VC Policy Pulse: the Volcker Rule with Mark Kvamme

We spoke to Mark Kvamme, Co-Founder & Partner at Drive Capital and former NVCA Board Member, about the effects of the Volcker Rule on the startup ecosystem in the Midwest.

Impact on VC: Recent reform to the rule will increase VC investment and startup activity in the middle of the country.

Welcome to the first blog in our VC Policy Pulse series, where we speak with a VC investor on a policy issue that is having a major impact on the VC and startup ecosystem. Today, we’re hearing from Mark Kvamme, Co-Founder & Partner at Drive Capital and former NVCA Board Member, about the effects of the Volcker Rule on the startup ecosystem in the Midwest and how recent reform to the rule will increase VC investment and startup activity in the middle of the country.


As a quick background on the issue, the Volcker Rule prohibited financial institutions from investing in covered funds to protect against systemically risky trading. However, despite the fact that barring bank investment in venture capital (VC) funds does nothing to accomplish the underlying objectives of reducing systemic risk in the financial system, venture capital was inadvertently swept into the definition of prohibited investments under the Volcker Rule. This prohibition does nothing to improve the health of the banking system, and created an unnecessary roadblock for capital formation, particularly in underserved areas where raising capital for venture capital investment tends to be more difficult.

NVCA has long advocated for reforms to the Volcker Rule to exclude venture capital funds from the covered funds prohibition. After many years of advocacy to lawmakers and regulators, NVCA was thrilled to see that several agencies have finalized a rule that will remove this needless regulatory barrier and encourage capital formation and greater entrepreneurial activity throughout the U.S. To gain more perspective on how this reform to the Volcker Rule will help emerging startup ecosystems across the country, we spoke to Mark Kvamme, who has been a leading advocate on this issue.

Q&A with Mark Kvamme

How has the Volcker Rule and its restriction against bank investment in VC funds impacted emerging ecosystems, and specifically, what impact has it had on the startup ecosystem in the Midwest?

When we founded Drive Capital in Columbus, Ohio, we were able to raise funds from traditional venture sources such as large endowments, charitable trusts, etc. as I had previously worked at Sequoia and developed strong connections with major LPs. But as I spent more time in the Midwest and spoke with other VCs in the region, I realized that one of the big funders of middle of the country VCs were local banks. It was a very important source of capital for most VC funds in between the coasts, and especially in the Midwest. When the Volcker Rule came in place and prohibited these banks from investing in VC funds, it had a dramatic impact on capital invested in the Midwest, heavily damaging the VC ecosystem in the Midwest and startup formation in the region. I have spoken to a number of VCs in Ohio that don’t exist anymore after the Volcker Rule. There were $100’s of millions that had been going into VC funds in the Midwest that ceased because of the Volcker Rule.

How might the regulators’ changes to the Volcker Rule, which will allow banks to invest in qualifying VC funds again, impact VC funds and startups in the Midwest?

I think this reform to the Volcker Rule will have a great impact. We’re going to see a lot of banks participate and invest in Midwest VC funds, which will not only be good for the banks and VC funds, but it will really help Midwest startups and their local communities. Drive Capital’s companies in Columbus alone employ about 2,000 people and create a great amount of economic value in their areas. This reform will have a dramatic impact in attracting VC to Midwest cities and increasing investment into local startups.

How will this change to the Volcker Rule help encourage investment into the Midwest ecosystem long-term?

To create a successful innovation ecosystem, it takes great talent, customers, size, and access to capital. The Midwest has amazing talent coming out of its many Universities, it has the customer base and the economic size (the Midwest would be the 5th largest economy in the world if it were its own country), but it’s the access to capital that the Midwest doesn’t have. We need more VC in the Midwest; we have all the raw ingredients, but we just don’t have the VC dollars. With local banks investing in these underserved markets through VC funds, we will see a great impact on access to capital in these areas, which could be the turning point that will start providing the Midwest with the capital it needs to become a true hub of innovation.

Now it’s time for VCs in the Midwest and other emerging ecosystems to know that this change exists. Top VCs are looking all over the world for new emerging markets to invest in, but the number one emerging market in the world is the middle of this country.

Who have been some of the key advocates (VC investors, firms, entrepreneurs, or organizations) that helped on this issue and pushed to make this reform happen?

When I was a Board member of NVCA, I spoke out about the impact the Volcker Rule was having on VC funds in the Midwest with the NVCA team. NVCA was integral in this, especially Bobby Franklin and Justin Field, who championed reforms to the Volcker Rule in D.C. for years. They saw how underserved areas in the Midwest were not getting the advantages that people on the coasts were seeing.

There were also a number of VCs, including Ray Leach, Rich Langdale, and others, who really helped make this reform happen.

What advice would you give to VCs or entrepreneurs that are interested in engaging on policy issues, like the Volcker Rule, that impact the startup ecosystem?

Obviously, get involved with NVCA, which protects and enhances the innovation ecosystem. Get a group of VCs and other participants in the ecosystem together to start working on the issue; talk to your local politicians and your local Congressmen to get things going and get your voice heard. Work with both sides of the aisle. When you come to your local politicians with something that’s reasonable and doable, folks will want to help get things done.

NVCA recently hosted a webinar for our members on the new reforms of the Volcker Rule. If you are an NVCA member and are interested in receiving a recording of the webinar, please contact Cassie Ann Kiggen at

As the Manager of Communications and Digital Strategy at NVCA, Devin plays a central role in NVCA’s communications operation, communicating with key constituencies in the entrepreneurial ecosystem as well as enhancing NVCA’s brand in Washington, D.C. Devin develops and executes on the organization’s communications and public relations strategies and creates media content to support them.