Backstage at a cavernous Denver nightclub called the Cervantes Masterpiece Ballroom, Roger McNamee sits in a blue plastic chair, cradling his Martin acoustic guitar and fretting. The veteran Silicon Valley investor looks around at the members of his new band Moonalice—six seasoned players whom he’d flown in, at his own expense, from around the country—and delivers the bad news.

“Nobody’s out there,” says McNamee, 51. On the other side of a flimsy, decal-covered door, the warm-up act, Storytyme, rocks out to a nearly empty room. McNamee frowns slightly and tucks wisps of his graying shoulder-length hair behind both ears. “The promoter said they would bring 50 to 100 people with them,” he says. “They appear to have brought between four and six.”

His bandmates nod solemnly. It’s not the first time they’ve outnumbered their audience. When someone mentions that Storytyme’s members are a trio of brothers in their twenties, Moonalice’s bass player, Jack Casady (who, in 1965, when he was in his twenties, joined the psychedelic-rock band Jefferson Airplane), sets down the World War II novel he’s reading. “That explains why there’s no one here,” he says, chuckling grimly. “Only one set of parents.”

McNamee shuts his eyes and keeps them shut. He made his name in a world far away from this grunge pit, whose floorboards stink of beer and where a chipped disco ball twirls slowly overhead. This Ivy League-educated, self-described geek has compiled a remarkable investment record that has given him near-wizard status on Sand Hill Road, the Bay Area tech industry’s main artery for capital. Known as a savvy strategist with a gift for anticipating technological change, McNamee has spent the past two decades guiding several top-performing funds—first at T. Rowe Price, the giant mutual fund manager, and then at two private equity shops he co-founded. Now he’s leading his third firm, Elevation Partners, whose profile—thanks to the involvement of U2 lead singer Bono—is even higher than the amount in its $1.9 billion war chest. (View slideshow.)

The midsize fund, which offers what McNamee calls “the T.L.C. of venture capital” to mature companies facing technology-related challenges, represents something of a comeback for him. In 2001, he had two strokes and underwent open-heart surgery. But a professional setback two years later was, in a sense, more devastating. Though it has never been made public until now, McNamee was ousted in 2003 from his previous fund, Silver Lake Partners, the renowned investment group he’d founded only four years earlier with three others. Now he’s out to show that Elevation and his band can rise concurrently, and he with them.

So far, Elevation has taken stakes in five companies: videogame developer Bioware/Pandemic; Move, a network of real-estate-related websites; the dubbing and subtitling company SDI Media Group; Forbes Media, publisher of Forbes magazine and Forbes.com; and, most recently, the handheld-computer manufacturer Palm. Though it’s too early to assess Elevation’s performance—it hasn’t even invested all its money, much less realized returns—those last two plays caused some head-scratching among industry observers. Elevation paid about $250 million for 40 percent of Forbes (essentially a huge bet on Forbes.com) and $325 million (its biggest investment yet) for 25 percent of Palm. Some tech experts doubt that the embattled smartphone maker can compete with the iPhone, the BlackBerry, and the unpredictable impact of Google’s entry into the market.

McNamee, of course, believes. Staying positive—or more precisely, suspending disbelief—has been one of the defining characteristics of his professional life. He also has faith, against all odds, in his band. He likes to say that building a band is just like building a company: You need capital, ideas, the right people, and, above all, patience. “Everything has a natural rhythm,” he says, gurulike. “You cannot rush it.”

After years of playing music for fun, McNamee says he’s dead serious about making Moonalice work as a business. Until then, he’s a rock-and-roll sugar daddy. For the trip to Denver alone, he chartered a jet and paid for 10 rooms in a four-star hotel—and the tour had only just started.

But that’s not the most audacious thing McNamee has done to feed his fantasy. Concerned that his stage patter lacks verve, he has created an alter ego—dubbed Chubby Wombat—and a backstory he calls the Moonalice Legend. A hippie shaman with a self-effacing smile, Chubby Wombat always wears jeans, a purple T-shirt, and a loud party shirt, unbuttoned. And without fail, at every show, he talks about the joys of smoking dope.

