Trouble in the House of Rothenberg

Charisma is the best and worst thing that you can find in a money manager.

It allows you to raise money, get deal flow and network with what looks like almost no effort.

It also allows you to get way in over your head.

I mean, this could describe maybe 10% of hedge funds that get started. Charismatic young leader, raises money, has a good year or two and then success gets to their head.

They take their eye off of work and start believing their own hype, they throw lavish parties, and fly in private jets.

Then the CFO quits, investor questions aren't answered in a convincing manner. Requested documentation is harder to find that Trump's tax return.

If you wanted to look for fraud in a fund, you could probably get to 80-90% success rate just by looking for

1) CFO or general counsel resignations.

2) CEO's who go from spending 16 hours a day working to 3 days a week working.

3) A pronounced decrease in fund transparency in the form of financials and reporting.

This is why countries have accredited investor rules. Fraud, even if it doesn't start out that way, too often creeps in when people who have initial success find that sustained success is much, much, much harder to keep up.

This is a great list of all the things you shouldn't do. It's all ego and no substance.

Just absurdly irresponsible with other people's money...

> Many investors say they did not know — nor was it disclosed in annual reports — that he was founding and funding his own business with their dollars, despite the fact that the investment was roughly 50 times the size of the seed investments the firm normally makes.

>He set out to bolster his new firm with spectacular events: BBQs with tutu-ed ponies or luau dancers, puppy parties, luxury boxes at Warriors and Giants games, a sponsored race car, and an all-day founder-and-investor soiree that involved renting out the Giants stadium every year.

was the luau party held at Alcatraz?

Boost VC, the other accelerator focusing on VR, is scrappy, focused, and cares only about the startups it's funded. Quite a contrast.

edit: This Rothenberg article sounds pretty damning, but also reads like a hit piece -- which makes me wonder what the other side of the story might be. I don't know anything about Rothenberg personally.

Is it correct that, from my reading, the authors did not speak to Mike Rothenberg before publishing this piece? If so I'm forced to categorize this more as gossip and speculation than as balanced investigative journalism.

It's clear that there are problems. But I'd rather see problems identified and corrected than aired as dirty laundry.

Yeah there's no bubble in tech.

So what. 95% of the poseurs doing "angel" investing are in it for the scene, the cachet, the parties, the "networking", the name-dropping etc etc. Rothenberg gave people what they wanted....a very exclusive club with ridiculous membership fees and all of the very visible attributes that let the "LPs" signal to their peers that they were "Valley players".