Is the pioneering venture capitalist Alan Patricof trying to be the grand old man of new media? As the chairman of Greycroft Partners—the small ($75 million) venture capital firm he started in 2005 after leaving Apax, the $30 billion behemoth he co-founded nearly four decades ago—the 73-year-old Patricof is again on the cutting edge.

Patricof, who had the insight or good luck to get in on the ground floor of Apple and America Online, today presides over an investment portfolio of such digital startups and young companies as PaidContent (paidcontent.org), an information and media enterprise; Takkle (takkle.com), the first online social network for sports fans; and the Huffington Post, the influential news site started by the power pundit Arianna Huffington. Some of these companies’ services and products are so technical that Patricof acknowledges even he doesn’t fully understand all of them. But profits have already begun to roll in: Greycroft’s modest investment—between $500,000 and $3 million—in Pump Audio paid off with a 700 percent return in June, when the digital-music-licensing company was sold to Getty Images for $42 million.

“I can be very dramatic and poetic and say I hope we find a Facebook or a Google,” Patricof told Portfolio.com in an exclusive interview. “I think that’s looking for a needle in a haystack, but it’s certainly possible. That’s the dream that stays alive when you’re in this business, of finding that unique company that does have that potential for growth.”

Sitting in his glass-walled office on the 53rd floor of Citigroup Center, Patricof also discussed his passion for encouraging entrepreneurship in Africa, his labors as a top fundraiser for the presidential campaign of Hillary Clinton, his habit of riding subways and flying commercial, and his claim that he’s having fun. “Oh, God, yes. I wouldn’t get here at 6:30 or 7 in the morning and stay until 7 at night if I didn’t enjoy it,” he said.

Lloyd Grove: So you just returned from Egypt. When did you get back?

Alan Patricof: Yesterday afternoon. I was in Alexandria. I was there for the first award of the Mo Ibrahim prize for good governance. It was established by a guy named Mo Ibrahim, who was one of the leading entrepreneurs in Africa and who sold his company Celtel last year to another cellular company in the Middle East for $3 billion. And he personally came away with a billion dollars, and now he’s doing some good things to give back, in effect.

L.G.: He’s an Egyptian?

A.P.: He’s actually a Sudanese who lives in London. So he’s created a fund for investing in Africa again, and he’s created this prize. It’s going to be given annually to the leading African statesmen, I guess primarily presidents, who retire democratically from office and who have left behind a legacy that is outstanding.

L.G.: Beyond a Swiss bank account.

A.P.: Exactly. It’s to avoid Swiss bank accounts. And the chairwoman of the prize committee is Mary Robinson, the former president of Ireland, and [former U.N. secretary general] Kofi Annan is on the committee. I’m not on the committee, but I’m a good friend of Mo. I’ve known him because of my interest in Africa and entrepreneurial activities in Africa. I met him four or five years ago, and we’ve had similar interests in trying to develop an entrepreneurial culture in Africa.

L.G.: You’ve been focused on that for about five years. What got you into it?

A.P.: Well, I decided to turn over the management of Apax, which I started in December 1969 or January 1970, however you want to count. And when I decided to turn it over to the other partners about five years ago, I wanted to kind of trifurcate my life—and continue to do venture capital investing in some form, spend part of my time giving back in the developing world, if it was applicable, and then a small part of my time is spent in politics, helping Democratic candidates get elected.

L.G.: Is it mostly Africa?

A.P.: No, I’ve traveled a lot for the International Financial Corp., which is part of the World Bank. I have been an adviser for several years, but I’ve also been on several commissions, and I’ve decided to spend my own personal philanthropy with organizations that are working in developing countries and entrepreneurial activities. And I’ve just recently joined the Millennium Challenge, which is the new foreign-aid program of the U.S. government, as a Democratic nominee.

L.G.: Why developing countries?

A.P.: Because in my experience, in my life, I thought I could be more productive and more involved here than in other areas. Where else? I mean, I’ve done Europe; I’ve been involved in Japan. This is pro bono work. I’m not doing this for profit. And it just intrigued me. I guess I’ve always been interested in the developing world. In fact, when I originally got out of Ohio State, I nearly went to work for the Agency for International Development in Latin America.

L.G.: What diverted you?

A.P.: I guess I decided that I’d go into the financial world and Wall Street instead.

