Drive Capital’s Investors Hit A Fork In The Road

It's a strategy that's worked in the past. JD Vance, a venture capitalist and author, founded Narya in late 2019 before announcing his Senate bid 1.5 years later.

Drive Capital’s Investors Hit A Fork In The Road-RAVZGADGET
Drive Capital’s Investors Hit A Fork In The Road

Drive Capital was founded by two former Sequoia Capital Partners looking to re-establish themselves in the Midwest.

However, investors in the Columbus, Ohio-based firm have had a rough ride recently, and they aren’t happy, according to our sources.

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In fact, the firm — cofounded by veteran VCs Mark Kvamme and

Drive announced $1 billion in capital commitments in June, a healthy amount for a 10-year-old firm whose mission is to invest nearly everywhere in the United States outside of Silicon Valley.

Mark Kvamme and Chris Olsen — appeared to be on a roll in June, with a couple of notable wins in its portfolio and assets under management totaling more than $2 billion.

Yet, as early as September, shortly after we interviewed Olsen for a story, we heard rumblings about a schism, as well as separate plans by Kvamme. The team was then announced to be splitting up last month.

Initially, it was reported that Kvamme, who had more than twice as many years at Sequoia as Olsen, was stepping down as “partner emeritus” because, as he told the regional publication Columbus Business First, 10 years and four funding cycles was longer than he had planned to lead Drive Capital. (This was a surprise to Drive’s investors.)

The other shoe dropped this week. Kvamme, who races cars, is not going into semi-retirement, but is instead talking with potential backers about a new fund, the Ohio Fund,

which will apparently invest in multiple asset classes, including other funds, public stocks, private companies in Ohio, and infrastructure. According to an unnamed source, the plan is to “focus on Ohio’s future economic vitality.”

Olsen declined to comment for this story, and we did not receive a response from Kvamme. But, to put it mildly, it’s complicated.

According to our sources, part of the split stems from Olsen’s relationship with Yasmine Lacaillade, who was Drive’s COO for nearly seven years before leaving in April to launch her own investment firm.

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When asked about this, a Drive spokesman played down any tensions that may have arisen from the two’s romantic relationship, writing: “Yes, you heard right in that Chris and Yas are in a relationship.” That has been widely known for some time. No further comments.”

Drive, like most venture firms, finds its portfolio in worse shape than a year or two ago. Root Insurance, a now seven-year-old Columbus, Ohio-based insurance company that specializes in automotive coverage and is planning a traditional IPO in November 2020, was one of Drive’s largest exits to date.

Though the stock performed well at first, it has since plummeted to around $7 per share after a reverse stock split, down from $486 per share on the day the company went public. Olsen left the board of directors in November of last year.

Olive AI, the other big star in Drive’s portfolio right now, is attempting to overcome its own challenges. The Columbus, Ohio-based healthcare automation startup, which was founded in 2012, has long framed its extensive history of pivots (more than 30 to date) as an inspirational story of trying, then trying again.

Investors rewarded Olive for its willingness to shift gears as well. It has raised a staggering $902 million over the years and was valued at $4 billion last year.

According to a series of damning Axios pieces, the outfit was never all that it seemed, and by September, the wheels were fast loosening.

The company’s chief financial officer and chief product officer were both abruptly fired, joining a slew of other C-level executives who left this fall, including its president, a senior director of operations, its EVP of operations, and its SVP of payer product strategy.

Since then, Olive AI has announced that it will sell a portion of its products and services to Rotera, a company founded by Olive’s venture studio.

Limited partners are dissatisfied with these collective developments, but as far as we know, they have not discussed taking action, and it appears unlikely that they will.

To begin, it is extremely rare for limited partners to organize against a venture firm to which they have committed capital, and it is only slightly more common for VCs to extend LPs the courtesy of reducing their commitments.

They may also expect Olsen to land on his feet. He does have 16 years of venture investing experience and a staff of about 20 people at Drive to back him up.

Furthermore, there isn’t much interest in causing problems for Kvamme, who is VC royalty. (His father was a Kleiner Perkins partner, and his first wife is the daughter of another well-known venture capitalist, former Sequoia Capital partner Pierre Lamond.)

Kvamme is well-connected in Ohio, having been lured there by his long-time friend John Kasich to work in economic development. He might have his own political ambitions.

Indeed, one regional investor recently told Business Insider that Kvamme may launch a fund to boost Ohio’s economy as a prelude to a future campaign.

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It’s a strategy that’s worked in the past. JD Vance, a venture capitalist and author, founded Narya in late 2019 before announcing his Senate bid 1.5 years later.

According to Cleveland.com, Kvamme co-hosted one of the fundraisers that helped Vance win that race earlier this month in late September.

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