Drive Capital was based by two former Sequoia Capital Companions trying to begin anew within the Midwest. However traders within the Columbus, Oh.-based agency have had a bumpy journey of late, and in accordance with 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 every single place within the U.S. outdoors of Silicon Valley. In reality, 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 and information funds that introduced Drive’s property beneath administration to greater than $2 billion.
But relationship again to September — quickly after we talked with Olsen about VCs doubling again to California — we heard rumblings a few rift, together with separate plans that Kvamme was making. Then got here the announcement final month that the group 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 instructed the regional outlet Columbus Enterprise 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 traders.)
This week, the opposite shoe dropped. Columbus Enterprise First reported that Kvamme, who races vehicles, isn’t zipping off to semi-retirement however as an alternative speaking with potential backers a few new fund, the Ohio Fund, which is able to apparently spend money on a number of asset courses, together with different funds, public shares, non-public corporations in Ohio, and infrastructure. The thought is to “concentrate on the long run financial vitality of Ohio,” stated an unnamed supply to the outlet.
Olsen now says that he’s stunned by this growth. 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 have been stunned by this information, as we’re certain you have 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 companion, it’s acceptable to offer you a clear replace about this example and our relationship with Mark.
After the article was printed we spoke with Mark and realized that the prospect of him elevating a brand new fund was leaked to a journalist from an unknown supply. In response to Mark, he has not but decided what he’s going to do subsequent. Elevating a brand new sort of fund is one thing he’s contemplating, together with different choices in public service and private endeavors.
Now 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 Restricted Companions’ pursuits, and all the things 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 acceptable to offer clarification. Ought to you could have any questions, please don’t hesitate to succeed in out [contact information redacted by TechCrunch].
Sincerely,
The Drive Workforce
Olsen declined to remark for this story; we reached out to Kvamme and didn’t obtain a response. Nevertheless it’s sophisticated, to say the least.
In response to our sources, a part of the cut 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 yr or two in the past. One among Drive’s greatest exits up to now 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 the moment priced at roughly $7 every after a reverse inventory cut up, down from $486 per share the day the corporate went public. Olsen stepped off the board in November of final yr.
The opposite large star of Drive’s portfolio at the moment — Olive AI — is making an attempt 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 up to now) as an inspirational story of making an attempt, then making an attempt once more. Olive was rewarded by traders for its willingness to shift gears, too. It has raised a staggering $902 million over time and stated final yr that it was valued at $4 billion.
However the outfit was by no means all that it appeared, in accordance with 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 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 completely happy about these collective developments, however so far as we’re conscious, they haven’t talked about taking motion and it appears unlikely that they may.
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 could count on that Olsen will land on his toes. He does have 16 years of enterprise investing expertise and a workers of roughly 20 at Drive.
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 may be very related in Ohio, after being lured there initially by his longtime good friend John Kasich to take an financial growth job. He could have political aspirations of his personal, too. Certainly, one regional investor just lately instructed Enterprise Insider that Kvamme could also be launching a fund meant to bolster Ohio’s economic system as groundwork for a future marketing campaign.
There’s a playbook in that case. Investor 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, in accordance with Cleveland.com, Kvamme co-hosted one of many fundraisers that helped Vance win that race earlier this month.
