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.