FROM: Don Pierce, Chief Investment Officer
SUBJECT: Drive Capital MCA
RECOMMENDATION:
title
Recommend that the Board approve the establishment of a Master Custody Account (MCA) with Drive Capital, including a $200 million initial allocation, subject to completion of due diligence and legal documentation.
body
BACKGROUND:
US Venture Market
The US venture market, today valued at approximately $240 billion, has historically been focused on two main coastal regions - Silicon Valley in California and the Boston/NYC corridor. This concentrated region receives nearly 75% of all venture capital funding and is home to 70% of the GP firms.
Drive Capital: Philosophy & Approach
Drive Capital (“Drive or Firm”) was founded on a core belief: venture capital’s coastal bias has left the vast middle of America - everything between the Hudson River and the Rocky Mountains - largely overlooked. Drive treats this region as an emerging market: underserved, undervalued, and ripe for disruption across large, traditional industries. This imbalance exists as a structural inefficiency and a durable competitive advantage for investors willing to commit to the region, which represents 80% of the US population and 74% of US GDP.
Deal sourcing is driven by both outbound and inbound strategies, anchored by the Firm’s proprietary technology platform (“Herbie”). Built and maintained by a dedicated data science team, Herbie tracks over 400,000 companies and 100,000 founders - enabling the team to build market maps, develop sector theses, and monitor portfolio companies. To data, Herbie’s algorithms have directly sourced 15 investments.
Complementing Herbie is Drive’s seed program (“F4”), which maintains a physical presence near six major research universities in Atlanta, Austin, Boulder, Chicago, Columbus, and Toronto. These offices serve as incubators, offering early-stage founders workspace, community, and initial checks of $500,000. Roughly 15% of F4 companies go on to receive full early-stage investment from Drive’s primary fund.
Firm History & Ownership
Drive Capital is a venture capital firm based in Columbus, Ohio. Founded by Mark Kvamme and Chris Olsen in 2013. The firm has raised $2.2 billion across 6 venture and growth equity funds. Prior to co-founding Drive Capital, Mark and Chris were partners at Sequoia Capital where they led investments in companies such as LinkedIn, MarketLogic, and Cast Iron (IBM).
In 2022, Mark departed Drive Capital to focus on personal interests and on managing other investment opportunities.
Firm ownership is largely held by Chris Olsen and includes a passive investment by a venture GP stakes platform called Collective Global. Chris Olsen, Nick Solaro, and Molly Bonakdarpour are General Partners at Drive. In total, the Firm has a team of 31 professionals, including 13 focused on investments.
Value-Add Platform
Beyond capital, Drive provides a suite of operational resources designed to accelerate portfolio company growth:
• Drive Talent Agency - a six-person recruiting team led by Annie Lapides, focuses on placing technical and sales talent within portfolio companies. Approximately 50 candidates have been placed to date, with a target of 75 or more annual placements going forward.
• Board Leadership - 38 active board seats planned across the Fund V portfolio, distributed among the investment team and select industry advisors.
• Network Access - enabling access to both follow-on capital and potential customer introductions through the General Partners’ established relationships with coastal venture firms.
Investment Structure
Seed-stage investments are structured as post-money Simple Agreement for Future Equity or SAFE - standardized convertible instruments that provide investors with a defined ownership percentage upon conversion at a future priced round. Later-stage investments are structured as preferred equity, affording Drive the customary protections associated with minority venture positions.
Investment Process
At Drive, investments require unanimous investment committee approval following roughly 30 days of due diligence covering business models, founding team, and market opportunity. Seed investments follow an expedited process requiring sign-off from two senior investors.
Team Alignment
The team’s economic interests are aligned with LP returns, with carried interest distributed broadly across the entire organization.
Performance
Performance returns for Drive’s funds are provided in Table 1 below. Performance data as of September 30, 2025.
Table 1: Drive Capital Performance
|
Fund Name |
Vintage |
Net IRR |
DPI |
Net TVPI |
|
Drive Capital Fund I, LP |
2014 |
18.03% |
1.8x |
4.0x |
|
Drive Capital Fund II, LP |
2016 |
16.65% |
0.3x |
2.7x |
|
Drive Capital Fund III, LP |
2019 |
16.83% |
0.9x |
1.8x |
|
Drive Capital Fund IV, LP |
2022 |
- |
0.0x |
0.9x |
|
Drive Capital Overdrive Fund I, LP |
2019 |
16.51% |
0.0x |
2.2x |
|
Drive Capital Overdrive Fund II, LP |
2022 |
- |
0.2x |
1.2x |
|
Drive Capital 2022 Co-Investment Fund, LP |
2022 |
55.01% |
0.9x |
2.3x |
Fund Structure
Drive Capital manages two distinct but complementary strategies:
• Drive V is targeting $540 million in commitments across 60 seed-stage and 30 early-stage investments in companies with less than $10 million in annualized revenue. Target sectors include AI, healthcare, mobile, and cloud computing. The Firm expects to lead investments and take board seats in most early-stage companies.
