Drive Capital launches seed program in 5 non-coastal cities

Drive Capital, one of the Midwest's most prestigious and well-known VC firms, wants to show the world that it's not fazed by the departure of its co-founder Mark Kvamme last year.

Wednesday, Columbus, Ohio-based Drive announced a new $80 million program that will make $500,000 investments in pre-seed and seed-stage startups in five developing tech hubs: Chicago, Atlanta, Columbus, Denver and Toronto. The capital for the initiative will come from the $1 billion that Drive closed across two multistage funds in July.

Chris Olsen, an ex-Sequoia investor and Drive's remaining co-founder, said that the seed effort is a formal expansion of what the firm has been doing all along in Ohio.

"We found that by getting involved with founders at the earliest stages, we develop a strong working relationship with them, and as their businesses grow, we can continue to invest in all their follow-on rounds," Olsen said.

Since leaving Drive, Kvamme has been raising a $500 million impact fund called the Ohio Fund, which will act like a sovereign wealth fund for the state, according to reports. Olsen said Drive now has 35 employees, including 15 investors, which helped the transition to be "seamless."

While the concept of investing from "seed to IPO" is popular with other multistage firms, Olsen insists that it's difficult to do successfully without being physically present where the company operates.

Olsen credits Drive's location in Columbus for its early investment in Olive, which was last valued at nearly $4 billion in 2021. The firm gave the healthcare automation company its first check in 2013.

Each of the cities in Drive's seed program will be overseen by a general manager located there.

The firm, which has also backed companies like edtech specialist Duolingo and Root Insurance, wants to take advantage of changing demographics.

Drive started out in 2012 as a Midwest-focused fund, but it has since expanded its investment geography from the Hudson River to the Rocky Mountains.

"The world is changing, and [this change] is building more technology companies in cities outside of the traditional hubs than we've ever seen before," Olsen said.

In 2022, US deal value declined by 31% from the previous year's peak, but deal value in the 30 states Drive invests in hardly receded, according to PitchBook data.  

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This article originally appeared on PitchBook News