Editor’s Note: Byron Roth is the owner and executive chairman of Newport Beach-based Roth Capital Partners, the largest investment bank with headquarters in Orange County.
In April, he will receive the prestigious Horatio Alger Award.
The American dream is there for all of us, but it doesn’t come to you; you have to go out and get it.
I was born in 1962 in a tight-knit Mennonite community in Wayland, Iowa. My world consisted of farmland, six Mennonite churches and a town so small the nearest stoplight was 10 miles away. Mennonites are a conservative Protestant sect, separate from the Amish and known for their agricultural mindset.
My father, uncles and grandfather were all farmers. I would have been a farmer had it not been for a series of tragedies that changed everyone’s lives in our family.
My dad lost his father and his brother in farming accidents, and then he lost our farm when turkey prices collapsed. Everything was liquidated, and my parents were forced to start over.
The family moved into town, and my father became a livestock feed salesman. He discovered a talent for sales and eventually that led him to owning two livestock auction barns.
I learned a lot from my father. He never feared failure. He relied on his own intellect, worked hard and moved forward. He liked people, and they liked him back. To this day, when I return to my hometown, people say to me, “Everybody loved Max.”
My mother also had to make some major changes. At the age of 45, she returned to school and earned a degree as a physician assistant. Unfortunately, she couldn’t find a job after her graduation. Instead, she worked for the local veterinarian, holding that position for 26 years.
My mother worked from the time I was in school. Whenever she couldn’t get a babysitter for me, I went on rounds with the vet. I loved livestock animals. I joined 4-H—mostly so I could play on their basketball team —but I grew to enjoy the organization and stayed with it throughout high school.
My life lessons began with my parents. They gave me a firm grounding through faith and values that I have passed on to my children. My parents taught me that when your current path forward crumbles below you, create a new pathway. They also taught me not to fear failure. These were valuable lessons that served me well.
A New Field of Dreams
All my brothers, three older and one younger, influenced me. The older brothers were in high school when we lost the farm, and they had to pivot from previous expectations of working on the land. Football became an unexpected path forward.
My brothers were good football players, and they were offered college scholarships for their athletic talents. I planned to follow in their footsteps and set my sights on the University of Iowa.
When one of my brothers was scheduled to play a bowl game, my parents and I took our first airplane trip to California. By then, I had been turned down for a football scholarship to Iowa.
As soon as we landed, I loved California. I began to think that if I couldn’t play for a big football program, then maybe I could get a scholarship to a small California school.
I toured the University of San Diego (USD) and immediately felt it was the right place.
Unfortunately, they did not offer football scholarships. Instead, I received an academic scholarship and a work-study program.
USD is a Catholic school, and my parents were unsure about that. I asked a Mennonite pastor to give his blessing on the decision. Thankfully, I received the pastor’s support, and
I was off to a whole new world in Southern California. I played as a linebacker and defensive back for two years at USD.
A Love for Wall Street
I had no idea what I would do for a career after graduation. During my senior year, I took a finance class on capital markets that included a simulated stock market game. Suddenly, I knew what I wanted. I loved the competitiveness, action and teamwork of this game. It reminded me of what I love about football. Immediately, I knew my place was on Wall Street. The only problem was my undergraduate degree from USD wasn’t going to get me there.
I learned that to get a job on Wall Street, you have to get in the room first. Deciding I needed an MBA from a Wall Street feeder school, I applied to Cornell’s Johnson School of Business.
After receiving a deferred acceptance, I read an article in a business magazine that said the Cornell dean believed in interviewing applicants. I requested an interview and shared my life story with the dean, a former executive with John Deere, who was well-versed in the Mennonite farming community. Immediately after the interview, he walked to the head of admissions and said he would love to have me.
Then I earned an internship with Marshall Swartwood, a Cornell Alum who was later in his career and had a family office on Wall Street. His biggest claim to fame was having both Henry Kravis who later went on to found Kohlberg Kravis Roberts (KKR) and Teddy Forstmann of Forstmann Little both work for him early in their careers.
In 1987, I began working full time for Swartwood, who became my mentor, teaching me that there was an edge to investing in below the radar public companies. That’s what I carry through to this day.
An Edge in Southern California
After five years on Wall Street, I returned to Southern California, where I joined a small investment banking firm, Cruttenden & Company.
The key to building my business was finding a niche where I didn’t compete with the up and coming Wall Street firms, which concentrated in Silicon Valley. For the first five years, two thirds of our business was getting in cars and driving to businesses located in Southern California.
We have a good filter to recognize companies that we were uniquely positioned to raise capital for. The first thing I ask – who are we going to sell this to? If we didn’t know that answer, it probably wasn’t a good fit.
I quickly became the firm’s top producer and advanced to president and partner, which resulted in the firm being renamed Cruttenden Roth. Five years later, I became CEO, chairman and the majority shareholder. In 2000, the firm became Roth Capital Partners, which now has 225 employees throughout the country. Hiring loyal and talented people is by far the hardest thing to manage. Our assets go up and down the elevator every day.
We have had some nice winners. A few of our more notable sole managed deals include: a 1994 IPO for U-Haul, which has returned over 2,600% (excluding dividends), Ultimate Software, which we did a follow-on offering for $5.30 in 2003, which sold for $331.50 per share in 2019 ($11 billion valuation), NV5, which we took public in 2013 at $6.00 a share and sold last year for $92 a share ($1.7 billion valuation), and finally IRadimed Corp., which we took public at $6.25 a share in 2014 and now trades near $100 (Nasdaq: IRMD).
One of the best and worst investments I ever made was back in the early 1990s when we did a secondary offering as a principal along with the management team of a company called Hansen with a $15 million market cap. We made a 10x return on it and thought we were smart.
But if we had retained our shares and owned it today, it would have been wildly greater. Hansen changed its name to Monster Beverage and nowadays, it has a market cap of over $70 billion (Nasdaq: MNST).
Our firm has raised more than $100 billion in capital and advised on numerous mergers and acquisitions across diverse industries. Additionally, I have co-founded three private investment firms: RX3 Ventures LP, RIVI Capital LLC and Aceras Life Sciences LLC. I also co-founded two asset management firms Cortina and IMC and have also served as co-chair and co-CEO of six special purpose acquisition companies.
Looking back at my career, I’m deeply grateful for the opportunities education has given me. I have made it a priority to support academic institutions, including USD and Cornell.
I’ve long been involved with the Boys and Girls Clubs of America (BGCA) where I helped create a partnership with the Special Olympics to provide club access to their participants.
This program promotes inclusion by bringing together youth with and without intellectual disabilities to build acceptance, leadership and healthy lifestyles. This mission resonates deeply with me — my younger brother Courtney has Down syndrome and is a Special Olympic athlete. Courtney has been a lifelong inspiration to me. His example reminds me daily of the importance of compassion, inclusion, community and just being happy.
My parents believed in me, and that allowed me to believe in myself. I think that is key when pursuing your dreams and goals. You must have that inner strength in yourself and your abilities. If you can do that, anything is possible.
