A San Francisco venture capitalist once dubbed the “party animal of Silicon Valley” has been convicted of defrauding a total of $19 million – and now faces up to 60 years in prison.
Michael Brent Rothenberg, who grew up in Georgetown, Texas, in a Jehovah’s Witness family, used his deep network of successful Ivy League friends to start his own VC fund in 2012 based on the strategy of throwing lavish parties.
He teamed up with Mark Zuckerberg, rented ballparks for networking events and threw all-day and all-night parties to attract investors and companies to invest.
This month, following an FBI investigation, Rothenberg, 39, was convicted of wire fraud, money laundering, bank fraud and making false statements to a bank.
His guilty verdicts followed a seven-week jury trial that showed Rothenberg’s VC schemes resulted in about $18.8 million in missing money.
Michael Brent Rothenberg, who grew up in Georgetown, Texas, used his deep network of successful Ivy League friends to start his own VC fund in 2012 based on the party-throwing strategy. At a party hosted by Rothenberg Ventures in February 2014, he was pictured wearing a T-shirt with the slogan “Well-behaved founders rarely make history.”
Once a year he hosted a Founder Field Day in April, renting out AT&T Park so founders, investors and VCs could network while playing baseball. The day of keynote speeches was followed by race car rides and a private concert. The event was so risqué that it was parodied by the HBO TV show “Silicon Valley.”
A picture from one of the lavish company parties in April 2015
The jury found that Rothenberg, 39, committed wire fraud at two of the venture capital funds he managed in 2015 and 2016.
Rothenberg founded Rothenberg Ventures Management Company and used it to raise and manage four annual venture capital funds between 2012 and 2018.
In 2015, Rothenberg founded River Studios – but he told his employees and investors that the company was “self-funded” and that no venture capital funding had been used. The jury found that to be a lie.
The Justice Department said in a statement: “However, the evidence showed that Rothenberg misappropriated a large amount of venture capital funds during this period to finance the operations of River Studios.”
“In addition to using venture capital funds to finance the operations of River Studios, the evidence also showed that Rothenberg routinely collected excess fees from the venture capital funds he managed in 2015 and 2016 and that investor funds were routinely used for other purposes as presented to fund investors, for example to cover RVMC’s operating costs and to secure a line of credit that RVMC took out from Silicon Valley Bank at the end of 2015.”
“Accordingly, the evidence presented at trial demonstrated that Rothenberg engaged in a scheme to defraud Silicon Valley Bank by making false statements to the bank and making false statements in order to obtain a $4 million line of credit to repay the fund from which he had drawn too much in fees.” .
Rothenberg will be sentenced on March 1, 2024.
In May 2013, Rothenberg toasted a group of his friends and colleagues. He founded Rothenberg Ventures Management Company and used it to raise and manage four annual venture capital funds between 2012 and 2018
The Silicon Valley “party animal” resume was very similar to that of his peers in the multimillion-dollar world of startups—he was a Stanford and Harvard graduate who worked at Bain & Company in his 20s.
Rothenberg was known as “The Machine” while studying management and engineering at Stanford. He was part of the Sigma Nu fraternity – and one of his best friends and fraternity brothers was Kevin Systrom, the co-founder of Instagram.
It was Rothenberg who actually introduced Systrom to Meta’s Mark Zuckerberg, years before he acquired Instagram for $1 billion. The meeting took place in the Rothenberg student dormitory.
Rothenberg welcomed Zuckerberg to his fraternity in 2006 – and at events he held at Stanford, he also met Linkedin founder Reid Hoffman and ex-Yahoo CEO Marissa Mayer.
After earning his MBA from Harvard University and inspired by his 50 friends who already had high-volume and lucrative companies, he founded Rothenberg Ventures in 2012 after raising $5 million in his first fund.
He relied on his network, which both investors and companies could invest in, and his secret weapon was his love of social gatherings.
Rothenberg (pictured at a party in US shorts) was known as “The Machine” while studying management and engineering at Stanford. He was part of the Sigma Nu fraternity – and one of his best friends and fraternity brothers was Kevin Systrom, the co-founder of Instagram
Rothenberg (fifth from left) in the picture laughing with his VC colleagues
The founder (left, pictured at a party in 2015) tried to maintain a “great” culture at the company, so instead of giving out bonuses, he gave out VR headsets to his millennial employees and held networking parties to keep the momentum going
Rothenberg bolstered his new venture with a series of breathtaking events—including soirées at Giants Stadium, hot air balloon wine tours through Napa Valley, barbeques with ponies and dancers, and sponsored car races.
He tried to maintain a “great” culture at the company, so he handed out VR headsets to his Millennial employees in lieu of bonuses and held networking parties to keep the momentum going.
Rothenberg used his deep social network, lavish events and youthful energy to make a name for himself in the California VC world – but many of these qualities led to his downfall.
He told Bloomberg, who initially described him as a “party animal” of Silicon Valley: “Semantics are important to us.” These are not parties – they have business intentions. “We are building a scalable network by hosting many events.”
The magazine predicted in 2015: “Rothenberg Ventures’ lavish parties are the company’s main strategy, but it’s unclear whether the plan is sustainable.”
At a party hosted by Rothenberg Ventures in February 2014, he was pictured wearing a T-shirt with the slogan “Well-behaved founders rarely make history.”
Rothenberg set a goal of hosting 100 networking events annually.
After earning his MBA from Harvard University and inspired by his 50 friends who already had high-volume and lucrative companies, he founded Rothenberg Ventures in 2012 after raising $5 million in his first fund
A picture of the founder’s friends, investors and colleagues at his company’s party in 2014
Rothenberg speaks at his 2016 Founder’s Day – compared to an image from HBO’s Silicon Valley, in a scene that spoofed the event
A picture from a Rothenberg Ventures party in April 2015
In September 2016, the company dropped the Rothenberg name from its title and replaced it with Frontier Tech Venture Capital after he was under investigation
He also hosted a Founder Field Day once a year in April, renting out AT&T Park so founders, investors and VCs could network while playing baseball.
The day of keynote speeches was followed by race car rides and a private concert.
The event was so risqué that it was parodied by the HBO TV show “Silicon Valley.”
When it was first announced that the SEC would be investigating Rothenberg, he wrote an email to his investors: “We are in the unfortunate position of having people trying to take us down, and they are doing a good one Job.”
“Juicy gossip sells clicks, and this is your update letter #2 this week.” “I have not taken sufficient time to lay off employees, leaving the possibility for disgruntled employees and then brutal press attacks.”
“It is in your best interest as LPs to let the SEC know that this is an internal accounting issue we are dealing with so we can take the time necessary to sort everything out.”
But things soon began to falter. In September 2016, the company dropped the Rothenberg name from its title and replaced it with Frontier Tech Venture Capital after it was revealed that he was under federal investigation.
He told WIRED in 2016, “I was overwhelmed.” I was focusing too much on our portfolio companies and connecting the companies with our advisors and LPs and not enough on internal collaboration. I didn’t have the right controls. “I didn’t hire and fire well.”
A federal grand jury indicted Rothenberg in August 2020.