Backstage, Chubby Wombat—seer-sage, strummer-stoner—stirs in his chair. If anyone can envision a crowd in an empty hall, it’s him. He opens his eyes. Showtime.

Three days earlier, at Elevation’s annual meeting in October, Bono had called Chubby Wombat out.

The setting was a Q&A session for Elevation’s limited partners, including representatives of the Ford Foundation, Hewlett-Packard, and the several state pension funds whose combined investments make up one-third of Elevation’s capital. Gathered in a vast meeting room at the posh St. Regis Resort, south of Los Angeles, this group of more than 100 men and women had already heard from the top executives of Elevation’s companies. Then McNamee summoned the general partners to the front and addressed the most famous among them.  

“Bono, do you want to say anything?” McNamee asked, kicking things off. “Any thoughts? Concerns?” All eyes shifted to the Irishman in green-tinted glasses, a black-denim shirt over a black T-shirt, black jeans, and black-suede platform shoes. “Hmm,” he said, hesitating. “Well, one big issue I’ve got to say I’m pretty concerned about is the length of Roger’s hair.”

The room exploded in laughter, and McNamee—dressed formally, for him, in chinos and a lavender dress shirt, no tie—laughed too. Since founding Elevation, he’d stopped cutting his hair, in hopes of earning more credibility as a rocker.

Over the course of the past 25 years, McNamee has cultivated a reputation as an intellectual provocateur, a man who can see around corners. A mentor for scores of Silicon Valley entrepreneurs, McNamee befriended a generation of industry leaders—Steve Jobs, Bill Gates, Larry Ellison—when they were making their first millions. “I’ve always been impressed by his ability to anticipate how key technology trends can disrupt entire industries and create new markets and new opportunities,” Gates says. When Gates was working on his first book, The Road Ahead, in the early ’90s, he recalls, “Roger was a great sounding board for many of the ideas I wrote about.”

A newer friend is Mark Zuckerberg, the 23-year-old founder of Facebook. When the two first met, in the summer of 2006, McNamee was “emphatic” that Facebook not be sold, Zuckerberg recalls. At the time, the social-networking site, in which McNamee would later acquire a small stake, reportedly had buyout offers of around $750 million.

“He clearly cared about building something long-term and about the impact of the things we build as opposed to just making money in the short term,” Zuckerberg says, adding that he found McNamee’s certainty “refreshing.” It would also, of course, prove prescient. In October, Facebook sold just 1.6 percent of the company to Microsoft for $240 million.

With Elevation, McNamee and his four general partners promise “a new form of private equity.” Unlike most of the big shops that propelled the buyout boom of the past several years, Elevation, its partners say, isn’t about stripping down and flipping companies; it’s about reinvigorating them. In language that inspires some and makes others roll their eyes, McNamee and Bono say Elevation was built around the romantic idea that business should have a role in transforming culture.

“I’m a top-line-melody guy,” Bono says, during a break at Elevation’s annual meeting. “That’s what I do. I understand harmony. I understand rhythm. But I sell ideas—musical, political, and, in this case, commercial ideas.”

Later, he adds, “So many great painters, great musicians, great geniuses, ended up with nothing. With broken hearts in rooms with broken windows. I want to see artists sitting at the table that decides the outcome of their lives.”

“I’ve not been famously profit-oriented. Roger’s also not motivated by profit,” he continues, laughing at how this must sound. “Isn’t profit what this is all about? But Roger believes, like I believe, that brilliance brings a better bottom line. Always.”

McNamee has always offset such abstract thinking by deliberately teaming up with people completely unlike him. “I’m most effective,” he says, “as a foil to others.” At Elevation, whose sleek, low-rise headquarters occupy a corner of an office complex in Menlo Park, California, each partner has a distinct role. Marc Bodnick, formerly a founding principal at Silver Lake, takes the lead on due diligence. Fred Anderson, the former chief financial officer of Apple Computer, is an operations expert. Bono, who says he spends about 15 percent of his time on Elevation, is both a door opener and a deal closer. And Bret Pearlman, previously a senior managing director of the Blackstone Group, the largest private equity firm in the world, is Elevation’s designated pragmatist and number cruncher. Elevation’s five general partners make investment decisions unanimously—a rare structure that Pearlman says was “absolutely critical” to his decision to join the firm.

