| SAN FRANCISCO
SAN FRANCISCO Feb 4 Regions around the world
have long sought to replicate California's success in launching
startups. Now, two venture capitalists have raised $250 million
in a gambit to recreate some Silicon Valley-style growth in the
Mark Kvamme and Chris Olsen, formerly partners at
venture-capital firm Sequoia Capital, announced Tuesday that
they had raised the funds to nurture companies in states often
overlooked by traditional venture cash. Their new fund,
Columbus, Ohio-based Drive Capital Fund I, will focus on
technology, healthcare and consumer businesses, they said.
"If they did have a funding source that was equivalent to
Silicon Valley, they would be massively successful," said Olsen
about Midwestern companies in a phone interview.
By funding source, he said he referred not simply to the
cash but to the complete approach many Bay Area venture firms
use, including intensive efforts to help portfolio companies
hire talent and find potential customers.
"The difference is here, you can name the firms on one
hand," Olsen said, whereas in California the list extends to
dozens. Existing venture-capital firms in the Midwest include
Arch Venture Partners and Pritzer Group Venture Capital, both
based in Chicago, and Minneapolis-based Split Rock Partners.
Traditionally, venture capital has flooded to the San
Francisco Bay Area, with other regions left far behind. Last
year, the Midwest attracted just $1.1 billion in venture capital
investments, according to the National Venture Capital
Association, or just under 4 percent of $29.36 billion total.
The Midwest trailed Silicon Valley; New England; the greater
New York, Los Angeles, and Washington, D.C. metropolitan areas;
and Texas. It came in just ahead of the Northwest, NVCA data
Perhaps the Midwest's most notable venture-backed company in
recent years has been Groupon, the daily-deals site
based in Chicago.
Kvamme and Olsen hope that with Drive's cash available they
can keep more promising entrepreneurs in the Midwest rather than
decamping to California in search of capital and advice.
"Just like Fred Wilson went to New York City and started
Union Square, we see that same opportunity here in the Midwest,"
said Olsen, an Ohio native. Union Square Ventures has backed
several big New York start-ups, including crafts-site Etsy,
considered an initial public offering candidate for 2014, and
blog site Tumblr, acquired last year by Yahoo for $1.1
Drive has already invested in a handful of Midwest
businesses, including retail-data service ChannelIQ;
health-information exchange CrossChx; farming software company
FarmLogs; and travel application Roadtrippers.
Its inaugural fund of $250 million is large for a firm's
first fund. The average venture capital fund totals around $150
million, according to the NVCA.
Kvamme previously led the nonprofit JobsOhio.