Drive Capital and the Rise of the Rest

Once tech returns to growth (hopefully), what will the next chapter look like?

ClimaTech and AI will certainly become the next industries VC’s froth over, but there is a sleeper market that has a number of things going for it: the Midwest.

Before I dive into Drive Capital, and why it will become one of the highest performing firms of the next couple decades, I will state that Silicon Valley, Boston and NYC will remain innovation hubs for years to come. Their chokehold on the industry, however, will disappear.

You can already see it as Utah’s emerged as a tech hotspot and VC favorite in recent years. They are behind only CA for most Unicorns in the US and home to tech behemoths like Qualtrics.

Drive Capital, HQ’d in Ohio, was founded in 2013 with an investment thesis focused on early-stage tech companies located outside of CA, MA and NY.

Chris Olsen is an Ohio native. He founded Drive after spending over a decade as a partner at TCV and Sequoia — OG firms with deep roots in Silicon Valley.

Olsen’s bet will prove incredibly fruitful in the coming decades as early winners like Duolingo are just a sign of things to come. Several macro factors will “Drive” the rapid shift towards the middle of the country — jumpstarted by the acceleration of remote work during the pandemic:

• Cost-of-living — Comparing the price of rent, food and taxes between CA and FL, TX, Kansas, et al is absolutely laughable. This is already driving many people out of moneypit states.
• Digital Transformation of Small Business/Manufacturing — Pretty self explanatory, but this is still an untapped and massive market for technology companies. These companies will look for vendors with local, cultural roots.
• Institutional Investment — Seeing the opportunity, investors are flocking to these regions at a faster clip than CA, MA and NYC. JP Morgan is even investing heavily in Detroit.
• Education — Colleges like Kansas, Wisconsin, Nebraska aren’t far behind Carnegie Mellon and University of Utah in investing heavily in Computer Science and entrepreneurship. Replicating the Stanford/Silicon Valley ecosystem across the localities.

A region battered by the fall of the automobile industry will reemerge. The best sales reps looking to capitalize on this impending tidal wave will throw away all the fancy sales techniques they learned over the past decade that catered to tech companies in CA, NY and MA.

Instead, top performers will choose a vertical that is behind the curve in digital transformation (say trucking), understand how they relate to each other, and then build a rolodex.

It is a steak dinner and handshake deal renaissance of sorts. Relationship-building and old school pitching will replace Sandler and PLG.