Rosen, Benjamin Maurice

(1933-)
Rosen Motors

Overview

A dynamic genius, venture capitalist, and "angel investor," Benjamin M. Rosen settled into the life of a high–tech mogul after years of unfulfilling work in a variety of well–paid professions—first as an electrical engineer, followed by consultant, analyst, and publisher. He first achieved fame while working as an analyst with Morgan Stanley, where his electronics newsletter became the industry bible. He then invested in two fledgling concerns in fairly rapid succession, and made a fortune in both: Lotus software development and Compaq computers. But dearest to his financial heart was his own private venture, shared with his brother, to develop an automobile motor that would replace the industry's standard turbine engine. The Rosen Motor, based on flywheel technology, came very close to doing just that.

Personal Life

Benjamin Maurice Rosen was born in New Orleans on March 11, 1933, the youngest of three siblings. His father, Isidore J. Rosen, was a dentist and his mother, Anna Vera (Leibof) Rosen, worked as a secretary. Benjamin's parents divorced when he was seven years old. Rosen later attended the Isidore Newman School, one of the finest in New Orleans. By all accounts he was a quiet teenager, a loner of sorts. In addition to playing the trombone in the school band, he began his first business, a mail–order photo–finishing service, at the age of 13.

In 1954 he graduated from the California Institute of Technology with a bachelor's degree in electrical engineering(B.S.E.E.) He continued is academic pursuits at Stanford University and received a master's degree in 1955. After college, Rosen joined his elder brother Harold in Oxnard, California as an engineer at Raytheon Corporation from 1955 to 1956, and then at Sperry Corporation in Great Neck, New York from 1957 to 1959. Rosen, despite his higher education, felt unfulfilled as an engineer. So in 1959 he uprooted himself, traveled to Europe, purchased a small motor scooter, joined the denizens of the French Riviera, and taught the French to play Frisbee until he ran out of money. When he returned, he went back to school, got his MBA, and embarked on a journey of top–level jobs over the next several decades that would earn him great respect, recognition, and wealth.

Rosen married Alexandra Ebere on September 29, 1967. The couple and their two sons, Jeffrey Mark and Eric Andrew, live in Westchester County, New York. An avid golfer—notwithstanding hip replacement surgery in 2000, he belonged to five golf clubs—Rosen's eclectic New York office for Rosen Motors contained a life–size statue of himself playing golf, donated by a friend. The office also housed an old Wurlitzer jukebox loaded with Ella Fitzgerald, Frank Sinatra, and Stephen Sondheim recordings. In 2001 he continued to sit on the board of overseers of Columbia University Graduate School of Business and serve as a trustee of the California Institute of Technology. He also is on the board of Memorial Sloan–Kettering Cancer Center in New York.

Career Details

Upon his return to the United States from France, Benjamin Rosen enrolled at Columbia University in New York City, where he secured a master's degree in business administration in 1961. For the next four years he served as a vice president at Quantum Science Corporation, specializing in mutual funds associated with the technology industry. In 1965 he joined Coleman & Company as a partner. There, his extensive background as an electrical engineer earned him a vice presidency, as well as a "guru's" reputation in matters of the semiconductor industry.

Despite his career shift, Rosen experienced renewed ambivalence, discontent, and diminished career expectations. In 1975 he joined Morgan Stanley as a vice president and organized a technology newsletter to dispense business news about high–tech industries. His quick wit appealed to a wide audience but he abandoned the lucrative position due to conflict of interest—he wanted to invest in high–tech industries himself. In 1980 he branched out on his own under the auspices of Rosen Research Inc. He wrote a newsletter and hosted forums focused on the personal computer (PC) industry, which was a fledgling startup at that time.

In 1981 Rosen entered into a partnership with L. J. Sevin, a fellow electrical engineer, to form a venture capital fund with $25 million in seed money, of which they personally invested $200,000 of their own capital. Rosen, as chairman of Sevin Rosen Management Company, brought his particular expertise and understanding of marketing and public relations to the firm. By 1983 Rosen had relinquished control of his newsletter and forum businesses, again due to a conflict of interest, and turned his attention to building technology enterprises.

In 1982 Sevin and Rosen funded PC manufacturer Compaq Computer Corporation. Compaq generated revenues of $111 million in the first year and by 1995 it was the world's largest manufacturer of PCs. Also in 1982 Rosen furnished the capital for a fledgling software company called Lotus Development Corporation, the manufacturer of 1–2–3 spreadsheet software. Lotus achieved $53 million in sales that year, overshadowing original projections by a factor of 17. By 1983 Rosen was both chairman of Compaq and a member of Lotus' board of directors, and the perennial conflict of interest issue dictated that Rosen resign from the board of Lotus. In 1983 Sevin Rosen invested $60 million into a second fund, while media observers marveled that venture capital constituted a fifth career for Rosen, after engineer, consultant, analyst, and newsletter publisher. Between 1983 and 1988 Rosen's firm nurtured 10 companies to their initial public stock offerings (IPOs), and by the end of 1989 those combined company values totaled $6.7 billion. Sevin Rosen undertook an average of five ventures per year and accumulated a success record of 35 out of 45 ventures undertaken. Rosen personally sat on the board of five of the ventures.

