October 18-20 | Tucson, AZ

The Research Institution GAP Fund and Accelerator Program Summit

Sequoia veterans plug a venture gap with $300 million fund for midwest start-ups, university tech

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October 18-20, 2023 / Tucson, AZ
The annual summit for research institution gap fund and accelerator programs, including proof of concept programs, startup accelerators, and university venture funds

The Story

As Silicon Valley venture capitalists, Chris Olsen and Mark Kvamme were reluctant to visit “flyover country” to do deals.

Now they’ve gone native and see the Midwest as the land of opportunity, setting up shop in Columbus, Ohio, with Drive Capital, a planned $300 million venture fund.

That’s good news for Chicago startups. Early stage funding, from a few hundred thousand to a few million dollars, has become much more available in recent years with the emergence of venture funds such as Lightbank. But there are few local options for companies looking for more than $2 million

“If you want to raise a half-million to $1 million, you can do that,” says Mr. Kvamme, who left Silicon Valley for Columbus to lead economic development for his friend John Kasich, who became governor in 2010. “Five or seven years ago, it would have been hard. If you’ve got to raise $2 million-plus, it’s virtually impossible unless you go to the coasts.”

Messrs. Kvamme and Olsen, former partners at Sequoia Capital, want to change that. “We’ll invest $100,000 up to $30 million,” Mr. Kvamme told me recently.

They’ve raised $181 million so far, according to federal securities filings.

Mr. Olsen grew up in Cincinnati, but Mr. Kvamme is a West Coast guy. While they’ve both warmed to the Midwest, a $300 million fund is about business, not fondness.

“In the three area codes that make up Silicon Valley, there is over $12 billion invested. That’s a little more than 50 percent of (annual) venture capital investment,” Mr. Kvamme said. “The Midwest is only $2 billion. It’s one-quarter of the U.S. geographically, but one-sixth of the the investment.”

Mr. Olsen added: “There are fantastic entrepreneurs based in the Midwest who, if they were based in Silicon Valley, would have access to tremendous amounts of capital,” he said.

The duo are among the investors who believe Chicago and the rest of the Midwest are poised to capitalize on the next big wave of Internet commerce, which will be aimed more at business-to-business spending than consumer shopping.

“We used to believe there was a strategic advantage to building a company in California,” Mr. Olsen said. “If you were trying to attract certain types of engineers — to build out data centers — they were in just a few centers in the world. Now companies are built in the cloud, and they don’t own single piece of hardware.”

“You no longer have to build a company next to the engineers. You can build next to customers. There is a huge customer base in the Midwest.”

The pair has visited Chicago several times but hasn’t made an investment here yet. One of the bright spots is the city’s concentration of immigrants alongside its big companies.

Nearly one-fourth of U.S. technology and engineering companies between 1995 and 2005 hadimmigrants on their founding teams. Think Mu Sigma, the data-analytics firm founded by Booth School of Business alum Dhiraj Rajaram, orFieldglass, the human-resources software company founded by Jai Shekhawat.



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