place within the U.S. outdoors of Silicon Valley. In truth, in June, the agency — cofounded by veteran VCs Mark Kvamme and Chris Olsen — appeared to be using excessive, with a few obvious wins in its portfolio and belongings beneath administration that had grown to greater than $2 billion.
Yet courting again to September — quickly after we interviewed Olsen for a narrative — we heard rumblings a few rift, together with separate plans that Kvamme was making. Then got here the announcement final month that the crew 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 “partner emeritus” as a result of, as he informed 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 automobiles, isn’t zipping off to semi-retirement however as an alternative speaking with potential backers a few new fund, the Ohio Fund, which can apparently spend money on a number of asset lessons, together with different funds, public shares, non-public firms in Ohio, and infrastructure. The thought is to “focus on the future economic vitality of Ohio,” mentioned an unnamed supply to the outlet.
Olsen now says that he’s shocked by this growth. We obtained a letter that Drive despatched out to its restricted companions tonight that reads:
Dear Limited Partner:
This week an article was printed indicating that our Partner Emeritus Mark Kvamme is launching a brand new funding fund. All of us at Drive have been shocked by this information, as we’re positive you have been too. While we is not going to ship you a be aware every time a brand new article about Mark is printed, we really feel that within the spirit of being companion, it’s applicable to give you a clear replace about this case 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. According to Mark, he has not but decided what he’s going to do subsequent. Raising a brand new sort of fund is one thing he’s contemplating, together with different choices in public service and private endeavors.
We 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 Limited Partners’ pursuits, and all the pieces we’re constructing towards at Drive.
Again, 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. Should you’ve any questions, please don’t hesitate to succeed in out [contact information redacted by TechCrunch].
Sincerely,
The Drive Team
Olsen declined to remark for this story; we reached out to Kvamme and didn’t obtain a response. But it’s difficult, to say the least.
According to our sources, a part of the break up traces to a relationship between Olsen and Yasmine Lacaillade, who was Drive’s COO for practically seven years earlier than leaving the agency in April to launch her personal funding outfit.
Asked about this, a Drive spokesman downplayed any tensions that will have arisen from a romantic relationship between the 2, writing: “Yes you heard right in that Chris and Yas are in a relationship. That’s been public knowledge for some time. No comments beyond 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 of Drive’s largest exits to this point has been that of Root Insurance, a now seven-year-old, Columbus, Oh.-based insurance coverage firm that makes a speciality of automotive protection and that staged a standard IPO in November 2020. Though the shares carried out initially, they’ve tanked since, presently 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 different large star of Drive’s portfolio presently — 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 over time and mentioned final 12 months that it was valued at $4 billion.
But the outfit was by no means all that it appeared, in response to a collection of damning Axios items, and by September, the wheels have been quick loosening. Most notably, the corporate’s chief monetary officer and chief product officer have 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 mentioned it would promote a portion of its services and products to Rotera, an organization constructed out of Olive’s personal enterprise studio.
Limited companions aren’t blissful 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 prepare in opposition to a enterprise agency to which they’ve dedicated capital and solely barely extra widespread for VCs to increase LPs the courtesy of scaling again their commitments.
They may also anticipate that Olsen will land on his ft. He does have 16 years of enterprise investing expertise and a employees of roughly 20 at Drive to assist him.
Further, 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 may be very related in Ohio, after being lured there initially by his longtime pal John Kasich to take an financial growth job. He might have political aspirations of his personal, too. Indeed, one regional investor not too long ago informed Business Insider that Kvamme could also be launching a fund meant to bolster Ohio’s financial 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 asserting his bid for Senate roughly 1.5 years later. In late September, in response to Cleveland.com, Kvamme co-hosted one of many fundraisers that helped Vance win that race earlier this month.