COLUMBUS, Ohio (USA TODAY) — Chris Olsen believes the next great tech firm could emerge right here from the heartland.
Sure, Silicon Valley is home to most huge tech household names (Apple, Facebook, Twitter, eBay and so many more), with New York (Tumblr) and Boston (Trip Advisor) creeping up, but as he sees it, why not Ohio or Michigan?
Hundreds of brilliant engineers are churned out yearly from top Midwestern schools like Ohio State University and University of Michigan. Graduates shouldn't have to leave for California to get funding for their dreams, he says.
So Olsen is literally putting investors' money where his mouth is, with a $250 million fund to bankroll tech start-ups from the Midwest.
"Silicon Valley is great," he says. "But everyone forgets that 40 years ago it was just apple fields and orchards. When we look around the Midwest, we see a lot of the raw ingredients for what could potentially be a great economic driver for tech, which over time will create great industries."
Olsen and partner Mark Kvamme are general partners at Drive Capital, which is based in the heart of Ohio's capital city here, in the city's trendy Short North district. It's a quick hop from 50,000 student-plus Ohio State University, in a historic neighborhood lined with funky coffee shops, antique stores and fancy restaurants.
Olsen and Kvamme are Ohio natives who worked together at the Silicon Valley-based Sequoia Capital firm. Sequoia's hit list includes some of the most successful tech firms ever, including Google, Apple, YouTube, PayPal, Instagram, Yahoo and Zappos.
At Sequoia, Olsen and Kvamme helped fund over 20 companies, including LinkedIn and comedy website Funny or Die. Kvamme left Sequoia to return to Ohio to work with the state economic development team. He liked what he saw and convinced Olsen to return and open a VC firm focused on the Midwest.
Their territory extends from Ann Arbor, Mich., and Pittsburgh through the three Ohio cities — Columbus, Cleveland and Cincinnati — and Indianapolis, Kansas City, Chicago and Minneapolis.
So far, the pair have invested in four Midwest companies, including Cincinnati-based travel advice website Roadtrippers, Chicago-based Channel IQ, which helps manufacturers set prices, Ann Arbor's farm software firm FarmLogs, and Columbus-based health care firm CrossChx.
James Fisher picked up $2.5 million for his Roadtrippers after Drive met him in Cincinnati, where Roadtrippers was based in the four-month Brandery accelerator program. He had expected to eventually find funding in California — and was pleasantly surprised when he didn't have to leave, he says.
Can the Drive Capital dream come true for others?
"Absolutely," says Fisher. "There are plenty of really smart people here."
Drive isn't the only Midwest VC firm. Chicago has two — Arch Venture Partners and Pritzker Group Venture Capital, while Milwaukee has Capital Midwest Fund and Minneapolis has Split Rock Partners.
In the Midwest, tech successes include Groupon and GrubHub (Chicago), the big Google high-speed Internet project in Kansas City, Angie's List in Indianapolis, and Duolingo, the Pittsburgh-based app that teaches languages. It was created by a Carnegie Mellon professor and his student. Apple in 2013 selected Duolingo as the app of the year.
On the plus side, the Midwest offers far cheaper real estate than Silicon Valley, and engineer salaries are also much lower.
But the region has extreme weather (many schools and offices have had closures this year due to extensive snow) and the community of talent is much smaller.
The partners spend much of their time driving or flying to nearby cities, but Kvamme says that with traffic in Silicon Valley, it can take as much time to get from Columbus to nearby Cincinnati (90 minutes) as it does from San Jose to San Francisco.
And as Olsen reminds, not all tech is born in California or East Coast tech hubs.
"It doesn't just happen at Stanford and MIT," he says. "These students graduate with tech degrees and are more than capable of building these products."
Kvamme says traditional investors have signed up to be part of his fund, including university endowments, charitable foundations and pension funds. "They all believed in the premise that you don't have to be in Silicon Valley to start a great tech firm."