Patricof Goes Back To Early-Stage Investing

Patricof is a legendary New York investor who first made his mark in 1969 with the formation of Alan Patricof Associates. That firm made early-stage bets like Apple Computer, and in 1987 became the first U.S. venture shop to establish a European affiliate. In 1991, Patricof renamed the U.S. group Patricof & Co. Ventures, while calling his entire international effort Apax Partners, even though it was split into U.K., French and Israeli silos.

At the time, both groups were dedicated to early-stage deals, but the Europeans kept moving further and further downstream. Once the Patricof & Co. moniker was dropped in favor of Apax in 2001, the firm was known more for leveraged buyouts than for the early-stage deals Patricof favored. Apax finally ditched early-stage investing altogether in 2005, but allowed Patricof to quietly make incubator-type deals while formally serving as firm chairman.

But Patricof knew that it didn’t make much sense to be making small startup bets out of a multibillion-dollar leveraged buyout platform. He also hadn’t been having too much success.

So rather than maintain the status quo or retire, Patricof opted to form an early-stage fund dedicated to early-stage digital media opportunities. He called it Greycroft Partners, and began hitting up friends to serve as limited partners.

“From the outset I decided to only offer participation in the fund to friends and business associates. As a result, it is completely funded by high-net-worth individuals,” Patricof explained. “There wasn’t a PPM. I simply sent a letter to people I knew asking for between $500,000 and $2 million. The original plan was to raise something smaller than $50 million, but there was a lot of interest.”

The firm formally launched last month, and expects to make between 12 and 14 investments over the next few years. It will focus on early revenue-stage companies in digital media spaces like wireless and entertainment. He didn’t disclose any targets, but some of his current Apax portfolio companies included online audio programmer Audible Inc., online broadcast media distribution company The NewsMarket Inc., mobile content provider UPOC Networks Inc. and voice response technology provider VoodooVox Inc.

Patricof says that he plans to spend between 70% and 80% of his time on the Greycroft business, which he refers to as his full-time job. He also has spent substantial energies on Third World micro-finance issues, and is a major Democratic Party fundraiser who serves as co-chair of Hillary Clinton’s re-election campaign for the U.S. Senate.

“I do spend a small portion of my time in politics and on trying to be helpful in the developing world, but my primary focus is still on small, growing businesses,” Patricof said.

Greycroft is currently operating out of Apax’s New York headquarters with Patricof and an undisclosed colleague. It also may add a summer intern or two as it ramps up.


What remains to be seen is whether Patricof can repeat his past successes. Specifically, can a 71 year-old VC legend still connect with the 20-something entrepreneurs who permeate Silicon Alley?

“I know this is going to sound ageist, but I don’t know how many entrepreneurs will identify with someone like Patricof,” says a fellow VC focused on digital media. “A lot of these folks want someone who’s always blogging and listening to their i-pods.”

But other VCs—who also declined to be identified—say that entrepreneurs of all ages are impressed far more by an investor’s track record than by his electronic accessories. If they’re correct, the man who helped build such companies as America Online and Office Depot shouldn’t have too much trouble securing portfolio companies. And if it’s contacts they’re after, he just might be in tight with our next President. –—D.P.