L.G.: Okay, so you’ve been traveling all around the globe. How many miles do you log?

A.P.: I don’t know. A lot.

L.G.: I hope you aren’t flying commercial.

A.P.: I fly commercial everyplace. I don’t have my own plane. I don’t have my own driver. Like everybody else, I commute either by taxi, subway, or bus—the great public transportation system. And occasionally somebody gives me a ride on their private plane if I’m lucky. But my trip just now to Alexandria was definitely on commercial.

L.G.: There’s obviously an attraction and a convenience to having access to a Gulfstream V or whatever.

A.P.: I think it would be wonderful. It’s not an extravagance that I would be comfortable with—let’s put it that way. Most of the places I go to are very easy to get to by commercial plane and difficult to get there by noncommercial. How would you like to be riding all by yourself to Alexandria, Egypt? I mean, I can’t envision it.

L.G.: So when did you actually start Greycroft Partners?

A.P.: I don’t know the actual date, but it’s probably going on two years ago.

L.G.: You have a pretty extensive portfolio.

A.P.: Yeah, we’ve actually put money in probably 18 companies already, and we’ve already sold one. Pump Audio [a six-year-old licensing company that digitally connects independent musicians with buyers in the mainstream media].

L.G.: And you got a 700 percent return on your investment?

A.P.: Yeah. We were lucky. We don’t disclose, but all of our investments are relatively small. Between half a million and $3 million. Traditionally, that’s the size of our initial thrust into a deal. The whole concept behind Greycroft is small. Everybody has moved up in the world. I mean, with the firm I started, Apax, its minimum investment is several hundreds of millions of dollars. And I watched everyone move up in scale. The longer your firm’s been in business, as business increases, the size of your investment gets bigger, the size of your investors gets bigger, and you have to, by the nature of the firm, increase the minimum size of your investment to make it economically viable or worthwhile to put the time into an investment. It takes as much time for a $100 million deal as it does for a $1 million deal, very often. And I’ve always had a passion for young, growing companies. So I decided to go back to my roots and start over again and deliberately do a small investors’ fund.

L.G.: And I’ve read $75 million.

A.P.: Seventy-five million dollars. It was deliberately kept at that size. And Apax now manages, worldwide, close to $30 billion.

L.G.: So you just decided you were going to start over again. You wanted the excitement of being on the ground floor. How old are you?

A.P.: I turned 73 in October. And, yes, there’s a certain degree of a feeling of involvement and attachment with young companies and watching them grow and suffering with them, and enjoying, perhaps, the fruits of your efforts. We have focused particularly in the new-media area. It’s just an area I’m very comfortable in, and I put together a new team, not people who have been at Apax.

L.G.: So you were looking for people with expertise in new media and the entertainment sector. Now I’m looking at some of these companies in your portfolio, and frankly, Alan, I don’t understand what they do, and I’m not going to ask you to explain them.

A.P.: It’s okay. A lot of the investors probably don’t understand either.

L.G.: You presumably understand everything.

A.P.: Well, not all of it. That’s why there are four of us. If I don’t, someone else does.... I could probably tell you about almost anything in the portfolio pretty accurately.

L.G.: Is there anything that you see here as the new Google?

A.P.: Well, I think everybody in this business would love to find the next Google. Who wouldn’t? But realistically, that happens perhaps once in a lifetime if you’re really lucky. I’ve been lucky in a couple instances. For instance, I was involved with the early stage of Apple and AOL. But you know, we’re looking for exciting young companies that hopefully will be in a takeoff mode.

L.G.: What kinds of returns do you look for? I mean, in the 1990s, there was a point where you were having average returns in the 30 and 40 percent range.

A.P.: Yes, in this field, the returns are all over the place, depending on the cycle you’re in and your timing. And I’m always very conservative and realistic about expectations in this business. In the venture capital business, if you can consistently produce north of 20 percent, you’re doing terrifically. If you happen to be very lucky and find a period where it’s 30 or 40 percent, I think you consider it an anomaly; it’s not the norm. But I think, particularly today, the opportunities for taking companies public are much, much more limited than they were. So with most companies that you invest in, you have to realistically look at your exit—the possible sale of the company as opposed to having an I.P.O. The number of I.P.O.’s  is very limited today.

