Former JobsOhio president Mark Kvamme pitched his risky new venture capital fund to two of the state’s five public pension systems and convinced Ohio State University to invest $50 million.
The Ohio Public Employees Retirement System met with Kvamme in January to hear his sales pitch on Drive Capital Fund I but took a pass, a pension system spokeswoman said. OPERS has about $1 billion of its $80 billion portfolio invested in venture capital.
The Ohio Police & Fire Pension Fund met with Kvamme and his business partner Chris Olsen in July, said OP&F spokesman Dave Graham. “Investment staff has not completed any due diligence research on Drive Capital so it would be premature to comment on the possibility of a future commitment to this fund,” Graham said.
According to filings with the Securities and Exchange Commission, Kvamme and Olsen have raised $181 million of $300 million for the new fund. The minimum investment is $1 million.
Venture capitalists pool cash from investors, put the money into a stable of start-up companies and then help guide the new businesses. If the businesses succeed, the profits for the venture capitalists can be fabulous. If the businesses fail, the investors lose their money.
“The winners are great and you hope the winners are better than the ones who don’t come through,” said John Taylor, head of research for the National Venture Capital Association. Historically, 14 percent of companies backed by venture capitalists go public and 10 percent are acquired, he said.
Taylor said it is a big plus for Ohio to have Kvamme starting a regional venture capital fund.
“He is an experienced investor and he sees opportunity there,” Taylor said. “And he is willing to put down roots and roll up his sleeves and get to work there.”
Kwamme is also close to Ohio Gov. John Kasich and former Ohio State University President E. Gordon Gee. Ohio State has not responded to a public records request or questions about the Drive Capital investment decision, which came after Gee retired as president on July 1.
Kvamme could not be reached for comment.
OSU Senior Vice President for Business and Finance Geoff Chatas told the Columbus Dispatch that the Drive Capital investment was part of a broader strategy to increase jobs and improve Ohio’s financial future.
The investment will more than double the $22 million OSU had previously invested in venture capital funds, according to university investment reports. Ohio State’s overall investment portfolio is $3.1 billion.
Kvamme, a native of California, was a venture capitalist at Sequoia Capital in Silicon Valley where he helped launch Linkedin, MarkLogic and FunnyOrDie.com. He arrived in Ohio less than three years ago to serve as Kasich’s development director for $1 a year in pay. He later shifted to run JobsOhio, Kasich’s new private economic development agency, but resigned in November 2012 to start Drive Capital.
In his short time in Ohio, Kvamme has connected with powerful business and community leaders, bought property north of Columbus and spent $97,500 on three grand champion farm animals at the 2013 Ohio State Fair.
When Kvamme suffered serious injuries in a motocross accident, Gee and Kasich visited him in the hospital. When Gee was under fire for spending millions on travel, parties and housing, OSU asked Kvamme to defend him.
Taylor said successful venture capitalists are well connected to investors and have a strong pipeline of businesses seeking backing.
The Ohio Democratic Party, though, says Kvamme is cashing in on his relationship with Kasich to raise millions from public pension funds for “risky, untested investments.”
“The state entities that have entrusted tens of millions of dollars to the governor’s close friend Mark Kvamme should stop stonewalling questions and finally disclose all details about these deals to prove public dollars won’t be lost,” party spokesman Jerid Kurtz said. “Ohioans deserve better.”