But McNamee is the firm’s spiritual leader, macro thinker, and recruiter in chief. Lorna Borenstein, a former Yahoo executive and chief of eBay Canada, recalls being invited to give a presentation at Elevation’s weekly partners meeting one Monday morning in November 2006. Seated at the head of the table in the company conference room near a large framed poster from U2’s 10th album, All That You Can’t Leave Behind, Borenstein talked for two hours. Bono asked her the most questions. McNamee seemed to be ignoring her.

“Roger was sitting to my left, on his laptop the whole time,” she recalls. But as she rose to leave, “Roger took my hand and said, ‘We need to talk.’  He wouldn’t let go of my hand.”

McNamee pulled Borenstein next door to Elevation’s game room—which houses an arcade console stocked with 5,000 titles—and began to grill her, ignoring his partners’ entreaties to please return to the meeting. It was then, Borenstein says, that she realized “not only had he been paying attention, I’m guessing he was doing research on me.” Over the next seven days, at McNamee’s insistence, Borenstein met with him four more times. He quizzed her on consumer technology and on how she believed online companies could best engage and retain users. She describes his approach as intense—“kind of   ‘I’ve looked into your soul.’ ”

By week’s end, he informed her that she needed to run one of Elevation’s companies: Move. The fact that she’d already turned down a recruiter for the job didn’t faze McNamee. “He’s reeling me in, going, ‘Now you’re interested. Now you’re interested,’ ” Borenstein says. She relented because her talks with McNamee let her see his imagined future, she says. “He’s the greatest optimist I’ve ever met.”

Pearlman agrees, admitting that, for a traditional transaction guy like himself, that took some getting used to. “Roger flies around at 30,000 feet,” Pearlman says, laughing. “Most private equity shops focus first on what could potentially go wrong. Elevation forces you to look at the upside of every transaction first—to ask, Is there a real potential breakout home run here?”

The breakout home run has a precedent, and everybody knows its name: Seagate Technology. Back in the late ’90s, the 20-year-old disk-drive maker was foundering. McNamee’s previous firm, Silver Lake Partners, assisted it in retooling. The deal was unusually complex. After arranging a stock swap with a software company in which Seagate had a 33 percent interest, Silver Lake helped take Seagate private and then public again two years later. But what the firm accomplished—growing an established brand while providing a sevenfold return to investors in its first $2.3 billion fund—is considered a landmark deal by private equity analysts.

No wonder, then, that for all of Elevation’s lofty rhetoric about transforming culture, for all of its talk of “natural rhythms” and “top-line melodies,” its investors are focused on the answer to these questions: Where’s the next Seagate, and will we get a piece of it?

A few minutes before taking the stage in Denver, the members of Moonalice reminisce about their earliest musical stirrings. Jimmy Sanchez, who’s played with everyone from Boz Scaggs to Bonnie Raitt, opens his laptop and displays a photo of himself as a small boy, drumsticks flying. G.E. Smith, the former leader of the Saturday Night Live band, recalls how his mother bought him his first used Fender guitar 44 years ago, when he was 11. Casady says he was 12 when, exploring in the attic, he stumbled across his dad’s old Washburn guitar and fell in love.

McNamee waits a beat. “When I was 11, I went up to the attic and found my father’s stock tables,” he jokes, and everyone laughs.

McNamee’s father founded a successful regional brokerage firm, First Albany, in Albany, New York. As the second-youngest of nine children (six McNamee kids and three adopted cousins), Roger was anything but an extrovert. He says the closest thing he had to a guitar-in-the-attic moment was when he visited his father’s office and played with the Bunker Ramo quote machine.

“I just thought it was the most amazing thing,” says McNamee, who now wears up to seven gadgets on his belt at a time. “You’d press things, and all of a sudden, something would come up on the screen.”

