Created on Saturday, 02 November 2013 Written by JULIE CARR SMYTH, AP Statehouse Correspondent
COLUMBUS, Ohio (AP) — A May dinner with then-Ohio State University president Gordon Gee appears to have helped change the fortunes of a fledgling venture capital fund co-founded by Ohio Gov. John Kasich's former jobs czar.
FILE- In this Thursday, Jan. 20, 2011 file photo shows former Ohio Department of Development Director Mark Kvamme speaking during a news conference to kick off JobsOhio legislative process with Ohio Gov. John Kasich, left, at The Tarrier Steel Company in Columbus, Ohio. An investment fund co-founded by Republican Gov. John Kasich’s former jobs czar, Kvamme, has landed a lucrative business deal with Ohio State University, whose ex-president is closely tied to the governor. (AP photo/Columbus Dispatch, Kyle Robertson, File)
Records released Friday show university officials were recommending strongly against investing in Drive Capital up until April, cautioning that the fund co-founded by former JobsOhio chief Mark Kvamme and Chris Olsen was untested, risky and overambitious. By July, Ohio State had quietly invested $50 million in the project.
In between, Kvamme and his wife Megan dined with Gee to discuss the venture, according to records released to The Associated Press through a public records request.
"Your thoughtful questions, insightful comments, and sense of humor always give us food for thought accompanied by the delicious meal," Kvamme wrote Gee on May 15. "We also always come away from our dinners with more ideas on how we can make Ohio the center of innovation and creativity."
Gee replied that he would work with Vice President for Finance Geoff Chatas to "see how we can best get other institutions to join with us." Among other universities Kvamme asked Gee to approach were the universities of Michigan, Minnesota, Wisconsin, Illinois and Indiana, Purdue University and Penn State.
Kvamme also spent "a considerable amount of time" in the interim trying to sway other key players, including Ohio State chief investment officer Jonathan Hook and trustee Jerry Jurgensen, the CEO of Nationwide Insurance, according to the records.
ProgressOhio executive director Brian Rothenberg, whose group is challenging JobsOhio's constitutionality in court, questioned the university's change of heart.
"This is just another example of how there is a cozy country club atmosphere that is playing with public money," he said. "You don't do $50 million deals with the public's money because of a dinner reservation. That's pretty expensive steak or halibut."
A March investment memo marked confidential concluded, "While Drive Capital may offer a persuasive story about applying Silicon Valley methods of investing to Midwest companies, it is still very much unproven at this stage." The memo questioned the fund's historical track record, proof of its concept and "other risks and unknowns."
The investment didn't "meet our traditional underwriting standards and risk/return criteria," the document stated, and would have to be considered "under the premise of supporting larger societal objectives, such as economic development."
Chatas said in a telephone interview Friday that all investments carry a certain amount of risk.
"Do all of our investments have risk? Yes — across the spectrum," he said. "But the goal is to generate return and to keep jobs in Oho and create jobs in Ohio."
He said the university committee that approved the investment ultimately determined it would meet Ohio State's goals.
"We are the flagship ..." he said. "Being a flagship means we are a cornerstone. What I would hate, is to have our innovations and companies have to go to places like California with Stanford or like Boston with Harvard and all these venture capitalists because we aren't willing to take prudent risks that have gone through a solid process to keep the momentum here."
The investment came just before a change in policy by Ohio State's board to allow top administrators more leeway over how to invest operating funds.
University records also shed new light on the timing of Drive Capital's solicitation, which began in October 2012, before Kvamme had left his post at JobsOhio. Olsen thanked chief investment officer Hook for meeting with "us" — copying Kvamme — on Oct. 26, 2012, the Friday before Kvamme's JobsOhio tenure official ended.
"Ohio State would be an ideal limited partner for us, and we would love to work with you guys to achieve this vision in the coming years and decades," Olsen wrote.
Gee and Kvamme are allies of Kasich and pivotal players in JobsOhio, a private nonprofit his administration created to handle Ohio's economic development functions. Kvamme helped Kasich launch it and Gee sits on the board.
Details on JobsOhio's donors and spending have been largely private.
Gee retired as Ohio State president in July after remarks he made disparaging Roman Catholics and Southeastern Conference schools became public.
A spokesman says Kasich was unaware of the investment until it surfaced in media reports and did not lobby Ohio State on Kvamme's behalf.
Reached Friday, Kvamme said he is prohibited under U.S. Securities and Exchange Commission rules from discussing the fund. At $50 million, Ohio State's investment makes up more than a quarter of what Drive Capital has reported raising so far.
Chatas said the fact Drive Capital approached Ohio State while Kvamme still served at JobsOhio is not concerning.
"There was no fund to react to," he said. "There was no document. It was just discussions of ideas."
Associated Press writer Andrew Welsh-Huggins contributed to this report.