Small is the new big

While the Great Men of the buyout world are raising mega-billions, the Great Men of the venture industry are going mini – take, for example, the recent activity from venture pioneer Alan Patricof. David Snow reports.

In the venture world, which just a few years ago was afflicted with a bad case of megafunditis, the new sign of bravado is to raise a very, very small fund.

Take, for example, a new vehicle led by Bill Hambrecht, who founded Silicon Valley tech bank Hambrecht & Quist. Hambrecht’s new Hambrecht Geneva Ventures Fund has capped at a modest $50 million.

Alan Patricof, an early backer of Apple Computer, AOL and Cellular Communications and one of the founding principals of Apax Partners, recently launched an independent fund with $50 million. Partricof’s new firm is called Greycroft Partners.

The most successful venture capitalists have had a hard time keeping their funds from ballooning toward the billion-dollar mark, given rabid LP interest. This has left what many veterans view as a gap in the early stage market, the field of tiny acorns where most VCs got their starts.

Greycroft today announced its first deal – an investment in a Series A financing of Pump Audio, a web-based middle-man for content creators, mainly musicians. Pump Audio’s platform allows media companies to license songs and other forms of content directly from content creators.

In a recent interview with sister publication Private Equity International, Patricof said, “I made a conscious decision . . . that I wanted to invest in young companies.”

Patricof, who describes global giant Apax as “my baby, in a way”, says he found himself spending much of his time at meetings and discussing the logistics of the firm, and was eager to get back to the business of early stage investing.

“I am looking at this with enthusiasm,” says the New York-based pioneer, now 71 years old. “I’ve got as much energy for this as I had thirty years ago when I was just getting started in the industry.”

Of the most recent tech bubble, Patricof had this to say: “Back in the Nineties, we were backing a bunch of kids that never worked a day in their lives. They didn’t really care what they were doing and ultimately pissed it all away.”

Patricof, to be sure, really cares what he’s doing, and he’s doing it with a very small fund.