He went to Yale University. After two years as an undergraduate, he took a break, following a girlfriend to San Francisco, where he sold display ads and tried to master a new hobby—playing guitar. When he returned to Yale, he studied history and joined a band called Guff. The group played Hot Tuna and Grateful Dead covers as well as original stuff, including a Frank Zappa parody called “The Club Foot.”

Asked what McNamee contributed, Guff’s viola player, Geoff Holdridge, answers, “A huge amount of enthusiasm and energy. He is really good now, but back then, he took a long time to tune.”

McNamee met his wife,  Ann, in a music-theory class (she was the graduate student leading his section). After Yale, he went to Dartmouth’s Amos Tuck School of Business. Ann headed for Swarthmore, near Philadelphia, where she would eventually chair the music department. They were married in 1983 but for nearly two decades lived mostly apart, following what McNamee calls a “deferred-enjoyment model.”

In 1982, McNamee had become an analyst at the Baltimore-based investment firm T. Rowe Price. Then as now, his best work was done not behind a desk, but up in people’s faces. He spent 100 days a year in Silicon Valley, dropping in on companies, playing with their products, and picking their brains. These trips gave him insights that often paid off: He was one of the original investors, for example, in Electronic Arts, the videogame behemoth.

From late 1987 to 1991, a period when technology stocks were far from stable, T. Rowe Price’s science-and-tech fund, which McNamee ran, returned about 17 percent annually to investors. While still at the company, McNamee became a ski instructor at Killington, in Vermont. By optimizing his life “across multiple dimensions”—a concept he wrote about in his 2004 book The New Normal—he seemed to excel in all of them. (Ed Mathias, McNamee’s boss at the time and now a managing director of the Carlyle Group, says he always believed McNamee had a less lofty motive: “He became a ski instructor so he could get to the head of the line.”)

In 1991, McNamee and John Powell—a colleague McNamee describes as so complementary to him that “it’s like Bono and the Edge”—broke away to launch Integral Capital Partners, which invested in both public and private companies, making it the first “crossover” fund. Integral, formed as a partnership with the big Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, scored big with early bets on Intuit, among other firms, delivering a net annual return of 24 percent between 1991 and 2003.

During the Integral years, McNamee formed a band, the Flying Other Brothers, with his younger brother, Giles, a Boston banker. The band was so named because no matter where they played, at least one McNamee brother had to get on a plane. But music wasn’t just a pastime; it was a networking tool. At tech conferences, McNamee jammed with the biggest names in the industry. (He once sang Jimi Hendrix’s “Little Wing” with Microsoft co-founder Paul Allen.) Later, after McNamee co-founded Silver Lake Partners (keeping Integral as a partner) in 1999, visitors to his office came face-to-face with a life-size papier-mâché Jerry Garcia. By that time, McNamee was more than a mere Deadhead: During the late ’90s, he had begun serving as a business adviser to the band.

It was through the Grateful Dead that he met Bono. The Dead had been selling music, concert tickets, and T-shirts directly to fans on the internet and was interested in creating a broader platform that would allow other artists to do the same. McNamee helped devise a business plan. The Dead approached U2 as a potential partner, and McNamee spent months discussing the idea (which would later be shelved) with Bono.

By 2001, Ann had retired from Swarthmore, and the couple were living together full-time in the Bay Area. Then, in June, while returning home from a trip to Dublin and New York, McNamee had a stroke, soon to be followed by a second one. “I’m in the car service headed home at 3:30 in the morning, when all of a sudden, it felt like somebody had poured chocolate sauce on top of my head. It felt really good for 10 or 15 seconds. Then, boom, the lights went out.”

He was 45. Open-heart surgery corrected a defect he’d never known he had. He recuperated for nearly three months. Then, only because his partners were out of the country, he returned to work—on September 11, 2001. After the strokes, he says, things were different at Silver Lake. Sources close to the firm say some there resented how the spotlight always seemed to shine on McNamee, even for deals in which he was less involved. Some also felt he overreached at times, trying to assert expertise in areas where others were more qualified.

Debates over the future of Silver Lake, McNamee says, grew increasingly heated. His desire to stay small, with time to focus on the strategic direction of each company in the firm’s portfolio, was at odds, he says, with the expanding vision of his partners. In 2003, his tenure at Silver Lake came to an end.

