Drive Capital investors reach split • TechCrunch

Drive Capital was founded by two former Sequoia Capital Partners who want to start over in the Midwest. But investors in it in Columbus, Oh. established company have had a bumpy ride lately and according to our sources they are not enjoying it.

It’s a dramatic turn for Drive, which announced $1 billion in capital commitments in June, a healthy amount for a 10-year-old company whose mission is to invest almost anywhere in the US outside of Silicon Valley. In fact, in June, the company – co-founded by veteran VCs Mark Kvamme and Chris Olsen – appeared to be riding high, with a few clear wins in its portfolio and assets under management that had grown to more than $2 billion.

But dating back to September — shortly after we interviewed Olsen for a story — we heard rumblings about a breakup, along with separate plans that Kvamme was making. Then came the announcement last month that the team was splitting up.

Initially, the story went that Kvamme, who had spent more than twice as many years at Sequoia as Olsen, moved to “emeritus partner” because, as he told the regional outlet Columbus business first, 10 years and four funding cycles were longer than he originally intended to lead Drive Capital. (This came as news to Drive’s investors.)

This week the other shoe fell. Columbus business first reported that Kvamme, who race cars, isn’t going into semi-retirement, but instead talks to potential lenders about a new fund, the Ohio Fund, which will apparently invest across multiple asset classes, including other funds, public stocks, Ohio private companies, and infrastructure. The idea is to “focus on Ohio’s future economic vitality,” an anonymous source told the outlet.

Olsen now says he is surprised by this development. We received a letter that Drive sent to his limited partners this evening, stating:

Dear limited partner:

An article appeared this week indicating that our partner emeritus Mark Kvamme is launching a new investment fund. We at Drive were all surprised by this news, and we’re sure you were too. While we don’t message you every time a new article about Mark is published, in the spirit of being a good partner, we feel it is appropriate to provide you with a transparent update on this situation and our relationship with Mark.

After the article was published, we spoke to Mark and learned that the prospect of him raising a new fund had been leaked to a journalist from an unknown source. According to Mark, he has not yet decided what he will do next. Raising a new type of fund is something he is considering, along with other options in public service and personal endeavours.

We have a formal separation agreement with Mark that prevents him from starting a competing company or fund for Drive. Please note that this was a heavily negotiated agreement to ensure that Drive, the interests of our Limited Partners and everything we build at Drive are substantially protected.

Again, we don’t intend to communicate with you every time a new article is written about Mark, but in this case we felt it appropriate to provide clarification. If you have any questions, don’t hesitate to get in touch [contact information redacted by TechCrunch].

Honestly,
The Drive team

Olsen declined to comment on this story; we have contacted Kvamme and have not received a reply. But it is complicated to say the least.

According to our sources, part of the split can be traced to a relationship between Olsen and Yasmine Lacaillade, who served as Drive’s COO for nearly seven years before leaving the company in April to launch her own investment outfit.

When asked about this, a Drive spokesperson downplayed any tensions that may have arisen from a romantic relationship between the two, writing, “Yes, you heard right that Chris and Yas are in a relationship. That has been common knowledge for some time. No further comments.”

Like most venture outfits right now, Drive too is finding its portfolio in a rougher shape than it was a year or two ago. One of Drive’s biggest exits to date was from Root Insurance, a now seven-year-old, in Columbus, Oh. established insurance company that specializes in auto coverage and is in a traditional IPO November 2020. While the shares performed initially, they’ve since tanked, currently priced at about $7 apiece after a reverse stock split, down from $486 a share the day the company went public. Olsen stepped down from the board in November last year.

The other big star of Drive’s portfolio right now – Olive AI – is trying to overcome its own challenges. Founded in 2012, the Columbus-based healthcare automation startup has long described its extensive history of pivots (more than 30 to date) as an inspiring story of trying and then trying again. Olive was also rewarded by investors for its willingness to switch. It has raised a whopping $902 million over the years and last year said it was valued at $4 billion.

But the outfit was never what it seemed, according to a series of destructive Axios pieces, and by September the wheels began to come loose quickly. In particular, the company’s chief financial officer and chief product officer were abruptly fired after numerous C-level executives also left this fall, including the president, a senior director of operations, the EVP of operations and the SVP or payer product strategy.

Olive AI has since said it will sell some of its products and services to Rotera, a company that grew out of Olive’s own venture studio.

Limited partners are not happy about these collective developments, but as far as we know they have not spoken about taking action and it seems unlikely they will.

First, it is extremely rare for limited partners to organize against a venture capital firm to which they have committed capital and only slightly less rarely for venture capital funds to renew LPs out of courtesy by scaling back their commitments.

They could also expect Olsen to land on his feet. He has as much as 16 years of venture capital investment experience and a staff of about 20 at Drive to support him.

Beyond that, there’s not much interest in creating headaches for Kvamme, which borders on VC royalty. (His father was a partner at Kleiner Perkins; his first wife is the daughter of another famous VC, former Sequoia Capital partner Pierre Lamond.)

Kvamme has many connections in Ohio, having originally been lured there by his old friend John Kasich to take a job in economic development. He may also have his own political aspirations. Indeed, a regional investor recently told Business Insider that Kvamme may be launching a fund designed to bolster Ohio’s economy as a foundation for a future campaign.

It is a script that has been used effectively before. VC and author JD Vance founded a venture in Cincinnati called Narya in late 2019 before announcing his bid for the Senate about 1.5 years later. In late September, according to Cleveland.com, Kvamme co-organized a fundraiser for Vance, who won his race earlier this month.

Add Comment