Drive Capital was founded by two former Sequoia Capital partners looking to start fresh in the Midwest. But investors in the Columbus, Oh. have had a bumpy ride lately, and according to our sources, they’re not enjoying it.

It’s a dramatic turn for Drive, which announced $1 billion in capital commitments in June, a healthy amount for a 10-year-old company whose mission is to invest nearly anywhere in the United States outside of the Silicon Valley. In fact, by June the company — co-founded by veteran VCs Mark Kvamme and Chris Olsen — appeared to be on the rise, with some apparent wins in its portfolio and assets under management that had reached over $2 billion.

Yet dating back to September – shortly after interviewing Olsen for a story – we heard rumors of a rift, as well as separate plans that Kvamme was preparing. Then came the announcement last month that the team was going their separate ways.

At first, the story was that Kvamme, who has spent more than twice as many years in Sequoia as Olsen, was transitioning to “partner honour” because, as he told the outlet regional Columbus Business First, 10 years and four rounds of funding was longer than he originally expected to run Drive Capital. (That was news for Drive investors.)

This week the other shoe dropped. Columbus Business First reported that Kvamme, who racing cars, is not going into semi-retirement, but is instead talking with potential backers of a new fund, the Ohio Fund, which will apparently invest in multiple asset classes, including other funds, public stocks , private Ohio corporations and infrastructure. The idea is to “focus on Ohio’s future economic vitality,” an unnamed source told the outlet.

Olsen now says he is surprised by this development. We have obtained a letter that Drive sent to its sponsors this evening which reads as follows:

Dear Sponsor:

This week, an article was published indicating that our partner emeritus Mark Kvamme is launching a new investment fund. We at Drive were all surprised by this news, and we’re sure you were too. Although we do not send you a note each time a new article about Mark is published, we believe that in the spirit of being a good partner, it is appropriate to provide you with a transparent update on this situation and our relationship with Mark.

After the article was published, we spoke with Mark and learned that the prospect of him raising a new fund had been leaked to a reporter by an unknown source. According to Mark, he hasn’t determined what he’s going to do next yet. He plans to raise a new type of fund, as well as other options for public service and personal effort.

We have a formal separation agreement with Mark that prevents him from starting a competitive business or fund to drive. Please know that this is a heavily negotiated agreement to ensure that it significantly protects Drive, the interests of our sponsors, and everything we build at Drive.

Again, we do not intend to communicate with you every time a new article is written about Mark, but in this case we thought it appropriate to provide some clarification. If you have any questions, do not hesitate to contact us [contact information redacted by TechCrunch].

Sincerely,
The Drive team

Olsen declined to comment for this story; we contacted Kvamme and received no response. But it’s complicated, to say the least.

According to our sources, part of the rift has to do with a relationship between Olsen and Yasmine Lacaillade, who was COO of Drive for nearly seven years before leaving the company in April to start her own investment firm.

Asked about it, a spokesperson for Drive played down any tension that might have arisen from a romantic relationship between the two, writing: “Yes you heard right in that Chris and Yas are a couple. C It’s been common knowledge for some time. No comment beyond that.

Like most venture capital firms right now, Drive also finds its portfolio in rougher shape than it did a year or two ago. One of Drive’s biggest exits to date has been from Root Insurance, a Columbus, Ohio-based insurance company that has been around for seven years now and specializes in auto coverage and held a traditional IPO in November 2020. Although the shares initially performed well, they have since fallen, currently priced at around $7 each after a reverse stock split, down from $486 per share on the day the company went public. Olsen left the board in November last year.

The other big star in Drive’s portfolio right now – Olive AI – is trying to overcome its own challenges. The Columbus-based healthcare automation startup, founded in 2012, has long touted its long history of pivots (more than 30 to date) as an inspiring story of trying, then trying again. Olive was also rewarded by investors for her willingness to shift gears. He has raised a staggering $902 million over the years and said last year he was valued at $4 billion.

But the outfit was never all it appeared, according to a series of overwhelming Axios pieces, and in September the wheels loosened rapidly. Most notably, the company’s chief financial officer and chief product officer were abruptly fired, following the door of many C-level executives who also left this fall, including its president, a senior operations manager, its vice president operations executive and its paymaster senior vice president. the product strategy.

Olive AI has since said it will sell some of its products and services to Rotera, a company spun out of Olive’s own venture capital studio.

The sponsors are not happy with these collective developments, but to our knowledge they have not spoken of taking action and it seems unlikely that they will.

First, it is extremely rare for LPs to organize against a venture capital firm to which they have committed capital and only slightly less rare for VCs to give LPs the courtesy of reducing their commitments.

They could also expect Olsen to land on his feet. He has 16 years of venture investing experience and a team of around 20 people at Drive to back him up.

Plus, there’s not much point in creating headaches for Kvamme, who borders on VC royalty. (His father was a partner at Kleiner Perkins; his first wife is the daughter of another famous VC, former Sequoia Capital partner Pierre Lamond.)

Kvamme is very connected in Ohio, having originally been lured there by his longtime friend John Kasich for an economic development position. He may also have his own political aspirations. Indeed, a regional investor recently says Business Insider that Kvamme could launch a fund to support Ohio’s economy as a basis for a future campaign.

It is a playbook that has already been used effectively. The VC and author JD Vance set up a venture capital firm in Cincinnati called Narya in late 2019 before announcing his Senate candidacy about a year and a half later. Late September, according to Cleveland.com, Kvamme co-hosted a fundraiser for Vance, who won his race earlier this month.