Chris Olsen was at Sequoia Capital, a California based company for six years. The serial investor was well acquainted with the California business scene before moving to Columbus, Ohio where he cofounded Drive Capital in 2013. Olsen is amongst the many investors who previously subscribed to the idea that there was an impending emergence of new markets in America outside Silicon Valley.
Like Olsen and Mark Kvamme, cofounder at Capital Drive, many institutional investors subscribed to the idea of an emerging American market outside Silicon Valley. Some investors have clearly acted on this theory going by the trust they have reposed on Olsen and Kvamme. Capital Drive secured a $1 billion investment which has taken the firm’s assets to $2.2 billion.
Capital Drive has continued to woo its peers, selling its “emerging market theory” to co-investors and venture capital firms. Although Drive has done a lot to lure big players to set up around its base, there are currently no coastal VCs with an outpost in Columbus. This is not as strange as the fact that contrary to the news in circulation about VCs moving to the Midwest, VCs are doubling back to California at an unprecedented rate according to Olsen.
The reason for this recent trend may not be far fetched. VCs who consider their performance to be below par are finding their way back to familiar territory where they have recorded peak performance. Speaking on this, Olsen explained:
“The reality is that if you’re a Silicon Valley-based venture firm, no LP at your annual meeting is going to ask you, ‘How did you miss company X in Columbus?’ Like, that’s not gonna happen. But they will ask you, ‘How did you miss company Y that was in Silicon Valley?’ They don’t want to miss those things in their backyard.”
Capital Drive might just be the one and only local stop for founders. The company currently has 36 employees in its roster. The Northern Californian region is rapidly getting venture firms launched afresh and Drive remains the poster company.
Drive has somehow been benefitting from siting its base in Columbus. One of such benefits is its deal with Root Insurance, a Columbus based car company. Root Insurance grew from one of Drives offices, and Drive singlehandedly invested a total of $67 million in the company. Root Insurance successfully raised several millions in funding capital from investors including Coatue, Redpoint, Ribbit Capital and Tiger Global. The company eventually went public in October 2020.
Retail investors may have lost substantially from what they invested in Root Insurance. Since the company went public, its shares have plummeted from $431 to $11 each. Capital Drives stake in Root Insurance before its IPO runs to $1.46 billion which represents 26.1%. Regardless, Root Insurance shares opened at $27 and traded at $190 after its lock up period expired.
Another company traceable to Capital Drive roster is healthcare automation startup Olive AI. Founded in 2012, this company leveraged on its deep history of pivots which stands at 27 to run a successful business. This robotic process automation company relieves doctors and nurses by performing their most monotonous tasks for them. As at 2021, Olive AI was valued at $4 billion and has raised over $902 over the years.
A report from Axios which interviewed 16 current and former employee and health tech execs shows that Olive AI is not all it is cracked up to be. The company may really be inflating its capabilities and “has only generated fraction of the savings it promises”. Olive AI which recently laid off about 450 employees has admitted some of its mistakes. According to a statement from Sean Lane, the company’s CEO: “Olive’s values of ‘choose vision over status quo’ and ‘act with urgency’ drove us to make significant investments across the most pressing parts of healthcare, scale our teams and move quickly to bring solutions to the market.”
Olsen sits on the board of Olive AI and thinks what the company is going through is expected of any company which experiences such an incredible growth curve as Olive AI has experienced.
In Olsen’s words: “every company that grows quickly is just messy. Companies that grow 300% a year, they are being asked to do three times the amount of things that they did the year before, and it’s not going to be perfect.
This statement seems to underscore the fact that VCs have recently become more austere about investments and have seems been presenting less generous terms than what was obtainable in the past. Going by this companies such as Olive AI are forced to readjust strategies and make tough choices.