L.G.: Like Colin Powell, you always have to have an exit strategy?

A.P.: Well, that’s probably a good way to look at it. I think in the old days, you always looked at having multiple exit strategies. Today. one of the difficulties in this business is, it’s hard to find multiple exits. The minimum size for a public offering today is probably a company with a value of $250 million. You sell 20 percent of it, that’s $50 million to get any underwriter even talking to you. And to build up the company to the value of $250 million, you have to have a pretty sizable company, and it has to have earning power. Maybe that’ll change in the next 10 years. We may have another cycle of euphoria. But in today’s environment, and certainly since the post-bubble of 2001, 2002, we haven’t seen anything like that, and I.P.O.’s at young companies today are few and far between.

L.G.: What percentage of dogs can you tolerate?

A.P.: That’s the question everybody is always trying to get the answer to. I think there is no real answer. I mean, you can have one winner that can take care of so many losers that you can afford to have a lot of losers. But you’re going to have an awful lot of companies that we call the “living dead.” You hold them for a long time, and you just get your money back. So it tends to skew from having some big hits if you’re lucky, some moderate hits, a lot of them that just get your money back, and as few as possible where you have a wipeout. The objectives are, frankly, to not drown in feeding money into losing propositions and to cut your losses early, and try to recover something if possible.

L.G.: So you and your people are watching every company pretty carefully?

A.P.: We all operate on the basis of keeping our investments realistic. The more early-stage they are, the more limited we’re going to put our money in. And we’ll feed it in over time as certain accomplishments are achieved. And the later the investment, the more confidence we have in the establishment of a viable business model, the more likely we are to put heavier investments. And of course, the more you have those characteristics, the higher the valuations. So it’s a tradeoff.

L.G.: Ideally, you put your money into a startup and it’s hugely successful, and you take it out after how many months, years?

A.P.: I wish it were that simple. Usually, if you put your money into a startup, there’s a second round and potentially a third round, and you feed additional capital in. I think we used to say that the time frame for investment was three to five years. I’d say today, you have to be realistic about the holding periods being longer, and five to seven is a more realistic time frame. Today you don’t have the ability that you did 10 years ago to take a startup that may be a year or two old, losing money, and go public with it and be able to get liquidity. That doesn’t exist today.

L.G.: Are there any of these 18 companies in your portfolio that you’re particularly fond of, other than the Huffington Post?

A.P.: It’s like asking which one of your three children you’re fonder of. I have equal fondness for all of them. That’s the truth. And initially, I have similarly great expectations for all of them. As you live with them longer, you find out their frailties, and we’re still, fortunately, at the early stages of our investments in a lot of these companies, so they all look great to us at this point. And we think we have a very interesting, balanced portfolio in music and games, almost all internet-related content. We’ve also made a couple of investments in the online-advertising-network field. We also have a couple of investments in the communications field—wireless and voice-over-IP.

L.G.: What persuaded you that you should invest in the Huffington Post? I read it was a $5 million investment. I don’t know if it all came from Greycroft.

A.P.: The principal investor is Softbank Capital, and our strategy is to do most of our investments with somebody else. So Softbank was the lead investor. I was intrigued with what the Huffington Post was trying to accomplish, which is, in effect, to be the newspaper of the future—to have the same characteristics that you would find in the newspaper in the new world of online-media distribution. And I think we’re well along to achieving that.

L.G.: There were a lot of skeptics when Arianna Huffington started.

A.P.: Yeah, Arianna is a very serious, very talented person, and she really understands her audience. And, you know, we’ve expanded from politics now to media, to entertainment, to business.

L.G.: There has been some talk along the lines of “Why can’t they pay their bloggers”? As Samuel Johnson said, “No man but a blockhead ever wrote, except for money.”

A.P.: I think that’s a debate that’s going on in the whole blogosphere. And I think the nature of blogs is such that people have an opportunity to express themselves who wouldn’t otherwise have an opportunity. I mean, if you want, you can write an op-ed for the New York Times or the Washington Post. I think the feeling is, people do it voluntarily. It’s not like they’ve been called and asked to write a 750-word article on a particular subject for which they have to go out and do research. I think they mostly write about things that they’re comfortable with. I know I’ve blogged four or five times about different subjects that kind of moved me at the moment. Subjects like entrepreneurialism.

L.G.: Do you dictate it?