But the overachieving Rosen and his rocket–scientist brother Harold had yet another venture in mind, this one aimed at the realization of a more personal dream. In 1993 the two brothers formed a partnership to develop a turbine–flywheel automobile. Rosen served as both chairman and deep pocket of the new company, called Rosen Motors, while Harold took the reins of president and CEO of the Woodland Hills, California, enterprise. Harold, a Ph.D. from Cal Tech, was an overachiever in his own right, having developed the technology for stationary satellites while leading the engineering staff at the Hughes Aircraft Space and Communications Group. For four years the brothers canalized their energies and their dreams toward developing a hybrid electric power train driven by two generators, one powered by turbine and the other by a mechanical flywheel. The flywheel turbine they eventually developed was made by another company the Rosens helped found, Capstone Turbine. All that they needed was to find an automobile maker that could house the engine in one of its car models.

Flywheels are battery–like additions to combustion engines that generate power and continue to propel vehicles forward once the regular engines started them moving. Proponents of the technology claim that flywheels can double fuel efficiency and slash emissions. Several automakers had looked seriously into the technology in the early 1990s, including Ford Motor Company and BMW. Chrysler unveiled its prototype flywheel–powered race car, the Patriot, in 1994 but never followed through with it because of expense and concern about flywheels breaking loose.

The Rosen brothers were eventually able to pair up with Saturn Corporation for a test prototype model using their engine. The turbine ran on regular unleaded gasoline from a standard size gas tank. When the engine was running, it could spin at 96,000 rpms on ultra–low–friction air bearings and the energy could be stored by the flywheel power train system. The Rosen model used a lightweight fiber composite that allowed spinning at very high speeds. The plan was to produce a system that could reach the energy equivalent of 200 horsepower (hp).

By late 1996 Rosen Motors had attracted more than 60 brainy employees, a remarkable team of engineers, scientists, and technicians, but still no government grants. The Rosen brothers had financed the entire venture, spending approximately $24 million between them and refusing investor inquiries until they could secure interest from a major automaker. In January 1997 they demonstrated their prototype SC2 Saturn in the Mojave Desert, running it on the test track for a solid two hours at approximately 40 mph. The ultimate plan was to induce a major automobile manufacturer to build a fleet of approximately 25 cars with flywheel turbines by 1998. Eventually, Rosen intended to manufacture the power trains through his company and sell them to the carmakers.

Despite the successful road test demonstrating the commercial viability of the technology, no carmaker emerged with a firm offer. Major auto manufacturers had their own agendas for alternate energy, several of them leaning toward fuel–cell technology with hybrid gas–electric engines. Although the Rosens had been negotiating with two carmakers to shoulder some of the development costs and help move the technology into a reality, they were unable to secure any real commitments other than research funding. Ben Rosen had made a commitment to himself that he would drop the project if his personal and financial investment did not pay off by the end of 1997. "We needed an automaker to participate at this point, and it became clear to us that they are not interested," Rosen told Automotive News reporter Lindsay Chappell. By the end of November 1997, the offices of Rosen Motors were empty and the 70 employees were laid off.

Chronology: Benjamin Maurice Rosen

1933: Born.

1954: Received bachelor's degree from California Institute of Technology.

1955: Received master's degree from Stanford University.

1975: Became vice president for Morgan Stanley.

1981: Formed first venture capital partnership, Sevin Rosen Management Co.

1982: Funded both Compaq Computer Corp. and Lotus Development Corp.

1982: Became chairman of Compaq.

1993: Formed Rosen Motors with brother.

1997: Rosen Motors ceased operations.

2000: Retired from Compaq.

In October 2000 Rosen retired as chairman of Compaq, a position he had held since 1982. His cash remuneration from Compaq for the previous year was in excess of $163 million. Former co–workers remember Rosen for his intelligence and sense of humor. One employee recalls how, once, when a young Compaq exceeded its sales quota, Rosen marched into a sales conference wearing a drum major's uniform and leading a 100–piece marching band.

But retirement has not slowed Rosen down. For private companies in need of startup cash, Rosen, along with other "angel investors," is available to consider investing. He belongs to a group known as the "Band of Angels Fund," comprised of 150 high–net–worth founders or former executive officers of high–tech companies who are available to finance startups. The Silicon Valley–based group backed approximately 20 startups in 2000.

Social and Economic Impact

Rosen helped to transform venture capitalism from a game of chance into the fine–tuned engine that drives much of the high–tech industry. Instead of simply doling out money and then hoping for the best, he eliminated much of the guesswork in his investments by becoming thoroughly familiar with the technologies he was investing in, resulting in both personal wealth and success for the companies. Despite the failure of his own company, Rosen Motors, to secure commercial contracts with major automotive manufacturers, Rosen's efforts helped narrow the gap between available technology and marketable products. He was ready for the automotive world, it just wasn't ready for him.