The Transform Technology Summits start October 13th with Low-Code/No Code: Enabling Enterprise Agility. Register now!
Those who know me were no doubt surprised a few months back when I started breaking the news. I’ve lived in Silicon Valley my entire career. My wife and I have grown very involved both civically and philanthropically.
We’ve been having a blast raising our three kids in San Francisco. I love the Bay Area, and I never expected or wanted to leave. For 17 years of ups and downs, it’s been home.
And yet, here I am, at Drive Capital’s offices in sunny Columbus, Ohio, and I’m happy as hell about it.
Three years ago, Mark Kvamme and Chris Olsen moved to Ohio and founded Drive Capital after having established world-class track records at Sequoia Capital. Most who knew them never thought they would leave either.
Drive Capital began with a simple idea: In the next 20 years, 90 percent of the market cap in technology will be built outside of Silicon Valley. What would happen if one applied a sophisticated approach to building massive companies in the Midwest? Mark and Chris raised a $250 million fund to go after this idea.
Three years later, it’s working.
The Midwest is an important, long-term driver of positive change in the world, and a driver of premier economic returns. I believe strongly enough in the power of the Midwest to transform American venture investing that I’ve pulled up my roots and made a move no one ever thought I’d make.
Entrepreneurs & Company Builders
When I moved to San Francisco 17 years ago, it was for the opportunity to be part of something new. The Internet felt like the early days of television, radio, and electricity all rolled into one.
At that time we couldn’t believe the problems that could be solved with this new technology. I wasn’t sure how to take advantage of what a web browser could do but truly felt that anything was possible, so I set off after problems to solve. I’ve always been of the opinion entrepreneurs solve a problem first and a company will get built around that, not the other way around.
In the Midwest I see and meet entrepreneurs solving real-world problems that they are passionate about. That’s how great companies get built, and that mentality is why I am here ultimately.
In contrast, elsewhere I’ve seen the “billion dollar company” mindset take over as the primary goal of a company. When you have such a high density of startups in a 7×7 mile square, you are constantly running into companies in search of a problem.
I have been spending a lot of time with entrepreneurs in cities outside the Bay Area like Minneapolis, Chicago, Columbus, Denver, Boulder, and Austin. I have become convinced more than ever that you can build great companies outside the Bay Area. In fact, I would argue that there’s a distinct advantage to doing so.
At my last company, Formation, we deliberately looked outside the Bay Area to build a world-class engineering team in Boulder, Colo. Sixty percent of that team are expats from Silicon Valley. This was mindblowing to me at the time.
Canary in the Coal Mine
There is only one Silicon Valley. There won’t be another. The place is magic.
Silicon Valley is a once-in-a-century thing, a singular innovation hub driving dramatic economic change worldwide. I’m happy that I was a part of it, but I’ve also seen that you don’t need to begin there or build there to be extraordinarily successful.
Yes, you need to be tied into the Bay Area, but today you don’t need to start in the Bay Area or even headquarter there. This is where I see huge opportunity in the startup hubs around the Midwest that I’m excited to become a part of. I want to be part of that change in these communities as it happens.
I’m also not saying that you can ignore Silicon Valley, because you can’t. I’m looking forward to working with my friends and colleagues from the Bay Area. I still encourage all companies and entrepreneurs, Midwest included, to make the pilgrimage for tradeshows, customers, networking, capital, and mentorship. I’m simply observing a pattern of great early- and late-stage companies outside of Silicon Valley, by design.
These companies are busy building first and raising capital second. The biggest successes in the Midwest aren’t financially engineered.
Half the time, it doesn’t even occur to Midwestern entrepreneurs to raise venture capital until they no longer need it. You don’t hear the constant coffee-shop talk about who is raising their next mega-round. In the Midwest, things are more straightforward. It’s all about building real businesses.
Yes, it is cheaper to build and keep an elite engineering team here. And, yes, the hometown crowd welcomes startups with open arms to be first customers. But it’s not all roses and rainbows in the Midwest. I want to be clear about that too.
For one, there is a general bias to work against. What it is really like here on the ground is not always clear to people who’ve never come to visit. They’re called the flyover states for a reason. Getting more and more people to land in the Midwest is a challenge, whether for a day, a week, or forever.
Next, we need more money in the Midwest. One day Drive will have $1 billion under management, perhaps more. And that still won’t be enough. That’s the mindblowing part, and what changed my mind ultimately about the Midwest. I thought Silicon Valley had all the deal flow I’d ever need as an investor and all the talent I could every want as an entrepreneur.
I was sitting pretty, right? Nope.
When I started to look at who was interesting in the Midwest, I just about fell over. There aren’t just good companies here. There are great companies, and equally great entrepreneurs running them. And it’s not just the quality that seized me, it was the amount of white space.
A related and final challenge we face is that VCs like Drive have only a few local partners with whom to syndicate. While we love to get coastal investors involved early and often, our fund strategy nonetheless requires that we reserve more follow-on capital than is typical for each investment we make. We have to assume that we’ll lead more than one round.
We would like this to change over time. We believe very strongly in the peloton, so to speak. I look forward to the day when we have more local firms, all with the pedigree of Sequoia Capital, Benchmark, and Kleiner Perkins.
Get Your Own Drum
I still love California. My friends and I are still very close, and my kids still think of San Francisco as home. We miss their schools and the incredible community support we had there from day one.
The landscape in the Bay Area is incredible. When I woke up today, I didn’t see my usual view of the bridge, which awes me every time. We miss Fillmore Street and our favorite dive bar, Tee Off. I miss Napa too, a place dear to my heart.
But in the end, I feel that to make the biggest possible impact, I can help fill an important gap. I’m taking a long position on the Midwest, as is Drive, as are our LPs, our colleagues, our portfolio entrepreneurs, our friends, and our families. There is real change happening here, and you can feel it.
The Midwest is not just an essential part of any balanced, diversified portfolio, country-wide. There is more latent value here than anywhere else on earth — value that I believe can be methodically realized over the next 25 years.
We’ll realize that potential by partnering with those world class entrepreneurs in our own backyard and bring jobs and economic change to areas that have been overlooked. We’ll get there by working with our friends on the coasts to bring a larger perspective to Midwestern companies. And all along the way, we’ll be sure that everyone wins, proving that you can build a world-changing company anywhere.
I’ve got a new address in Columbus, Ohio. Come see us. Please come see firsthand what I’m talking about. No matter who you are, I would love to show you this incredible place and introduce you to some of the smartest, most passionate entrepreneurs in the whole world.
Andy Jenks is the newest Partner at Columbus, Ohio-based VC firm Drive Capital. Previously he was cofounder and COO of Formation Data Systems, and cofounder and GP at Stage One Capital. You can follow Andy on Twitter: @ajenks.
VentureBeatVentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative technology and transact. Our site delivers essential information on data technologies and strategies to guide you as you lead your organizations. We invite you to become a member of our community, to access:
- up-to-date information on the subjects of interest to you
- our newsletters
- gated thought-leader content and discounted access to our prized events, such as Transform 2021: Learn More
- networking features, and more