Drive Capital LLC raised $1 billion to invest in startups in 2022 – joining a record-shattering fundraising year for U.S. firms overall – then announced a major change in leadership for its second decade.
Other venture capital firms in Central Ohio launched new funds of $50 million or more during the year.
Here's a look at the biggest news of note for the region's venture capital scene this year:
Drive, Kvamme plan their futures
Columbus-based Drive, already the largest active firm in the Midwest, nearly doubled to $2.2 billion under management when it announced two new funds in July: $400 million for its fourth seed and early-stage fund and $600 million for later growth-stage tech companies. About 95% of limited partners from previous funds returned, and many increased their commitments.
Just over 20 firms nationwide raised $1 billion or more; other than Illinois firms, Drive is alone in the Midwest. Nationally, VC firms had raised a collective $151 billion through September – already breaking the year-end record total for all of 2021, according to data from PitchBook and the National Venture Capital Association.
But firms were more parsimonious in outlaying those funds to invest in startups. Meanwhile, high interest rates have limited partners looking at different asset classes. This month PitchBook projected that overall VC firms will raise less than $130 billion in new funds for 2023.
With its coffers refilled, Drive also widened its Midwestern hunting grounds for high-growth tech startups. Now the firm will invest anywhere from the Hudson River to the Rocky Mountains.
That's one of the reasons that co-founder Mark Kvamme stepped away in October from day-to-day operations to become partner emeritus. Co-founder and partner Chris Olsen now leads Drive solo, in a succession planned since the two started the fund 10 years ago.
“I want to focus on Ohio,” Kvamme told Columbus Business First in an exclusive interview in November.
Indeed, although he said he couldn't comment, Kvamme has been floating the idea an Ohio-focused private analog to a "sovereign wealth fund," said one of the people approached.
Called a permanent trust fund when not operated by a national government, the vehicle sells shares and invests the capital in a number of assets – stocks, bonds, hedge or venture funds, and equity stakes in companies. Unlike a VC or private equity fund, however, it seeks to hold and grow those assets instead of flipping them to sell for a profit.
Kvamme also owns a car racing team.
MDK Motorsports
Startups, unicorns face rocky year
Portfolio companies backed by Drive’s first $1.2 billion have created 8,000 jobs. Its $250 million first fund raised in 2012 has returned more than what LPs put into it.
A rocky 2022 for all of tech brought mixed results to Drive's portfolio: It added a new unicorn in Immuta, a Boston startup with a Columbus office. In Central Ohio, Forge Biologics raised one of the year's biggest VC rounds and is hiring in droves, Beam Benefits (formerly Beam Dental) is growing rapidly, Rhove launched its Regulation A offering for everyday investors to get into commercial real estate, and LinkedIn data indicates Enlace Health – loaded with $58 million at the close of 2021 – has nearly doubled its staff.
But its two highest-profile Columbus unicorns struggled:
Root Inc. cut nearly 500 jobs over two rounds as part of major cost-cutting to preserve its still considerable cash. The digital insurer saw a second major investor depart its board. Following this summer's 1-for-18 reverse stock split, the share price was around $4 by year's end, a far cry from the $464 adjusted price of its IPO two years ago.
Olive AI Inc., which thus spring bought the former Anthem building in Worthington to renovate as its headquarters, cut 450 jobs in July, and C-suite and other top execs started leaving.
Central Ohio VC fund news of note
Other Central Ohio VC firms raised funds this year, and a number of emerging managers aim to increase diversity both among VC investors and the startups they back. These are some of the highlights:
- Heartland Ventures in Columbus raised a $52 million second fund toward its model of providing "outsourced R&D" to Midwest corporations.
- Tamarind Hill, based in Dublin, closed a $50 million second fund and already made seven investments from it in 2022, co-founder Mark Shary said via email. The fund looks for early-stage digital health and supply chain software companies that already have recurring revenue. One of its portfolio companies moved to Columbus from Kentucky.
- Overlooked Ventures made progress toward its goal of a $50 million fund and started investing in startups founded female and nonwhite entrepreneurs who are simultaneously underfunded and over-performing.
- Loud Capital LLC, based in Columbus, was raising a third fund while creating targeted funds in a joint venture with Atlas Venture Partners: Pride Fund LLC focused on LGBTQ+ founders and Ohio Impact Fund LP to invest in for-profit social enterprises. They have started investing. Next year comes a fund for refugees and new Americans.
- Zell Capital, which had sought to open VC to everyday investors, in July suspended offering of its shares after selling $714,000 worth its first year. Next week shareholders will vote on whether to cash out at the purchase price of $20 a share or convert it to a private investment fund, according to regulatory filing. So far the fund has invested in five very early startups.
- Health2047 Capital Partners LLC, a Silicon Valley VC firm with a $70 million first fund, has a partner and two portfolio companies in Columbus and made Central Ohio a hub for portfolio companies to find customers and mentorship.
- Meanwhile, Rev1 Ventures, a Columbus organization that invests in and advises tech startups, reported in June that its total economic impact over the decade has topped $4 billion.
