Pat Haden is accustomed to adversity.
As quarterback of the Los Angeles Rams, he led the team to its only Super Bowl appearance, only to break his hand near the end of the season. He sat on the sidelines as the team lost to the Pittsburgh Steelers in front of a hometown crowd at the Rose Bowl.
Today Haden faces something more formidable than a stadium of disappointed fans: gyrating financial markets.
As a partner at downtown L.A. venture capital firm Riordan, Lewis & Haden, he oversees a $100 million investment portfolio that includes several public companies.
Some of those companies have been caught in the recent downturn, like Data Processing Resources Inc., which was trading at $24 last week, down from almost $34 in late July.
But true to form, Haden seems unshaken amid the turmoil. The venture capital firm specializes in high-growth California companies, typically in the business services, medical and environmental sectors.
While he has fond memories of his football days, and still appears as an on-air commentator for college games on NBC, Haden says he has no regrets about trading in his jersey for a business suit.
Question: With several public companies in your portfolio, how has the stock market volatility been affecting your business?
Answer: Well, our initial investments are generally in privately held companies, so in those cases, not much. But our portfolio does include a number of public companies. And the public companies that we own that are in an acquisition mode may be affected as the stock they use to make acquisitions may be devalued. And of course our own net worth gets affected by gyrations in the market.
Our companies have done pretty well, considering. They do their business primarily in the U.S., so they are not directly impacted by what is happening in places like Russia. We are not out there looking for stocks that have been hammered by the Asian crisis that we can pick up at discount prices. The ideal thing for us is to look for a $30 million company that is heading for $300 million in sales. Generally these companies are not public yet, but they will be in two or three years time. We want to help those companies take that next step.
Q: Does the volatility help your business in any way?
A: It goes both ways. A couple of weeks ago we had to postpone the IPO (initial public offering) of Financial Pacific, headquartered in Sacramento, because of market volatility.
But private companies that were thinking about raising money on the public markets might instead think about coming to us for money.
As for my own investments. I’m 45 years old. I’m not thinking about retirement and I’m not thinking of selling.
Q: There have been indications that L.A.-area investment funds are flush with cash being diverted from Wall Street. Are you worried that all this capital chasing local deals might drive up prices?
A: Our size of investment is generally below the radar screens of the big firms. Because of their size, they have to invest $30 million to $100 million per transaction. But we are going to invest between $3 million and $15 million per transaction. And we do not get involved in auction transactions.
But it is getting harder to get all the stars aligned for us to make investments. We need strong management, a growth industry, unique characteristics about the firm and an exit strategy, such as taking the company public. To find all those things is getting harder and harder.
Q: What kind of companies are you typically investing in?
A: We have invested a little over $100 million in 12 companies that together have annual sales of over $1 billion. All but one are California-based companies and most of them are in service industries outsourcing companies, white-collar companies that are reflective of the Southern California economy. Four or five are public companies. The rest are in gestation.
One is Steven Myers and Associates, an aerospace consulting firm down in Orange County. We took them public about a year ago. Another is an information technology staffing company called Data Processing Resources Inc., also in Orange County. A local company is Tetra Tech Inc. up in Pasadena. They solve environmental problems.
Q: What’s the best investment you’ve ever made?
A: Steven Myers and Associates. It encompasses all the traits we look for in an investment: strong growth and good management. We brought it out (through a January IPO) at $12 a share and now it is at $21.
Q: How about your worst investment?
A: A company called Sierra Distributing, which distributed beer. It was a situation where we were dealing with a commodity business that did not have the growth characteristics that we were looking for. We lost our investment. We sold the company in 1997 and used the proceeds to pay off our lenders.
Q: Do you think your football background helped or hindered you in your white-collar career?
A: I really don’t know. Probably both. Sometimes you have people who think that because of your background, you are not qualified to handle a particular situation. But sometimes they want you on board because of your sports background. But at the end of the day, you have to have the intellectual firepower to get the job done. And as time goes on there is less and less name recognition.
Football was an interesting period in my life, and I suppose I’m still involved to some degree through broadcasting. But I really view my life as quite different now.
Q: Pro football is also quite different now. What are your thoughts on that?
A: The economics were different back then. In those days, even though you made a lot of money, it wasn’t anything like the guys make these days. When I retired in 1982, I was a starting quarterback, but my starting salary was $250,000 a year. Starting quarterbacks today are making a minimum of $3 million a year. So these days, even if you are in a 50 percent or 60 percent tax bracket, if you play for seven to 10 years and invest your money wisely you can achieve financial independence at the end of it. But back when I played, very few players ever achieved financial independence. And I knew that I didn’t want to coach. I knew that I didn’t necessarily want to remain in the game after I retired. So I decided that the legal education was broad-based enough that it would be useful no matter what I wanted to do.
Q: How did you meet Mayor Riordan and come to be named a partner in his firm?
A: In 1987, Dick Riordan was looking for a lawyer to represent him in a dispute he had with the Raiders. I interviewed for that job and Dick at the time offered me a job with his law firm. I said I was happy where I was, but that I had some entrepreneurial interest. So he introduced me to his partner Chris Lewis and I joined their investment practice.
Q: Will he be coming back after he leaves office in two years?
A: Well, the day he left, Chris Lewis and I took over his office and I took over his parking space. So if he comes back he’s going to fight for his parking space. I really don’t know what he’s going to do when he leaves the mayor’s office. His seasoned outlook was very valuable when he was here. And he could do due diligence on companies and people very quickly. He could call anyone in the country and in half an hour could have a pretty good lead on the ability of a management team. That’s a real plus.
He’ll probably come and have an office here. But he probably won’t have a day-to-day role here. I can imagine him being more involved in charitable and philanthropic activities.
Q: There is a great deal of debate about bringing professional football back to Los Angeles. Has Mayor Riordan asked you to get involved in the discussions?
A: He has not asked me to be involved and I have mixed emotions about bringing football back to L.A. I would love to see a team here, but I don’t want to see public money spent to do so. I feel there are better ways to spend the public’s money. And I believe that’s the way a lot of people feel around town. I don’t see an overwhelming desire by Los Angeles residents to get football back here.
Q: Do you want your children to be lawyers or football players?
A: We have four kids and all of them have played team sports in high school. My son is a talented quarterback at his high school. But do I foresee my son being quarterback of the Chicago Bears someday? I hope not. I hope he’ll do something else and be more productive.
PATRICK HADEN
Title: Partner, Riordan, Lewis & Haden
Born: Westbury, N.Y., 1953
Education: B.A. in English literature, USC; Rhodes Scholar, Oxford University; J.D., Loyola Marymount University
Most Admired person: His mother
Hobbies: Reading, golf
Turning Point in Career: “The day I went to work with Richard Riordan and Chris Lewis.”
Personal: Married, four children
