When a colleague suggested to tech entrepreneur J. Scott Hamilton that he tap venture capitalist Alan J. Patricof for money, he thought to himself: "You've got to be kidding." Hamilton had no business plan and paltry sales, but like most upstart CEOs, he was hungry for funding. He landed an appointment, and just 15 minutes into the presentation, Patricof "stood up, said, 'We can do this deal,' and walked out of the room," recalls Hamilton. Since the April, 2004, encounter, Hamilton has gotten $1.7 million from Patricof and $3.3 million from Walt Disney Co. (DIS). "It forever changed the prospects of my company," he says. "I had instant credibility."
The often gruff Patricof has bruised many an ego with his abrupt exits over the years, but his well-timed entrances have made him one of the world's most successful venture capitalists. Having backed AOL (TWX), Cellular Communications, and Apple Computer (AAPL) over a 30-year career, he is now seeking trendsetters of the digital media age. In Hamilton's case, Patricof saw a company that manages listener lines for some 250 radio stations but also could be an advertising channel for call center services and directory assistance. His instincts are right so far: The company, VoodooVox, has revenues of $8 million, up from $800,000 two years ago.
Such small and promising ventures have been increasingly out of reach for Apax Partners, the firm Patricof founded in 1969. At $19.4 billion under management, it has morphed into a buyout firm rather than one that invested in early-stagers. Seeking to return to his VC roots, Patricof in March launched Greycroft Partners, a $75 million fund that's already made five investments of $500,000 to $3 million. So far he's bought into blogs (PaidContent.org, The Huffington Post), social networking (TAKKLE Inc., the first online social network for high school sports), and digital entertainment (Pump Audio, a music software producer), among other things.
A millionaire many times over, he isn't in it for the money. "It's a disease," says the 72-year-old Patricof. A self-styled "triple-A personality," he's looked at some 200 prospects in the past six months and hired three seasoned VCs to help find more. "The VC mantra has been 'We don't do deals under $5 million,'" he says. "[But] I don't care how small it is. I'm going back to the model I created. The idea is to build a company and stay with it."
Still, Patricof isn't seeking fresh startups. "He likes the mechanics of the business to make sense," says Steve Ellis, CEO of Pump Audio, Greycroft's first investment. Pump was founded six years ago to supply the advertising and TV industries with music tracks made by independent artists with no royalty constraints. A catalog of more than 75,000 songs, all original, supplies 16 MTV channels, Nickelodeon, Discovery, and other major networks. Besides the bankroll, Patricof has been pivotal in making Ellis some high-profile introductions. "There isn't anybody in the media space who doesn't know Alan," he says.
Patricof's name opens doors beyond investing, too. A friend of the Clintons, he has served as Hillary's campaign finance chairman since her initial bid for New York senator. He also advises the World Bank's International Finance Corp. and the African Venture Capital Assn.; in two years, he has logged a dozen trips to locales from Mali to Nigeria.
But his first love is media. An original backer of New York magazine, he now sees the Net as ripe with potential. Blogger Rafat Ali, founder of PaidContent.org, was heavily courted by VCs who wanted "far too big of a chunk of the company," says Ali. But the $1 million or so he says he got from Patricof secured his independence--even from Patricof. Case in point: On Aug. 4, Ali posted a scoop about an M&A deal involving a company with which Patricof has ties. Patricof "went ballistic" and pressed Ali to reveal his sources, says Ali. "I said, 'Look, I am not going to tell you.' Then after he told people, 'Rafat did a great job.' He understands the boundaries."
Patricof also lit a fire under Ali to assemble a board and extend the brand. "We like that business a lot, and we've already noticed a lot of interesting changes since Alan made his investment," says Reed Phillips, managing partner of the New York media investment bank DeSilva & Phillips.
Patricof has had his critics over the years. "He's very, very smart, but a complete control freak," says media writer Michael Wolff, who roasted him in his 1998 book Burn Rate. "He's made an enormous amount of money using what I'd call the brass knuckles method of investing." But VoodooVox's Hamilton gladly suffers Patricof's shortcomings: "He has a style that some interpret as brusque... but when someone of Alan's stature tells you something, you listen."
By Mara Der Hovanesian, with Heather Green in New York