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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<\/a>, this cycle of attention and disinterest played out against the backdrop of its own internal upheaval several years ago \u2014 a co-founder split<\/a> that could have ended the firm but may have ultimately strengthened it.<\/p>\n At a minimum, Drive achieved something newsworthy in today\u2019s venture landscape this past May. The firm returned $500 million<\/a> 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.<\/p>\n It could be seen as a gimmick, sure, but limited partners were undoubtedly pleased. \u201cI\u2019m unaware of any other venture firm having been able to achieve that kind of liquidity recently,\u201d said Chris Olsen, Drive\u2019s co-founder and now sole managing partner, who spoke to TechCrunch from the firm\u2019s offices in Columbus\u2019s Short North neighborhood.<\/p>\n It\u2019s a remarkable turnaround for a firm that faced existential questions just three years ago when Olsen and his co-founder Mark Kvamme \u2014 both former Sequoia Capital partners \u2014 went their separate ways. The split, which surprised the firm\u2019s investors, saw Kvamme eventually launch the Ohio Fund, a broader investment vehicle focused on the state\u2019s economic development that includes real estate, infrastructure, and manufacturing alongside technology investments.<\/p>\n Drive\u2019s recent success stems from what Olsen calls a deliberately contrarian strategy in an industry preoccupied with \u201cunicorns\u201d and \u201cdecacorns\u201d \u2014 companies valued at $1 billion and $10 billion, respectively.<\/p>\n \u201cIf 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,\u201d Olsen said. \u201cBut the reality is, while those outcomes do happen, they\u2019re really rare. In the last 20 years, there have only been 12 outcomes in America over $50 billion.\u201d<\/p>\n By contrast, he noted, there have been 127 IPOs at $3 billion or more, plus hundreds of M&A events at that level. \u201cIf you\u2019re able to exit companies at $3 billion, then you\u2019re able to do something that happens every single month,\u201d he said.<\/p>\n That rationale underpinned the Thoughtful Automation exit, which Olsen described as \u201cnear fund-returning\u201d despite being \u201cbelow a billion dollars.\u201d The AI healthcare automation company was sold to private equity firm New Mountain Capital, which combined it with two other companies<\/a> to form Smarter Technologies. Drive owned \u201cmultiples\u201d of the typical Silicon Valley ownership stake in the company, said Olsen, who added that Drive\u2019s typical ownership stake is around 30% on average compared to a Valley firm\u2019s 10% \u2014 often because it is the sole venture investor across numerous funding rounds.<\/p>\n \u201cWe were the only venture firm who invested in that company,\u201d Olsen said of Thoughtful Automation, which was previously backed by New Mountain, the PE firm. \u201cAbout 20% of the companies in our portfolio today, we are the sole venture firm in those businesses.\u201d<\/p>\n Portfolio Wins and Losses<\/strong><\/p>\n Drive\u2019s track record includes both big successes and also stumbles. The firm was an early investor in Duolingo, backing the language-learning platform when it was pre-revenue after Olsen and Kvamme met founder Luis von Ahn at a bar in Pittsburgh, where Duolingo is based. Today, Duolingo trades on NASDAQ with a market cap of nearly $18 billion.<\/p>\n The firm also invested in Vast Data, a data storage platform last valued at $9 billion in late 2023 (and is reportedly fundraising<\/a> right now), and Drive made money on the recent Root Insurance distribution despite that company\u2019s rocky public market performance since its late 2020 IPO.<\/p>\n But Drive also experienced the spectacular failure of Olive AI, a Columbus-based healthcare automation startup that raised over $900 million and was valued at $4 billion before eventually selling portions of its business in a fire sale.<\/p>\n \u201cYou have to be able to produce returns in bad markets as well as good markets,\u201d Olsen said. \u201cWhen markets really get tested is when there\u2019s not as much liquidity.\u201d<\/p>\n What sets Drive apart, Olsen argues, is its focus on companies building outside Silicon Valley\u2019s hyper-competitive ecosystem. The firm now has employees in six cities \u2014 Columbus, Austin, Boulder, Chicago, Atlanta, and Toronto \u2014 and says it backs founders who would otherwise face a choice between building near their customers or their investors.<\/p>\n It\u2019s Drive\u2019s secret sauce, he suggests. \u201cEarly-stage companies that are based outside of Silicon Valley have a higher bar. They have to be a better business to garner a venture investment from a venture firm in Silicon Valley,\u201d Olsen said. \u201cThe same thing applies to us with companies in Silicon Valley. For us to invest in a company in Silicon Valley, it has a higher bar.\u201d<\/p>\n Much of the firm\u2019s portfolio centers not on companies trying to come up with something entirely novel, but instead on those applying tech to traditional industries that coastal VCs might overlook. Drive has invested in an autonomous welding company, for example, and what Olsen calls \u201cnext-generation dental insurance\u201d \u2014 sectors that arguably represent America\u2019s $18 trillion economy beyond Silicon Valley\u2019s tech darlings.<\/p>\n Whether that focus \u2014 or Drive\u2019s momentum \u2014 translates into a big new fund for Drive remains to be seen. The firm is currently managing assets that it raised when Kvamme was still on board, and according to Olsen, it has 30% left to invest of its current fund, a $1 billion vehicle<\/a> announced in June 2022.<\/p>\n Asked about cash-on-cash returns to date, Olsen said that with $2.2 billion in assets under management across all of Drive\u2019s funds, all are \u201ctop quartile funds\u201d with \u201cnorth of 4x net on our most mature funds\u201d and \u201ccontinuing to grow from there.\u201d<\/p>\n In the meantime, Drive\u2019s thesis about Columbus as a legitimate tech hub received further validation this week when Palmer Luckey, Peter Thiel, and other tech billionaires announced plans to launch Erebor<\/a>, a crypto-focused bank headquartered in Columbus.<\/p>\n \u201cWhen we started Drive in 2012, people thought we were nuts,\u201d Olsen said. \u201cNow you\u2019re seeing literally the people I think of as being the smartest minds in technology \u2014 whether it\u2019s Elon Musk or Larry Ellison or Peter Thiel \u2014 moving out of Silicon Valley and opening massive presences in different cities.\u201d<\/p>\n<\/div>\n