A.P.: I usually write things out in longhand—

L.G.: Very old media!

A.P.: —I can think better that way. And I have someone transcribe it, who can read my handwriting, which is very difficult because I’m left-handed. And then I have it printed out, triple- or quadruple-spaced, and in effect I almost rewrite it as I read it.

L.G.: That is so not what blogging is supposed to be about, is it?

A.P.: But from my standpoint, I like to be careful with my words and my grammar and try to be correct if I can. Obviously, I use a computer, and I’m totally versatile in every aspect of the computer, and I do write some memos, and I do write to people on the computer. I mean, I’m sending emails all the time and receiving them, back and forth. But when it comes to writing something that I think people are going to read in substance, I like to be careful.

L.G.: I read that you get 30 to 50 business plans a week that you guys are looking at?

A.P.: We don’t look at that many, but we get a lot of things that come in over the transom that frankly are discarded. I think the number of companies that we will look seriously at, that we’re looking at today, is collectively maybe 10 different transactions. And they won’t be the same 10 next week. At any one time, we’re probably looking at three or four seriously. We’ve done 18 in two years—which is a lot, by the way.

L.G.: Does  it represent $75 million?

A.P.: No, less than half of it, because we make investments where we’re preparing to have a second or third round so we don’t shoot everything in the first investment round. We’re staging our investment, and unless it’s a more advanced company, for which we’ll have a larger-size investment. But the nature of what we’re trying to do is, since we’re doing young companies where the risks are higher, we tend to spread our risk more broadly.

L.G.: And what are the characteristics of a company that you’ll put money into?

A.P.: Well, like everybody else, we’re looking for good management. That’s first, second, and third—like the old real estate expression "location, location, location.” We’re looking for management—first, last, and always. We’d rather have good management without a product than a product without management. And very often we’ll turn something down because we’ll think the service or product is good, but we don’t like who it’s attached to. And we try to get people who have had a previous record of success. We’re looking for people with teams; they’re not just operating as a lone wolf. And we’re looking for big markets to have the opportunity to expand in some exponential fashion. We’re not looking for companies that will grow 5 percent a year—that’s not the nature of it. We’re looking to high-growth businesses, with broad-interest markets. Not always broad, oftentimes niche markets. And hopefully we can establish a position in a niche market and fast-growing markets. Of course, you want them to have the economic characteristics, that they can make a reasonably good profit margin that can justify earning enough money to put back into the business to build it.

L.G.: Anybody can read somebody’s résumé, but how do you judge people? What are the characteristics that you, Alan, like in people that you’re going to put your money behind?

A.P.: We do a lot of reference checking. In any deal, we’re doing everything we can to find out how they’ve done where they worked. Then, it’s personal judgment. I mean, we don’t do psychological testing. Some venture capitalist firms do psychological testing, but we don’t.

L.G.: Why not?

A.P.: I don’t know how predictive it really is. You have to make a judgment in the end about people. And sometimes you’re wrong. People have quirks that you didn’t realize, but you try to find them out in advance. I have to say that in all the years I’ve been in this business, I haven’t yet been defrauded by anyone. It says something, I guess. We haven’t woken up and found out that someone left and took money out of the till, haven’t had any people running off and disappearing with anything. But we’ve had lots of failures.

L.G.: You have arguably been treated roughly by some of the beneficiaries of your investments. Well, one of them in particular—Michael  Wolff. [In his book, Burnrate, about the short, unhappy life of his new media  company in the 1990s, Wolff took several shots at Patricof, derisively claiming that he didn't understand the internet.]

A.P.: No comment. I don’t know Mr. Wolff, so it's—

L.G.: Presumably Newser.com [Wolff’s latest venture] was not one of the business plans that was submitted to you?

A.P.: I have not seen Newser.com.

L.G.: Have you been on the site?

A.P.: No. I haven’t even looked at it, but I wish him well. [Laughs]

L.G.: Okay, well. Another thing that’s fascinating in your personal history is you were a founder of New York magazine. Why did you want to do that?

A.P.: You know, it was a company that came to me, going back a long time ago, back in the 1960s, and I thought there was great potential. It was started in 1967 with Clay Felker and Milton Glaser.

L.G.: That was an iconic magazine.

