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Interesting timing, I had just finished reading this Backchannel article regarding Rothenberg Ventures from September: https://backchannel.com/mike-rothenbergs-

Interesting timing, I had just finished reading this Backchannel article regarding Rothenberg Ventures from September: https://backchannel.com/mike-rothenbergs-vc-firm-was-young-splashy-and-loaded-with-cash-now-it-s-all-come-crashing-down-e76fa076c7c5#.gz51k7nld https://backchannel.com/mike-rothenbergs-vc-firm-was-young-s... Just an excerpt, an example of what I'd imagine some of the unwise personal projects regard: "Most troublesome are questions about how Rothenberg managed investors’ money. Specifically, in 2015 he founded a virtual reality production company called River Studios to create virtual reality videos for the likes of Coldplay and Björk, funding it with $5 million from Rothenberg Ventures. 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."

endorphone 9y ago
I'm taking a beating in another comment (it's one of those ridiculous discussions where everyone can demonstrate how righteous they are), but I listened to the podcast and the argument was that the management company (e.g. not the actual funds) used management fees to pay for their own investments. Ala the frat bros owned A. A had funds B, C, and D. Investers are LPs of B, C and D. Management fees flowed from B, C and D to A, where it was used for nonsensical stuff. There's nothing at all illegal about that. If a fund has a 10% of holdings management fee, the fund has zero obligation or "fiduciary duty" to the charged fund holders in how they use that money. They can use it on a mountain of blow, or a room of strippers. Or they can invest in dubious investments. Whatever. If investors don't like the returns relative to the management fees, they redeem. This whole story is very offputting. The individual is talking about various completely uncriminal emails that he read in podcasts, itself arguably criminal and with profound civil liability. And that's the hero of the story? Eh.
- jartelt 9y ago
  Well, if the management company didn't use any of the fees to pay employees, credit card companies, other vendors, etc. and instead used the fees to buy a "mountain of blow", I think that qualifies as an issue.
  - endorphone 9y ago
    In the wake of controversy they saw mass redemptions, fees obviously collapsed, and the company became essentially insolvent. There is nothing criminal about that, and it happens to funds as a regular event, and it came much later than the events around this purported whistleblowing.
- gregshap 9y ago
  I haven't listened to the podcast, but according to the backchannel article linked above, the money came from the funds themselves > The $5 million that went into launching River Studios came from Rothenberg Ventures’ second and third funds...One LP says that in a phone call with investors in August after Rothenberg had told them about the River Studios investment in an email, one grilled him on why River Studios wasn’t in the annual reports, and says Rothenberg responded that he was still getting around to the disclosures. Rothenberg’s employees also say they were kept in the dark. Two former employees tell Backchannel that when they asked Rothenberg how River Studios was funded, he told them only that there were outside investors. Another recalls Rothenberg saying he paid for it himself. Rothenberg disputes this, saying that all investors had been made aware, adding, “We’ve been very public about it.” [https://backchannel.com/mike-rothenbergs-vc-firm-was-young-splashy-and-loaded-with-cash-now-it-s-all-come-crashing-down-e76fa076c7c5 https://backchannel.com/mike-rothenbergs-vc-firm-was-young-s...]
  - endorphone 9y ago
    Later information is much more vague about this, and one of the core complaints is that he used the management fees of his funds to sponsor companies that arguably competed with holdings of the funds - a serious conflict of interest. This fund was started with a ridiculous fee structure of 17.5% of total investment upfront, and then apparently no going forward fees. Like a "lifetime VPN" subscription, the economics don't make sense and it is a folly arrangement for all sides.
    - dmschulman 9y ago
      Also from the Backchannel article: "Several former Rothenberg Ventures and River Studios employees now say they didn’t understand why River Studios was green-lit. One former employee noted that River Studios also competed for clients and market share with at least two of Rothenberg Ventures’ portfolio companies that were already in VR film production, Triggar and vantage.tv. (Triggar didn’t respond to requests for comment, and vantage.tv’s CEO Juan Santillan wrote in an email, “I don’t agree with many of the things that were going on at RV…” but added, “RV[’s] extended team has been great to us.”)"

endorphone 9y ago

I'm taking a beating in another comment (it's one of those ridiculous discussions where everyone can demonstrate how righteous they are), but I listened to the podcast and the argument was that the management company (e.g. not the actual funds) used management fees to pay for their own investments. Ala the frat bros owned A. A had funds B, C, and D. Investers are LPs of B, C and D. Management fees flowed from B, C and D to A, where it was used for nonsensical stuff. There's nothing at all illegal about that. If a fund has a 10% of holdings management fee, the fund has zero obligation or "fiduciary duty" to the charged fund holders in how they use that money. They can use it on a mountain of blow, or a room of strippers. Or they can invest in dubious investments. Whatever. If investors don't like the returns relative to the management fees, they redeem. This whole story is very offputting. The individual is talking about various completely uncriminal emails that he read in podcasts, itself arguably criminal and with profound civil liability. And that's the hero of the story? Eh.

jartelt 9y ago
Well, if the management company didn't use any of the fees to pay employees, credit card companies, other vendors, etc. and instead used the fees to buy a "mountain of blow", I think that qualifies as an issue.
- endorphone 9y ago
  In the wake of controversy they saw mass redemptions, fees obviously collapsed, and the company became essentially insolvent. There is nothing criminal about that, and it happens to funds as a regular event, and it came much later than the events around this purported whistleblowing.
gregshap 9y ago
I haven't listened to the podcast, but according to the backchannel article linked above, the money came from the funds themselves > The $5 million that went into launching River Studios came from Rothenberg Ventures’ second and third funds...One LP says that in a phone call with investors in August after Rothenberg had told them about the River Studios investment in an email, one grilled him on why River Studios wasn’t in the annual reports, and says Rothenberg responded that he was still getting around to the disclosures. Rothenberg’s employees also say they were kept in the dark. Two former employees tell Backchannel that when they asked Rothenberg how River Studios was funded, he told them only that there were outside investors. Another recalls Rothenberg saying he paid for it himself. Rothenberg disputes this, saying that all investors had been made aware, adding, “We’ve been very public about it.” [https://backchannel.com/mike-rothenbergs-vc-firm-was-young-splashy-and-loaded-with-cash-now-it-s-all-come-crashing-down-e76fa076c7c5 https://backchannel.com/mike-rothenbergs-vc-firm-was-young-s...]
- endorphone 9y ago
  Later information is much more vague about this, and one of the core complaints is that he used the management fees of his funds to sponsor companies that arguably competed with holdings of the funds - a serious conflict of interest. This fund was started with a ridiculous fee structure of 17.5% of total investment upfront, and then apparently no going forward fees. Like a "lifetime VPN" subscription, the economics don't make sense and it is a folly arrangement for all sides.
  - dmschulman 9y ago
    Also from the Backchannel article: "Several former Rothenberg Ventures and River Studios employees now say they didn’t understand why River Studios was green-lit. One former employee noted that River Studios also competed for clients and market share with at least two of Rothenberg Ventures’ portfolio companies that were already in VR film production, Triggar and vantage.tv. (Triggar didn’t respond to requests for comment, and vantage.tv’s CEO Juan Santillan wrote in an email, “I don’t agree with many of the things that were going on at RV…” but added, “RV[’s] extended team has been great to us.”)"