“My partners said, ‘You know, we kind of think it’s time for you to move on,’ ” McNamee says, recalling how they surprised him by suggesting he take a more limited role at the firm.

Asked what had led to the rift, he says, “I think the simple answer is, I’m an acquired taste and high maintenance, and culturally speaking, they liked it better without me.”

He admits he could have reacted with less emotion. But so, he says, could his partners. “One of them told the whole world I still had a huge health problem, and all I really wanted to do was play music. Oh, it was really ugly.”

Jim Davidson, a Silver Lake co-founder who remains at the firm, calls McNamee “truly gifted” and “instrumental” to Silver Lake’s early success. McNamee and his wife are godparents to all three of Davidson’s children, and their friendship survived McNamee’s departure. But the end, he acknowledges, was tough.

“Roger’s investment performance stacks up with the best, but he is not willing to compromise, whether in his investment business or his band or his friendships,” Davidson says. “And that can be hard on people.”

In 2003, just as McNamee was starting to wonder what he’d do next, his cell phone rang. It was Bono, calling from the south of France. They hadn’t talked in about two years, but the rock star had an idea about investing in the music business. That idea was the seed that would grow into what Elevation is today.

“The story of my life is bouncing back,” McNamee says, noting that, in the ’90s, he used to say his perfect year included 20 Grateful Dead shows, 20 days of skiing, and 20 baseball games. “Now my goals are much less specific than they were then. And they’re certainly not numerical. I make crisper choices now.” Asked to describe a perfect year today, he says, “Any year I survive.”

Elevation had its first crisis last year, when one of its founding partners, John Riccitiello, left to return to his previous employer, the videogame giant Electronic Arts. The departure of a managing director—a rare and troubling development so early in a fund’s life—heightened some investors’ concerns that the “first-time fund” (with a management team that had never worked together) wouldn’t click. McNamee, whose ties to E.A. go back to his
T. Rowe Price days, had recruited Riccitiello to join Elevation. Although Riccitiello said he left only because his dream job—C.E.O. of E.A.—opened up, others confirm that he and McNamee clashed.

“Roger and John were almost polar opposites,” Fred Anderson says. “They really respect each other, but they saw things very differently. That was probably the biggest challenge in the chemistry. All the rest of us jelled.”

Riccitiello’s exit also set the stage for Elevation’s first investment liquidation, a profitable transaction that nevertheless raised some eyebrows. In October, McNamee and his partners revealed that the firm was selling its controlling stake in the videogame developer BioWare/Pandemic to E.A. The sale would double the value of Elevation’s $300 million investment in less than two years—a respectable, if not blockbuster, return—and was generally viewed as a smart move, since the company needed a cash infusion and, as one investor put it, “the deal went sideways and lost its champion” when Riccitiello quit.

But the news fueled a simmering question: Was Elevation suffering from “strategy drift”? According to a memo circulated to potential investors when the firm was first founded, entertainment assets would be a primary focus. Yet for all Bono’s talk about “artists sitting at the table,” the Bioware/Pandemic sale spelled the end of the only high-profile entertainment play Elevation had made.

Moreover, some Elevation investors were displeased to learn that the sale would mean a windfall of as much as $4.9 million for Riccitiello, who held an indirect interest in Bioware/Pandemic’s parent company, VG Holding, through his continued ties to Elevation.

“He doesn’t deserve to take anything with him when he walked out like that,” says one Elevation investor, who asked not to be named because his employer forbids it. “I take a very dim view of people who ask us to sign up for 10 years and then feel free to jump ship. Someone who chose to do that should leave all their economics behind.”

But this same investor also says he’s happy with Elevation’s progress. While the most recent performance figures, made public by a state pension fund, show Elevation’s holdings to be worth less than the capital invested so far, with a negative 8.3 percent internal rate of return, that’s largely due to two things: the fee structure of private equity (general partners take their fees annually, before any returns on investments are realized) and timing (the figure predates the Bioware/Pandemic sale). Once the Bioware sale is accounted for, the fund’s return to date should jump. But even then it will be years before Elevation’s performance can be accurately measured.