• Overdrive III is targeting $810 million in commitments across 15 expansion-stage companies generating at least $10 million in annual revenue with 75% year-over-year growth. Approximately 50% of capital will be deployed as follow-ons into top early-stage performers. The fund may also make new investments in companies that have outgrown the early-stage mandate, with board representation expected across nearly all portfolio companies.
SBCERA Venture Capital
Venture capital investments represent 3.5% or $616.6 million of SBCERA’s total portfolio of $17.4 billion as of September 30, 2025. Industry Ventures MCA (“IV”) accounts for $445.5 million of this exposure and is invested across a broad spectrum of venture and growth opportunities, including direct, primary, and secondary investments. Pathway Capital (“Pathway”) represents $138.3 million in primary investments and Adam Street Partners (“ASP”) represents $32.9 million in co-investment exposure to venture capital. Table 2 below presents the relationship-level performance for the three MCA managers as of September 30, 2025.
Table 2: MCA Performance* - ASP, IV, & Pathway
|
|
ASP |
IV |
Pathway |
|
Inception Date |
2020 |
2008 |
2004 |
|
Total Commitments |
$233.5 MM |
$742.5 MM |
$1,986.8 MM |
|
Contributed Capital |
$200.9 MM |
$523.4 MM |
$1,694.2 MM |
|
Distributions |
$28.3 MM |
$317.2 MM |
$2,215.6 MM |
|
Market Value |
$277.9 MM |
$593.2 MM |
$864.2 MM |
|
Net TVPI - Total Value to Paid-in Capital` |
1.4x |
1.7x |
1.8x |
|
DPI - Distributions to Paid-in Capital |
0.1x |
0.6x |
1.3x |
|
Net IRR |
13.0% |
16.6% |
12.4% |
*As of September 30, 2025.
Key Points of Differentiation Versus Existing SBCERA VC Portfolio
• Geographic Focus - Coastal venture markets vs. middle of America for Drive.
• Investment Sourcing - focuses on GP relationships and network effect vs. Drive’s seed program and direct sourcing approach.
• Value Proposition - value creation centers on deal access and structuring, capital solutions, and network effect. Drive Capital differentiates itself through Board-level involvement, operational control, and hands-on support.
Impact on Private Equity Budget
SBCERA’s 2026 budget for private equity investments is $735 million. This includes $315 million allocated to current MCA relationships and $420 million of unallocated capital. The impact of a Drive MCA on the 2026 private equity budget is provided in Table 3 below. However, it is worth noting that most commitments are drawn over the investment period.
Table 3: Private Equity Budget and Allocations for 2026
|
Manager Allocations |
2026 |
|
Total PE Budget |
$735 MM |
|
Drive Capital MCA |
$100 MM |
|
Adams Street Partners MCA |
$50 MM |
|
Adams Street Partners Headwaters Fund |
$65 MM |
|
Industry Ventures MCA |
$50 MM |
|
Partners Group MCA |
$75 MM |
|
Pathway Capital MCA |
$75 MM |
|
Allocated PE Budget |
$415 MM |
|
Unallocated PE Budget |
$320 MM |
Venture Capital - Risk
Venture capital has the potential to generate significant returns; however, this does not come without risk. The thesis behind a Venture capital strategy is simple: most startups will fail, but a few will generate returns that compensate for losses and yield significant profits.
Potential Investments
• $40 million commitment to Drive V: Seed- and early-stage venture focus.
• $60 million commitment to Overdrive III: Venture buyout/growth equity focus.
• Co-investment opportunities in venture buyout/growth equity investments.
Summary
Staff and NEPC believe that Drive Capital has built a structurally differentiated VC model - higher ownership, less competition, contrarian geography, and a disciplined exit strategy - that has produced 3 IPOs and 9 active unicorns. In addition, the General Partners - Chris Olsen, Nick Solaro, and Molly Bonakdarpour, are supported by a strong bench of 6 mid- and junior-level investors with deep technical backgrounds and deal expertise. For SBCERA, Drive Capital represents a compelling and proven opportunity.
BUDGET IMPACT:
Investment Costs are deducted from Net Asset Value.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Amit Thanki
ATTACHMENTS:
Exhibit A: Drive Capital Presentation
Exhibit B: NEPC Cover Memo (confidential)
Exhibit C: Additional Staff Information (confidential)