In his San Francisco office, Mike Rothenberg , a self-described "millennial venture capitalist," is sipping an iced coffee surrounded by three Apple computer screens, an Apple Watch on his wrist and an iPhone within reach. He's explaining what he means when he talks about "the transitive power of amazing." Roughly translated, the idea is that the best way for Rothenberg's venture firm to find promising startups and attract capital is to throw lots of parties for young technology workers. Rothenberg's not a character from the HBO comedy Silicon Valley, but he's been an inspiration to the makers of the show.
His three-year-old firm, Rothenberg Ventures, has made a name for itself by sparing few expenses. Its rotating list of invitees have ridden hot-air balloons on wine tours of Napa Valley, eaten at San Francisco's trendy Samovar Tea Lounge, and gotten free seats to Giants and Golden State Warriors games in Rothenberg's luxury boxes. Another regular Rothenberg gathering is Puppy Hour, which brings together puppies and booze. For its biggest event, called Founder Field Day, the firm rents AT&T Park, the Giants' stadium, each April. Startup founders take batting practice on the field and get free massages. Silicon Valley co-creator Mike Judge shot a similar-looking scene for the show's second-season premiere, which aired shortly before Rothenberg's 2015 ballpark outing.
Rothenberg, 31, shrugs off the parody as though he's in on the joke. "When you're doing something different, people will have fun with it," he says. During his gatherings, he sets up demos for the bevy of virtual reality startups he backs. Introducing the guys (they're mostly guys) behind those enterprises to other budding entrepreneurs and potential investors could ultimately bolster his portfolio. Widening his in-person social network may also help Rothenberg meet up-and– comers before more established investors do. "Semantics do matter to us. These are not parties – they have business agendas," he says. "The way we build a scalable network is by hosting a lot of events."
The approximate number of startups Rothenberg Ventures has invested in to date While some of Rothenberg's events are sponsored by the likes of Hewlett-Packard and Lyft, his company has raised about $20-million, not a big sum by Valley standards. It's backed more than 60 companies, but typically for about $100,000 each. Filings with the Securities and Exchange Commission first reported by Re/code show Rothenberg Ventures tried to raise $50-million for its second fund in late 2013 and secured only $850,000. Rothenberg says the firm raised more money after those initial filings and has more than $30-million in assets under management if you account for the value of its investments.
Rothenberg grew up north of Austin, Texas, a national math Olympian in a land of football obsessives. He got a master's in management science and engineering from Stanford, then an MBA from Harvard, where he decided to become a venture capitalist – or, in his formulation, an "entrepreneur talent scout." A bunch of friends from college had started companies by then. Rothenberg says there's a lot of overlap between good startup founders and the kind of people he wants to hang out with. Instagram co-founder Kevin Systrom "is one of my best friends," he says. "I introduced Kevin to Mark Zuckerberg in my dorm room." Through a spokesman, Systrom confirmed that account.
In 2012, Rothenberg declined a summer job at a New York hedge fund to raise $5-million from friends, family, and former classmates. One of his investors is Michael Cronin, founder of private equity firm Weston Presidio. Cronin's son was one of Rothenberg's Harvard classmates and rooms with one of his co– founders. "When I went out there to check in on my son, I met them and they gave me the pitch," Cronin says.
About a quarter of Rothenberg's investments are in people he met at Stanford, where he organized a series of talks that featured Zuckerberg, LinkedIn co-founder Reid Hoffman, and former Apple executive Tony Fadell. That's where he learned, he says, that "with entrepreneurship, one plus one can be 100." Robinhood, a stock-trading app that raised $50-million in May, was founded by a Stanford friend with some money from Rothenberg. Revel Systems, which makes software to turn an iPad into a cash register, also got money from Rothenberg, as did clothing startup Chubbies.
Rothenberg is part of the gold rush to invest in companies just as they're getting off the ground. So-called seed investing increased 49 per cent, to a record $1.3-billion, last year, estimates researcher CB Insights. The money is inflating valuations at a pace that "has just gotten out of control," says Mike Maples, an early backer of companies including Twitter and Lyft. Rothenberg has succeeded in distinguishing his firm from others, says Maples. "If you're just another me-too microfund, you have no chance," he says. "Being different in this environment is really important." As for making the right calls on which startups to back: "That's a higher-order bet."
While most seed funds have a handful of employees, Rothenberg has about 25. They include old buddies like Ish Simpson, a former research analyst at Apple who played football at Stanford, alongside new faces he hired away from Google and Lyft. Given the company's finances, it's not entirely clear how it pays for such a large staff. Rothenberg says the firm has four sources of noninvestment revenue, including renting office space to startups. He wouldn't detail the other three. "They have demonstrated an ability to get in on a deal," says Cronin, the investor. "The challenge over the next few years is to see if their portfolio plays out correctly."
For Game 5 of the NBA playoffs between the Warriors and Memphis Grizzlies on May 13, Rothenberg's firm rented a luxury box at midcourt. About 20 startup founders, investors, and friends watched the action over Heinekens, Johnnie Walker Red, quesadillas, and fried chicken. For most of the game, Rothenberg was stuck at the office. Colleagues said he's often held up by a steady stream of calls and e-mails. When he gets here, one predicted, he'll joke about his boss being a jerk.
Rothenberg arrived midway through the fourth quarter and made the joke. People still laughed. Shortly after the final buzzer sounded, he jumped into a Lyft. Later, he sent an e-mail to say the next Puppy Hour is planned for June 3.
The bottom line: Rothenberg Ventures' lavish parties are the firm's primary strategy, but it's unclear if the plan is sustainable.