At a media conference in New York in October, McNamee said that he had no idea where the online-media world was headed—a surprising admission for someone whose firm had recently made a quarter-billion-dollar wager on a content company with big digital dreams. 

At Forbes Media, which the Forbes family still controls, about two-thirds of Elevation’s investment is aimed at improving Forbes.com. Though McNamee says he believes the print world will never go extinct (“Magazines are a low-power, lightweight thing you can read on the toilet,” he likes to say), he thinks business journalism is particularly well suited to the Web because consumers hunger for information that can help them take control of their financial lives.

That perceived hunger has prompted McNamee to push Forbes to make acquisitions to beef up the personal-finance functions of Forbes.com, which has been criticized for goosing traffic with lists of the world’s most expensive homes and best topless beaches. One such acquisition was Investopedia, the leading online portal for investment-related research, which Forbes bought in April 2007. Another was Clipmarks, a small company that lets users tag, store, organize, and share snippets of webpages, acquired in November 2007. (McNamee’s musical passions aided in the brokering of that deal—he’d met Clipmarks’ founder through the young man’s father, a lawyer who represents the rock band Phish.)

Forbes Media’s rank and file have reacted to McNamee and Elevation with cautious optimism, mainly because the investment has allowed the company to add staff—an uncommon thing at a news organization these days. And while McNamee is characteristically hands-on as a board member, he is not perceived as a meddler in the newsroom—at least not yet. Carl Lavin, formerly a top editor at the Philadelphia Inquirer, became Forbes.com’s managing editor in October. Six weeks later, he still hadn’t met or spoken to McNamee.

There has been much speculation that Elevation’s investment in Forbes will lead either to the sale of the company or an initial public offering. Tim Forbes, the company’s chief operating officer, confirms only that a liquidity event is coming, saying that “it will be in the window defined in the agreement—anywhere from five to 10 years.” He also says the Forbes family has the right of first refusal to buy Elevation’s stake if the firm decides to sell it. “They have the right to put, we have the right to call,” he says.

Elevation has an estimated $850 million left to play with, and it plans to make two to four more investments over the next three years. McNamee rejects the “strategy drift” charge, countering that Elevation’s lack of entertainment investments is due to economic considerations, not strategic ones. When Elevation first began shopping for companies in 2005, the credit market was still strong, emboldening other suitors for the entertainment properties Elevation was looking at and driving prices higher than the firm was willing to pay.

Sources confirm that it stepped away from a potential deal with Take Two Interactive, the videogame developer behind the controversial (and lucrative) Grand Theft Auto franchise, deeming the price too high. Elevation has also tried to get into music publishing but has been stymied, McNamee says, by the industry’s resistance to change. There is one potential music investment that Elevation has “worked on continuously since the beginning,” he says, “and I don’t think we’re any closer to it today than we were then.” And when Priscilla Presley contacted Bono and floated the idea of selling the Elvis estate, Elevation investigated but took a pass. (Presley later sold to entrepreneur Bob Sillerman, who paid $100 million for 85 percent of the estate.)

“That was a very good sign,” says one Elevation investor, who calls that sum “ridiculous.” Elevation, he continued, has “not lowered the bar in order to fill the fund with high-profile, sexy stuff. Private equity people usually do the opposite, because they want to raise the next fund and layer the next fees on top.”

Elevation prides itself, of course, on doing things private equity people don’t usually do. At times, this can make you wince. When Elevation announced its Forbes investment in 2006, some observers questioned both the whopping price tag and how “a magazine that celebrates wealth and consumption,” as the New York Times put it, jibed with the firm’s investment goals. More than a year later, some still cite McNamee’s response—he was quoted, in reference to plans to bolster Forbes.com, as saying, “The way you solve poverty is giving people the tools to overcome it”—as evidence of Elevation’s preciousness. (Said one skeptic, “Does he really believe Forbes.com is addressing the suffering in sub-Saharan Africa?”)

McNamee can live with that.

