Drive Capital LLC has launched a $300 million fund to invest in Midwest startups, surpassing its first fund and catapulting the venture capital firm to more than a half-billion dollars under management.
Co-founders Mark Kvamme and Chris Olsen, who started the firm in Columbus after leaving Sequoia Partners in Silicon Valley, said their thesis is catching on that the Midwest is fertile territory to build fast-growing tech companies and bet on a billion-dollar breakout.
“Three years ago, most of our buddies in Silicon Valley thought we were completely nuts,” Kvamme told me Tuesday. “They’re starting to come around, that maybe we had a good idea. … People are realizing the power of (startups) being close to the customer.”
Olsen wrote about the promise of Midwestern startups this week in VentureBeat: “Every time we go to the coasts, we hear the same old reasons why the Midwest won’t work for startups. I have yet to see anyone validate these claims with data. … When people take the time to see what is going on out here, they stay for the opportunity.”
Drive Capital is close to investing in the first new company from the second fund, Kvamme said, and the startup would likely move to Columbus from outside the Midwest.
Drive Capital invested in 19 companies from its first $250 million fund; it’s made just 13 of those investments public. Any funds left are reserved for re-investments in that portfolio. Five of the companies are in Chicago, while Kvamme said “four and soon to be five” are in Columbus. Others are in Minneapolis, Pittsburgh and Kansas City.
Ohio State University invested $50 million in Drive’s first fund. Kvamme said he could not identify limited partners in the second.
“We had more support outside the Midwest than inside the Midwest in this fund than the last fund,” he said. ” Folks in the Midwest are still trying to figure out venture capital. The folks on the coasts are a lot more comfortable (with the idea that) it takes six to seven years before you start seeing any real returns.”