Drive Capital dedicates $80M, 'boots on the ground' to seed-stage startups in four new cities

Drive Capital LLC has hired general managers in four North American cities to repeat its model of investing in future unicorns before the founders even know the idea represents a company.

Now with $2.2 billion in assets under management, the venture capital firm announced Wednesday setting aside $80 million in a seed program for hands-on investment – up to $500,000 at a time in 160 startups – similar to its patterns with tech companies such as Root Inc. and Olive AI Inc., with an emphasis on "overlooked" founders such as nonwhite entrepreneurs currently attracting a tiny sliver of VC investment.

Besides its Columbus base, Drive has opened a physical office in Chicago and hired remote general managers for fast-growing startup ecosystems in Atlanta, Denver and Toronto. The program already includes about 10 startups.

"The (general manager's) role is to be completely intertwined in that startup community and be the face entrepreneurs think of when they have an idea," Drive co-founder and Partner Chris Olsen said in an interview. "There’s a difference in strategy at this stage of investing."

Since raising $1 billion in two new funds in July for early and later-stage companies, Drive has widened its Midwest focus to the non-coastal stretch from the Hudson River to the Rocky Mountains. Drive carved this latest $80 million initiative out of its $400 million seed and early-stage fund, the fourth raised since its founding in 2012. An undisclosed amount of the program represents new fundraising since July.

They're still seed investments, he said, but these investments come with greater hands-on mentorship – stopping early startups in the target cities from leaving for coastal VC epicenters.

"Historically, we were only able to do it on a very small basis and really only in Columbus," Olsen said.

Andy Jenks, a Drive general partner, is general manager in Central Ohio, the only GM with a dual role. The other geographic leads hunt for prospects and link portfolio companies to mentors and operational support, but refer prospects to Drive partners who make the final investment decisions.

From the two co-founders, Drive has grown to 15 investment partners in a total staff of 34. Mark Kvamme last year stepped back from operations to turn the reins over to Olsen.

Those general managers are:

"We’re just starting out with this program," Olsen said. "Assuming it goes the way we think it will, it will absolutely go to more cities."

Before co-founding Drive, Kvamme – a former Sequoia Capital partner who thought he was on a temporary Ohio gig – met southeast Ohio native Sean Lane at an economic development event.

The former military intelligence officer ticked off the many tech companies and incubation efforts he was leading then in Baltimore and mentioned one idea he was mulling, bringing the connectivity of the internet to the fax-driven world of healthcare.

Drop everything, Kvamme said. Move to Ohio. Build the internet of healthcare.

Then called CrossChx, Lane's startup was among the first in Drive's portfolio. Similarly, in 2015, Root Insurance Co. was just two people on laptops in the firm's Short North office. In 2019, Root Inc. was valued at nearly $7 billion in Ohio's largest-ever IPO.

Since those days, both companies have struggled, cutting hundreds of jobs since early 2022. But Olsen says they are still young, and like other tech companies managing expenses prudently in unprecedented times.

Drive still looks throughout the middle of the continent for investment prospects. This hands-on, pre-seed initiative focuses on the cities with the speediest velocity – to prevent ambitious hometown graduates from fleeing to the VC epicenters of Silicon Valley, New York City or the Boston area.

For example, Rivet, an artificial-intelligence-powered audience management platform, was founded by MIT graduates who moved the startup to Chicago upon Drive's $500,000 investment, Chicago Inno reported. Campbell said he found another Drive $500,000 investment in a startup ignored by others at a Northwestern University pitch competition: JupiterDX, tech for managing long Covid and other chronic illnesses.

"The culture at Drive is to constantly be on the go, looking for founders where they’re currently at – not waiting for founders to come to us," said Campbell, Chicago's general manager for Drive, said in an interview. "A lot of times these are founders before they’re 'founders.'"

Campbell said he's traveling to college campuses nationwide, looking for "overlooked founders in overlooked areas" with ideas written on napkins.

"There’s no way to ‘apply’ for what we’re doing," he said.

Campbell grew up in the San Francisco Bay Area before attending Chicago's DePaul University and falling in love with the Second City. He worked in marketing and product management roles for stalwarts such as the Chicago Tribune and Motorola before co-founding a podcast interviewing entrepreneurs and investors who got their start in their 20s.

In those interviews, he learned how to "connect the dots" between what founders need and what knowledgable investors can impart.

"That’s a philosophy I’ve believed in my entire career: Do the work before you have the job," Campbell said. "I want to be a therapist to my founders."

Arguably, the new Drive cities already are ahead of Columbus in spawning successful tech startups. That doesn't mean they still don't have a shortage of early-stage capital and mentorship, Olsen said.

"What we've found is, you look at dollars per capita in a place like Silicon Valley and New York, they’re way ahead of us," Olsen said. "That’s what this program helps us demonstrate and solve.

"This is no longer about one company in one city. This is about a community of companies, together building a startup economy."