Drive Capital is a venture capital firm headquartered in Columbus, Ohio. Today, it is a force to be reckoned with in the investment world, managing $2.2 billion in assets across its many funds. The firm’s unique value proposition stems from its application of a contrarian investment philosophy. In an industry that typically pursues big hits, high-profile “unicorns” and “decacorns,” it is a radical move. By targeting their investments in companies based outside the hyper-competitive Silicon Valley, they back founders who are forced to decide between being near their customers or their investors.
Founded by Chris Olsen and Mark Kvamme in 2012, Drive Capital saw skepticism from many in the venture capital community, including a few who called it a “dumb idea.” Olsen recalls, “When we started Drive in 2012, people thought we were nuts.” With this deal, the firm has now muted many of its critics. In the process, it has enjoyed phenomenal success, with all of its funds listed as “top quartile funds.” Notably, Drive’s most mature funds have returned “north of 4x net,” a statistic that underscores the firm’s effective investment strategies.
Drive Capital’s portfolio includes a number of strong early-stage investments. Among them is the language-learning platform Duolingo, an early investment by the firm even before it started bringing in revenue. Today, Duolingo has a share on NASDAQ under the symbol DUOL with a market capitalization close to $18 billion. Survivor success story This success story is an example of Drive Capital’s thesis of finding and investing in the next great companies before everybody else does.
The firm’s strategy could not be more opposite to what’s happening in venture capital today. Yet Olsen notes that too many investors plan for the big bang. Companies getting to $50 billion or $100 billion are incredibly uncommon. “The reality is, while those outcomes do happen, they’re really rare,” he explains. Instead, Olsen advocates for a more pragmatic perspective: “If you’re able to exit companies at $3 billion, then you’re able to do something that happens every single month.”
This commitment to just focusing on the exits that are achievable has resulted in Drive Capital being able to create an incredibly diverse portfolio. Shockingly only about 20% of the companies inside Drive Capital’s investments are companies where Drive Capital is the only venture partner. Their typical ownership stake averages around 30%, which significantly exceeds the 10% stake typical of firms based in Silicon Valley.
Drive Capital’s strategic investments go beyond early-stage technology startups. The firm has invested in sectors ranging from drones for autonomous welding to a next-generation dental insurance platform. This diversification increases the likelihood of returns and any subsequent public-sector investments. It builds innovation across a variety of industries.
Drive Capital is back in the news again, this time for unexpectedly returning $500 million to investors. This remarkable accomplishment happened in literally just one week’s time. You’ve also cashed out of Austin-based Thoughtful Automation and one other undisclosed company. A few months later, you were awarded $139 million in shares of Root Insurance. Such quick returns underscore the strength of Drive Capital’s operating playbook and skill at executing on intricate market dynamics.
With employees stationed in six cities—Columbus, Austin, Boulder, Chicago, Atlanta, and Toronto—Drive Capital has cultivated a broad network that connects them to diverse markets and talent pools. This geo-strategic approach allows the firm to pursue and find opportunities that other more traditional, Silicon Valley-centric firms wouldn’t dare to chase.
Three years ago, Olsen and Kvamme had to answer some difficult existential questions when they divorced. Since then, Drive Capital has been booming under Olsen’s energetic leadership as the sole managing partner. His vision to make investments in early-stage companies outside of Silicon Valley is what drives Drive Capital. It creates a creative space beyond the bounds of any one city or state to allow the best innovators to flourish without the constraints of any one geographic jurisdiction.
Olsen emphasizes the elevated standards required for investing in early-stage companies located outside California’s tech hub: “Early-stage companies that are based outside of Silicon Valley have a higher bar.” This mentality reaches as far inward as firms in Silicon Valley, too. He states, “For us to invest in a company in Silicon Valley, it has a higher bar.”