“Not everybody likes my act. There are plenty of people who think I’m a windbag, and they may be right,” he admits. “I’ve said the stupidest thing that many of the smartest people in Silicon Valley have ever heard. In a few cases, more than once. I’m not afraid to look like a fool. I assert ideas energetically. Then people shred them. That’s how I learn.” 
 
McNamee likes to say he doesn’t court attention, but people who know him say he crafts his image carefully. He has long been a media favorite, known both for his wit and his accessibility. (In 1995, when Jerry Garcia died on the same day Netscape went public, the New York Times and USA Today quoted McNamee on both events.) Whether opining on CNBC or appearing at industry events, he has worked tirelessly to build himself into a brand.

“There are very few people in the business who you can mention their first name and people know who you are talking about,” says former boss Mathias. “When you say ‘Roger,’ people know.”

But having his own famous persona is no longer enough for McNamee. Today, he dearly wants to build a comparable identity for Moonalice, which plays what he calls ’60s-style music (think Creedence Clearwater Revival meets Barenaked Ladies). The group has a website, moonaliceband.com, where fans can download songs—mostly written by McNamee and his wife, who sings in the band—and read about the Moonalice Legend, which explains, among other things, that hemp (as Chubby Wombat calls marijuana) is “the foundation for the Moonalice culture.”

McNamee isn’t merely a nerd who’s trying to act cool. His goofy charm lies in the fact that he’s a nerd playing a cool guy who hasn’t forgotten he’s a nerd. Consider: He actually has a mathematical formula that he uses to calculate when Moonalice will become profitable (the end of 2009). “All it takes is playing 150 more shows,” he says, explaining that if you presume current audience levels and extrapolate the resulting ripple effect of good word of mouth, Moonalice should be consistently packing 500- to 1,000-seat venues after another 150 outings. To the extent that the possibility of bad word of mouth occurs to him, he chooses to ignore it.

Consider, also, his alter ego. Instead of opting for some kind of futuristic avatar, he has picked a cartoonish, nonthreatening marsupial, whose cuddly-looking photograph can be seen (gnawing on a carrot) in that most revealing of places: McNamee’s Facebook page.

To have cred onstage, McNamee believes, he must adopt an authentic rock-and-roll persona. This explains the hair. “In the business world, one shows respect by wearing a suit and tie. In rock and roll, one shows respect by adopting the sartorial conventions. You sound better when your hair is long,” he told investors at Elevation’s annual meeting. Bono, whose hair couldn’t have been shorter, looked on with amusement.

It also explains why he’s spending so heavily (he won’t reveal how much) on talent. He hired T Bone Burnett, the legendary record producer, to help with Moonalice’s upcoming debut album, and he’s paying salaries to Casady, Sanchez, Smith, and two other professional musicians—pedal-steel guitarist Barry Sless and keyboardist Pete Sears. Also on the payroll: Journey’s former road manager.

Finally, McNamee’s desire to be taken seriously as a rocker goes a long way—though perhaps not far enough—toward explaining the drug references Chubby Wombat works into every show. “If you’ve got any brown acid left over from Woodstock, this would be a good time to take it,” he told several thousand people at the Hardly Strictly Bluegrass Festival in San Francisco. In Las Vegas, he playfully offered to help the 150 or so audience members test the quality of their weed. And in Big Sky, Montana—elevation: 7,200 feet—he told the assembly, “The higher you are, the better we sound.” 

Though Chubby Wombat never mentions Elevation Partners, his shtick certainly gives new meaning to the firm’s name. McNamee calls it theater. “When you’re a performer, you have to entertain,” he says. “Our investors know what I’m like. If they ever tire of me, they can always fire me.”

So no dope smoking, then? “None of your business,” he scolds. “This is America.”

But as McNamee devotes more and more time to Moonalice—traveling from Skagway, Alaska, to Teaneck, New Jersey, playing as many as nine shows in 10 days—it seems fair to ask: Are his Elevation partners worried about the impact his night job might have on his day job? To a man, they say no. “Letting Roger be Roger,” Bodnick says, “has been a big part of our success.”