A.P.: Yeah, and I’m still very friendly with a lot of the writers from that period who are still around. Probably a week or two doesn’t go by before I run into one or another of them. It’s a lot of people who have certainly made an impact in the media world.

L.G.: Why did you get out of it? [In 1977, Patricof and his associates sold New York and the Village Voice to Rupert Murdoch.]

A.P.: At the time, we were a very young company. We were growing, and we had actually gone public back in the early 1970s. At that time, we were losing money. And it was a difficult challenge to finance the company. And we had an opportunity to sell it at an attractive price.

L.G.: To Rupert.

A.P.: To Rupert, right. It was very early on in his stage. He may have just bought the Post at that time. And Rupert came along very quickly and offered to solve the problems that the board was having in terms of controlling the costs of the company. And he had a lot of money to put in—which, as a public company, it would’ve been very difficult for us to finance. It was a financing solution more than anything else.

L.G.: Did you miss it?

A.P.: Yeah, I liked it. It was 10 great years that I was involved with it and made a lot of friends and contacts and relationships that still prevail. And it was early on in this whole trend toward the city magazine. Clay Felker was a brilliant editor and really led the whole field. And it was iconic in the sense that he started the whole movement of city magazines. I subsequently did several other magazine investments—Details magazine, American Photographer, and a magazine called Baby Talk, which was merged into Parenting. And Details I sold to Si Newhouse at Condé Nast. We also had a magazine called Senior Golf.

L.G.: None of those titles were as hot as New York.

A.P.: Details was a very hot magazine in its time, a different kind of magazine—it was a downtown magazine.

L.G.: But since New York was a weekly, that magazine had a lot of power and influence on the day-to-day lives of people.

A.P.: Yes, it did. The theme was how to survive in New York. But I was very careful being the chairman of it, and out of the day-to-day operations, to leave all editorial decisions to the editors. So I never tried in any way to take advantage of the position—no more, frankly, than, as far as I know, Bruce [Wasserstein, chairman and chief executive of the investment house Lazard and New York's current owner] does at New York magazine today. I don’t think he gets involved in it. I think it’s run by the editor and has total editorial freedom. It was the same way back in the early days of New York. I got enough complaints about people who were written about at the time.

L.G.: How did you handle those?

A.P.: I would say exactly what I told you: “I have nothing to do with what’s printed in the magazine. I get to read it when you do.”

L.G.: Okay, how long have you been fundraising and involved in politics?

A.P: Since 1991, I guess. Since Bill Clinton decided to run for president. I had met him back in the late ’80s, actually out in East Hampton. He used to come out there in the summer in August, around the time of his birthday. He stayed with someone out there [the lobbyist and Democratic activist Liz Robbins] who was a good friend. And I happened to be a very active marathon runner at that time. Bill Clinton liked to run, so when he was there, I would run with him, and we had similar interests in, I don’t want to say underdeveloped areas, but he was trying to bring economic development to Arkansas at the time. And so it was a common thread we had, a mutual interest on how you create entrepreneurial activity. It was a difficult challenge, but he was focused on that. And then when he decided to run for president, he called me, and so I admired him, and from then on, I’ve been a loyal supporter of him and Hillary.

L.G.: What do you like about fundraising?

A.P.: I can’t imagine someone really likes fundraising. I think it’s something that has to be done, and I’ve been reasonably successful at it.

L.G.: How much do you think you’ve raised for your Democratic candidates?

A.P.: Honestly, I have no idea. I don’t keep a tally of any sort.

L.G.: [Hillary Clinton’s campaign chairman] Terry McAuliffe does.

A.P.: Really? Terry McAuliffe probably knows what I raise better than I do. Terry McAuliffe is the best; there’s no one who can raise money like Terry McAuliffe. He’s got a talent that is just beyond belief. He has magic in his voice. I think he’s done a great job for the Clintons and for the Democratic Party.

L.G.: What do you do to raise money?

A.P.: Just call people. If you’re sincere and believe in what the candidate stands for, it’s very easy. If you don’t have a candidate you believe in, it’s hard. And I think that you have to get yourself pumped up to really feel that. I think Hillary would be a great president. So it’s not hard at all to ask you to contribute. Would you like to make a contribution?

L.G.: Who, me?

A.P.: Yeah.

L.G.: No. Sorry.

