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 experience of late, and in keeping 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. exterior of Silicon Valley. In actual fact, in June, the agency — cofounded by veteran VCs Mark Kvamme and Chris Olsen — appeared to be driving excessive, with a few obvious wins in its portfolio and property below administration that had grown to greater than $2 billion.
But 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 “associate 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 buyers.)
This week, the opposite shoe dropped. Columbus Enterprise First reported that Kvamme, who races vehicles, shouldn’t be zipping off to semi-retirement however as a substitute 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 firms 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 growth. We obtained a letter that Drive despatched out to its restricted companions tonight that reads:
Pricey Restricted Associate:
This week an article was revealed 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 is not going to ship you a notice every time a brand new article about Mark is revealed, we really feel that within the spirit of being a very good associate, it’s acceptable to give you a clear replace about this case and our relationship with Mark.
After the article was revealed 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 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.
Now we have 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 the whole lot 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 gotten any questions, please don’t hesitate to achieve 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. But it surely’s sophisticated, to say the least.
In keeping 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 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 largest exits so far has been that of Root Insurance coverage, 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. Although the shares carried out initially, they’ve tanked since, presently 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 massive 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 so far) 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 stated final yr that it was valued at $4 billion.
However the outfit was by no means all that it appeared, in keeping with a sequence of damning Axios items, 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’s 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 glad 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 much less uncommon for VCs to increase LPs the courtesy of scaling again their commitments.
They could additionally count on 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 help him.
Additional, there isn’t a lot curiosity in creating complications for Kvamme, who borders on VC royalty. (His father was a associate at Kleiner Perkins; his first spouse is the daughter of one other famed VC, former Sequoia Capital associate Pierre Lamond.)
Kvamme could be very linked 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.
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, in keeping with Cleveland.com, Kvamme co-hosted a fundraiser for Vance, who received his race earlier this month.
