The venture capital world has always had a hot-and-cold relationship with the Midwest. Investors rush in during boom times, then retreat to the coasts when markets turn sour. For Columbus, Ohio-based Drive Capital, this cycle of attention and disinterest played out against the backdrop of its own internal upheaval several years ago — a co-founder split that could have ended the firm but may have ultimately strengthened it.
At a minimum, Drive achieved something newsworthy in today’s venture landscape this past May. The firm returned $500 million to investors in a single week, distributing nearly $140 million worth of Root Insurance shares within days of cashing out of Austin-based Thoughtful Automation and another undisclosed company.
It could be seen as a gimmick, sure, but limited partners were presumably pleased. “I’m unaware of any other venture firm having been able to achieve that kind of liquidity recently,” said Chris Olsen, Drive’s co-founder and now sole managing partner, who spoke to TechCrunch from the firm’s offices in Columbus’s Short North neighborhood.
It’s a meaningful turnaround for a firm that faced existential questions just three years ago when Olsen and his co-founder Mark Kvamme — both former Sequoia Capital partners — went their separate ways. The split, which surprised the firm’s investors, saw Kvamme eventually launch the Ohio Fund, a broader investment vehicle focused on the state’s economic development that includes real estate, infrastructure, and manufacturing alongside technology investments.
Drive’s recent success stems from what Olsen calls a deliberately contrarian strategy in an industry preoccupied with “unicorns” and “decacorns” — companies valued at $1 billion and $10 billion, respectively.
“If you were to just read the newspapers or listen to coffee shops on Sand Hill Road, everyone always talks about the $50 billion or $100 billion outcomes,” Olsen said. “But the reality is, while those outcomes do happen, they’re really rare. In the last 20 years, there have only been 12 outcomes in America over $50 billion.”
By contrast, he noted, there have been 127 IPOs at $3 billion or more, plus hundreds of M&A events at that level. “If you’re able to exit companies at $3 billion, then you’re able to do something that happens every single month,” he said.
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That rationale underpinned the Thoughtful Automation exit, which Olsen described as “near fund-returning” despite being “below a billion dollars.” The AI healthcare automation company was sold to private equity firm New Mountain Capital, which combined it with two other companies to form Smarter Technologies. Drive owned “multiples” of the typical Silicon Valley ownership stake in the company, said Olsen, who added that Drive’s typical ownership stake is around 30% on average compared to a Valley firm’s 10% — often because it is the sole venture investor across numerous funding rounds.
“We were the only venture firm who invested in that company,” Olsen said of Thoughtful Automation, which was previously backed by New Mountain, the PE firm. “About 20% of the companies in our portfolio today, we are the sole venture firm in those businesses.”
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