Drive Capital was based by two former Sequoia Capital Companions seeking to begin anew within the Midwest. However buyers within the Columbus, Oh.-based agency have had a bumpy journey 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 all over the place within the U.S. exterior of Silicon Valley. In actual fact, in June, the agency — cofounded by veteran VCs Mark Kvamme and Chris Olsen — gave the impression to be driving excessive, with a few obvious wins and information funds that introduced Drive’s belongings underneath administration to greater than $2 billion.
But courting again to September — quickly after we talked with Olsen about VCs doubling again to California — we heard rumblings a couple of rift, together with separate plans that Kvamme was making. Then got here the announcement final month that the staff 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 “accomplice emeritus” as a result of, as he informed a Columbus Enterprise First, 10 years and 4 funding cycles was longer than he initially deliberate to steer Drive Capital. (This was most likely a giant shock to the buyers who’d simply agreed to let Drive make investments their capital.)
This week, the opposite shoe dropped. Columbus Enterprise First reported that Kvamme, who races automobiles, just isn’t zipping off to semi-retirement however as a substitute speaking with potential backers a couple of new fund, the Ohio Fund, which is able to apparently spend money on a number of asset lessons, together with different funds, public shares, personal corporations in Ohio, and infrastructure. The thought is to “concentrate on the longer term financial vitality of Ohio,” mentioned an unnamed supply to the outlet.
Olsen now says that he’s stunned 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 stunned by this information, as we’re positive you had been too.
Whereas we won’t ship you a be aware every time a brand new article about Mark is printed, we really feel that, in
the spirit of being a very good accomplice, it’s acceptable to offer you a clear replace about
this case and our relationship with Mark.
After the article was printed we spoke with Mark and realized that the prospect of him elevating a
new fund was leaked to a journalist from an unknown supply. In accordance 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’ve got a proper separation settlement with Mark that stops 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 little 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 acceptable to offer clarification. Ought to you’ve any
questions, please don’t hesitate to succeed in out [contact information redacted by TechCrunch].Sincerely,
The Drive Crew
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 accordance with 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 that 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 information for a while. No feedback past that.”
Like most enterprise outfits, Drive additionally finds its portfolio in rougher form than a 12 months or two in the past. One in all Drive’s greatest exits thus far 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 12 months.
The opposite huge 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 in depth historical past of pivots (greater than 30 thus far) as an inspirational story of making an attempt, then making an attempt 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.
However the outfit, a robotic course of automation firm that aimed to tackle hospital staff’ most tedious duties, was by no means all that it appeared, based on a sequence of damning Axios items; and by September, the wheels started to return off. 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 mentioned it can promote a portion of its services to Rotera, an organization constructed out of Olive’s personal enterprise studio.
Restricted companions aren’t pleased about these developments, however so far as we’re conscious, they haven’t talked in earnest about taking motion and it appears unlikely that they’ll. At the very least, it’s exceedingly uncommon for restricted companions to cancel their capital commitments and solely barely extra widespread for VCs to increase them the courtesy of scaling again these commitments.
They may assume Olsen will land on his toes. Additional, there isn’t a lot curiosity in creating complications for Kvamme, who borders on VC royalty. (His father was a accomplice at Kleiner Perkins; his first spouse is the daughter of one other famed VC, former Sequoia Capital accomplice Pierre Lamond.)
Kvamme could be very related in Ohio — he was lured there initially by his longtime buddy John Kasich to take an financial improvement job. He might have political aspirations of his personal, too. Certainly, one regional investor not too long ago informed Enterprise Insider that Kvamme could also be launching a fund meant to bolster Ohio’s financial system as groundwork for a future marketing campaign.
There’s a playbook in that case. Investor JD Vance arrange a enterprise agency in Cincinnati referred to 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 one of many fundraisers that helped Vance win that race earlier this month.
