An Interview With Alan Patricof

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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.

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