A.P.: [Laughs] That’s how easy it is. See, if you say no, I go on to the next subject.... It’s staggering how much money it takes to run a political campaign.

L.G.: It’s a crazy business, political fundraising, because you never know what people’s motives are.

A.P.: I can tell you honestly that in all the time I’ve been involved, I have never had anyone ask for something or even discuss with me anything that interested them in exchange for them giving money. It just never even occurred.

L.G.: But were you shocked or surprised at Norman Hsu? He was huge for the Hillary campaign. [The Hong Kong-born Hsu, an apparel executive, raised $850,000 for the Clinton campaign before news accounts revealed he was running from a 15-year-old arrest warrant for a fraud conviction. The Clinton campaign subsequently returned the money.]

A.P.: But Norman Hsu was just another person. He was another person who put his energies into raising money, like anybody else that was out fundraising. As far as I know, I never saw him do anything or ask for anything or behave in any manner other than being an extremely enthusiastic supporter of various candidates. I didn’t know him, as a friend, in close personal way, but I saw him, and I was as shocked as anyone when I read about it. It was amazing, just totally floored me.

L.G.: How much of your time is devoted to fundraising?

A.P.: A modest amount. I don’t know, 5 percent of my time? Ten percent? No idea, not that much.

L.G.: Were you surprised that Obama has done so well on the fundraising front?

A.P.: I think he’s done a very good job so far. I think it’s a real race, and I think Hillary will win, but I don’t think even Edwards can be discounted, because Iowa is a very strange political animal. I don’t think anyone can anticipate what the outcome of that will be, based on a relatively small number of people’s behavior on a cold winter night.

L.G.: Is there any similarity between raising money for candidates and venture capitalism?

A.P.: None whatsoever.

L.G.: There’s no sense, just to use sort of a business analogy, that Obama might be something like Apple in the startup stage, and Hillary’s like Time Warner?

A.P.: You’re getting carried away. It wouldn’t even occur to me.

L.G.: But you’re not concerned? There has been a lot of talk about Bill saying things on the stump that have come around and caused problems for Hillary, at least in the chattering classes.

A.P.: That’s all extraneous noise for them as far as I’m concerned. I can’t get involved with all the minutiae that goes on from day to day. There are rumors every day and rumblings, and “he said, she said.” You know, it’s all going to be fought in the living rooms of Iowa and New Hampshire. It’s all one-on-one retail politics. And we’re going to have to see how those two states come out, and then go from there. But certainly, we’re going to know by the early part of February who the candidate is.

L.G.: Do you think Hillary can beat any of the possible Republican candidates?

A.P.: I think Hillary’s a very strong candidate. She’s very intelligent; she understands the issues; she is experienced. I would feel totally comfortable with her as president, more so than any other candidate that I’ve seen so far. And, you know, I certainly hope and expect her to win.

L.G.: And you wouldn’t mind if she and [House Ways and Means Chairman] Charlie Rangel raised capital gains taxes?

A.P.: I know it sounds strange, but that’s not an issue that I’ve ever been particularly concerned with. I think I’m a little bit in the Warren Buffett class of thinking. I think we lead a nice life. You know, there’s enough left over.

L.G.: By the way, Warren Buffett issued a challenge to anyone who could prove that they’re paying a higher tax rate than their secretaries: He’d give them a million dollars. You didn’t want to rise to that challenge?

A.P.: No, I didn’t think about it, but he’s probably right. Because people like myself are making investments, and that has capital gains, and that’s at a lower rate than from an ordinary-income standpoint.

L.G.: But didn’t you express concerns about raising the rate?

A.P.: Back in the early ’90s, I was very interested in creating incentives for investments in young companies and creating elements of the tax code that incentivize people to invest in young companies at a time when there was a dearth of startup capital around. And there were some elements of the ’93 tax act that gave incentives for people who held the investment for a long period of time and who invested in companies under a certain size. And that much I supported. But I’ve never gone out on the stump to reduce, specifically, capital gains.... I think [Rangel] is right to be concerned about the [alternative minimum tax], and I think that my taxes will probably go up. No one likes the idea of paying more, but I think we’ve got to do something about our fiscal deficit. It’s really in bad shape. If you travel around and really get the flavor of $1.50 to the euro, or a pound that’s over $2 today, you understand what a debasement of our currency has taken place because of fiscal deficits.

