Drive Capital announces $250M fund focused on Midwest investments
Growing up, Chris Olsen didn't plan on staying in his hometown of Cincinnati.
"It's kind of an unlikely turn of events that we ended up here," Olsen told Silicon Prairie News.
"I grew up in Cincinnati and spent 18 years of my life trying to get out of the region and get to California."
Now Olsen and his co-founder, Mark Kvamme, are turning their attentions back to the heartland with Drive Capital, an Ohio-based venture capital firm the pair founded in 2012. On Tuesday, Drive Capital announced the firm had completed fundraising for its first $250 million fund.
Kvamme was born and raised in California, and eventually worked with Olsen over the six years both men were at Sequoia Capital, a Silicon Valley venture capital firm located in Menlo Park, Calif. It wasn't until Kvamme moved to Columbus, Ohio, and took an economic development job—"as a six-month favor to a friend," Olsen said—that Olsen realized how much had changed in his home state.
"(Mark) saw a tremendous amount of entrepreneurship and innovation and felt like it was really something exciting," Olsen said. "He said we should really go out and create a fund to invest in these entrepreneurs.
Now the Columbus-based firm has seven employees and a growing portfolio.
"It was just an idea on paper 12 months ago," Olsen (right) said. "We didn't know what we would run into until we got out here and started talking to entrepreneurs and looking under these rocks to see what people were building out here.
"There's way more innovation here than I had first thought."
4 down, 26 to go
Since completing its fundraising, Drive Capital has invested in four companies around the Midwest; Olsen says they hope to invest in about 30 companies through the fund. In mid-January, Ann Arbor, Mich.-based FarmLogs announced a $4 million Series A round led by the firm—the company has ties to Iowa with Dylan Hamilton, who lives in Ankeny and co-works out of StartupCity Des Moines, serving as FarmLogs' growth team lead.
Drive Capital's website lists technology, tech-enabled services, health care and consumer industries as the fund's target. Olsen says one of the biggest trends that has driven the firm's investment philosophy has been the impact of cloud computing on traditional markets.
"In today's world you don't necessarily need to rely on people who know how to build data centers because you can house what you're building through the cloud," he said. "You don't have to build your company in the corner of the world where that space exists anymore."
Olsen also sites a company like FarmLogs as an example of entrepreneurs who are using technology to change their industry: "In the Midwest you have a lot of these industries that are ripe for technological innovation, but they haven't historically had the access to do it. Now with cloud computing they can."
The Midwestern region the firm is interested in ranges west from Pittsburgh to Kansas City and up into Minnesota.
"You don't have the money here"
While he's originally a Midwesterner, Olsen says another one of the things that motivated the pair to create a venture capital firm focused on the heartland was the region's discrepancy between entrepreneurial activity and available capital.
"The biggest difference is that you don't have the money here," Olsen said of the differences between the Midwest and West Coast. "There's a lot of angel groups and a lot of small funds that are trying to invest and help these entrepreneurs build their companies, but if you're an early-stage company and want to raise 4 or 6 or 8 million dollars here, it's near impossible to do."
Above all else, Olsen says that passion is at the root of what he and Kvamme are looking for in prospective investments.
"Oftentimes they're not the best business plans or the best resumes, but these are the people who are going to do whatever they have to to solve a problem because it's important to them," he said.
Credits: Chris Olsen photo from Drive Capital.