One morning in his Menlo Park office, where a huge stuffed version of the rat from the film Ratatouille shares space with several Mr. Potato Heads, McNamee is talking about Palm—and, of course, his band. “Letting people download full CD-quality files of your music is not a common practice in the music business,” he says of Moonalice’s decision to do just that. “I don’t know if it’s going to work any more than I know if Palm is going to work.”

Currently, there are 2.7 billion cell-phone subscribers in the world, and more than a billion phones are sold each year. Only about 10 percent are in the smartphone, or mobile-computer, market, in which Palm is trying to compete. (The company’s market share has dwindled to about 19 percent, a precipitous tumble from its glory days in 1999, when the Palm Pilot was the gadget to beat.) But as handheld devices increasingly blur the lines between telecommunications, computing, and entertainment, smartphone sales are expected to more than double by 2011.

With a market that huge, Elevation believes, you don’t have to trounce your rivals to make a great deal of money. But you do have to carve out a niche. Even before the Elevation investment, Palm was replacing its aging software, which had been updated over the years with the tech equivalent of rubber bands and chewing gum. Now it’s focusing on hardware. At Elevation’s urging, Palm just hired Jonathan Rubinstein, a former Apple engineer who led the team that developed the iPod. McNamee believes that Palm can begin to differentiate itself with innovative designs and new types of devices that meet consumers’ various needs. BlackBerry may rule in the corporate market. Apple’s iPhone is mostly a media phone. (McNamee calls it “the coolest 1.0 product in memory.”) But there’s still plenty of room, he asserts, for both high-end toys and affordable ones (like Palm’s new $99 no-frills Centro phone). 

“Why shouldn’t cell phones be like shoes?” he says, imagining a day when people will own several phones—work phone, car phone, play phone—that all share the same number. “In the long run, everything that matters to people should be available to them on some sort of mobile device. Today, you can’t even come close to that. And that suggests enormous opportunity.”

Ask McNamee, and he’ll say that U2 is to Moonalice as “the Federal Reserve is to a Podunk credit union.”

Ask Bono, and he says Moonalice has potential. “T Bone has taken them away from the amateur and toward the auteur,” says the rock star, who introduced McNamee to Burnett. “They’ve got a mood.”

Ask Mickey Hart, the Grateful Dead’s former drummer, and he takes a different tack. “Just because you’re a billionaire doesn’t mean you can play music,” Hart says. “Roger is a good student, and someday he will be a really good musician. But Roger is about connections. That’s what Roger does. He’s electric. He’s magnetic. He has the ability to instill hope in people. He’s always trying to build something. He understands group mind.”

For the record, McNamee says he’s no billionaire—“far from it.” And while it’s true that he’s fascinated by the potential of groups—investment firms, bands—he likes it best when they see the wisdom of following his lead. “I definitely like to see my fingerprints on stuff,” he says.

What keeps him from being overbearing (though sometimes just barely) is that whatever McNamee directs himself to do—collecting children’s books or bankrolling a bunch of aging rockers, for example—he does with boundless enthusiasm. As G.E. Smith observes, “He’s obviously a pretty successful guy. He could be buying yachts and stuff for himself.” But he isn’t doing that. Yachts—like cars, or watches, or any number of toys favored by wealthy men in midlife—don’t turn him on. McNamee would rather use his money to pay a Bay Area artist named Chris Shaw to design expensively produced Moonalice posters to be distributed for free—a different poster for every gig.

Back in Denver, at the Cervantes, Chubby Wombat yanks open the backstage door and leads his bandmates into the dank, musty club. Minutes before, the house had numbered just half a dozen, give or take a few parents. Now, as his eyes grow accustomed to the darkened room, he sees not exactly a crowd, but a solid 40 people. Some have brought album covers for Pete Sears and Jack Casady to autograph. Others have brought hemp, which they freely ignite just feet from the stage.

Chubby Wombat remembers how his guitar teacher, Jorma Kaukonen of Jefferson Airplane and Hot Tuna, once told him that all bands begin and end in dive bars; the only question is the height of the curve in between. Now onstage, blinking under the lights, he looks out into this dive and chooses to believe that this is Moonalice’s beginning.