L.G.: How has that affected your business?

A.P.: It doesn’t affect our business really at all. First of all, we’re domestic, but our companies are in such early stages. People always ask me what is the impact of the subprime market or tightening of interest rates. It has no impact, because all my companies are financed with equity. They don’t have the ability to borrow if they wanted to, at their early stages. If you’re not borrowing money, the change in interest rates doesn’t make too much difference.

L.G.: Why all the irrational exuberance, as Alan Greenspan might say, over things like Facebook? For instance, Microsoft paid $240 million for a stake in Facebook, which would give that company a valuation of $15 billion.

A.P.: Certainly Facebook has touched a very sensitive chord on the American public scene and has grown like Topsy. And it’s an amazing achievement as a young company in a very short period of time, and everything I read about it and everything I see is certainly very positive. I don’t know the numbers so I can’t really comment on valuation, but we all thought, when Rupert Murdoch bought MySpace and paid $650 million or thereabouts, that he overpaid for that. I don’t think anybody today would think that he overpaid.

L.G.: He recently claimed it was now worth $10 billion.

A.P.: In the context of Google value and the context of Facebook, he’s probably right.

L.G.: Are these realistic valuations?

A.P.: Well, we do know the public figures for Yahoo, and we do know public figures for Google, and we’ve seen what kind of unbelievable exponential growth these companies have had. And no one could have dreamed five years ago that Google would have the kind of revenues and profits that it has today. When you’re on the leading edge of a trend like Facebook is in social networking, it’s an amazing phenomenon, and it doesn’t seem to have any top. And [in 2006] when they opened up their [application programming interface] to everybody, and all of the sudden everybody can be developing applications using Facebook as the basis, it opened up exponential opportunities. It’s unlimited today. So I don’t know where it goes.

L.G.: Years ago, a couple of college kids quit school and brought some invention to you that they wanted you to invest in, and you told them to go back to school and called their dean to see if they could reenroll. Do you think you would have been insightful and smart enough not to have told Harvard dropout Mark Zuckerberg to go back to school?

A.P.: But that was a different time, this was 1999 or 2000, at the height of the boom, and they had a crazy idea, and they quit college with really nothing. And I think I gave them good advice, because it wasn’t more than six months or a year afterward when the whole world fell apart. So I hope they did go back to school. I have no idea who they are. They may walk into this office someday with a new project and say I’m the guy.

L.G.: But what if Zuckerberg had come into your office four years ago?

A.P.: Oh, jeez, I don’t know. That’s a good question. I don’t know. I don’t know. I might not have financed him. It’s great hindsight to say, “Sure!” But I don’t think any of us can judge in hindsight. I’m sure other people turned him down. I didn’t get the opportunity to turn him down, so I can’t comment.

L.G.: What would be your hopes for Greycroft five years from now?

A.P.: I hope we’ll have had a second fund. Right now we’re closed until we decide to raise another fund.

L.G.: Will you just cherry-pick the investors you want?

A.P.: That’s what I did this past time. I had the luxury of being able to do that, and hopefully I will have the luxury again. We have people who have indicated interest in the next fund. We won’t raise a fund certainly until late in 2008 or early 2009. In the meantime, I hope we’ll have had a lot of success in our portfolio. I can be very dramatic and poetic and say I hope we find a Facebook or a Google. I think that’s looking for a needle in a haystack, but it’s certainly possible. That’s the dream that stays alive when you’re in this business, of finding that unique company that does have that potential for growth.

L.G.: Otherwise you’d be happy with your 20 percent.

A.P.: No one’s ever happy with just that. We’ll keep striving for more and better and bigger, and it depends on the economic environment too. We don’t know how the economy is going to behave, and if the public markets reopen for young companies in an earlier stage, I think the opportunities in the venture business will become that much bigger. I think the other thing is that in this smaller end of the market, there are fewer people fishing around, because, by necessity, almost everybody’s moved up their minimums. So that leaves a nice room down at the bottom end, and there are fewer of us fishing in that pond.

L.G.: You’re having fun?

A.P.: Oh, God, yes. I wouldn’t get here at 6:30 or 7 in the morning and stay until 7 at night if I didn’t enjoy it. I mean, just the fact that every day, you open a door and you don’t know whether that Facebook or Google is going to come in the door.