Drive Capital’s second act – how the Columbus venture firm found success after a split
“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.”
Portfolio Wins and Losses
Drive’s 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.
The firm also invested in Vast Data, a data storage platform last valued at $9 billion in late 2023 (and is reportedly fundraising right now), and Drive made money on the recent Root Insurance distribution despite that company’s rocky public market performance since its late 2020 IPO.
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.
“You have to be able to produce returns in bad markets as well as good markets,” Olsen said. “When markets really get tested is when there’s not as much liquidity.”
What sets Drive apart, Olsen argues, is its focus on companies building outside Silicon Valley’s hyper-competitive ecosystem. The firm now has employees in six cities — Columbus, Austin, Boulder, Chicago, Atlanta, and Toronto — and says it backs founders who would otherwise face a choice between building near their customers or their investors.
It’s Drive’s secret sauce, he suggests. “Early-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,” Olsen said. “The 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.”
Much of the firm’s 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 “next-generation dental insurance” — sectors that arguably represent America’s $18 trillion economy beyond Silicon Valley’s tech darlings.
Whether that focus — or Drive’s momentum — 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 announced in June 2022.
Asked about cash-on-cash returns to date, Olsen said that with $2.2 billion in assets under management across all of Drive’s funds, all are “top quartile funds” with “north of 4x net on our most mature funds” and “continuing to grow from there.”
In the meantime, Drive’s 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 crypto-focused bank headquartered in Columbus.
“When we started Drive in 2012, people thought we were nuts,” Olsen said. “Now you’re seeing literally the people I think of as being the smartest minds in technology — whether it’s Elon Musk or Larry Ellison or Peter Thiel — moving out of Silicon Valley and opening massive presences in different cities.”
Content Original Link:
" target="_blank">
