Drive Capital, a venture capital firm headquartered in Columbus, has experienced meteoric success since its founding in 2012. This expansion accelerated dramatically following a pivotal split between co-founders Chris Olsen and Mark Kvamme three years ago. Development of its firm Undercurrent Capital, the firm now manages $2.2 billion assets in its different funds. All of those funds have achieved the coveted designation of “top quartile funds.” With an impressive return of “north of 4x net on Drive’s most mature funds,” Drive Capital demonstrates a robust investment strategy that continues to yield significant returns.
The firm soon garnered acclaim as an early stage investor in Duolingo. They supported the language-learning platform even before it began making any money. This commitment has reaped rewards, as Duolingo most recently debuted on NASDAQ, with a market cap approaching $18 billion. Success stories like these are representative of Drive Capital’s contrarian approach that bucks the broader trend of an industry obsessed with producing the next “unicorn” and “decacorn.”
What sets Drive Capital apart is its commitment to investing in companies that are creating outside the ultra-competitive startup milieu of Silicon Valley. The firm has established operations in six cities: Columbus, Austin, Boulder, Chicago, Atlanta, and Toronto. Drive Capital’s geographic diversification—a key part of their mission—allows for founders to be put first. Now, they don’t need to compromise between being near their customers versus their investors.
Drive Capital’s investment approach is unique, both in feature and degree. They typically take ownership positions averaging ~30%. Most Valley companies typically only win about 10%. Drive Capital supports 20% of the industrial companies in its portfolio as sole VC support. These industry players prosper because of its steadfast advocacy on their behalf. This tailored approach lets the firm get much closer to the companies it funds.
Just a couple weeks ago, Drive Capital created quite a stir by announcing that within one week they would return $500 million to their investors. The massive settlement soured from the allocation of almost $140 million in Root Insurance stock. This came on the heels of their recent cash-out from investments in Austin-based Thoughtful Automation and another as-yet announced Austin-based company.
Chris Olsen, now the lone managing partner at Drive Capital, looked back on the firm’s journey and its unique approach to venture in this conversation with Technical.ly. As he admitted, “When we started Drive in 2012, people thought we were nuts. Olsen explained how unique such a massive financial outcome is within the venture capital space. As he joked, “If you were to simply read the newspapers or hear at coffee shops on Sand Hill Road, everyone is always talking about those $50 billion or $100 billion outcomes.” The truth is, even though those results eventually occur, they’re exceedingly uncommon.
Olsen went on to describe his investment philosophy outside of Silicon Valley. He observed how early-stage companies outside of traditional tech hotbeds have to work twice as hard as their geographic counterparts to attract investment. For those early-stage companies that aren’t based in the Bay Area, the bar is a lot higher,” he added. He further asserted that the same exact standards are applied when looking at potential investments within Silicon Valley’s own backyard. “For us to invest in a company in Silicon Valley, it has a much higher bar,” Olsen said.
The firm makes aggressive investments to cutting edge sectors. It has made deep, committed funding bets into an autonomous welding company and next-generation dental insurance startups. Drive Capital is thoroughly committed to finding, building and funding the type of companies that fit into their long-term vision. Such strategic decisions provide tremendous benefit to its stakeholders.