Feb. 8 (Bloomberg) -- Alan Patricof’s investment in America Online when it was a startup in the early 1980s came full circle when AOL Inc. said yesterday it was acquiring the Huffington Post, another one of his ventures, for $315 million.
“What goes around comes around, in a good way,” Patricof, whose 40-year career in the venture-capital industry includes early investments in Apple Inc., said in a telephone interview yesterday. “It’s been a successful investment for everyone.”
The deal makes New York-based Huffington Post, a political blog known as much for its outspoken leader as its content, the best investment so far for Greycroft Partners LLC. Patricof founded the venture fund in 2006 after heading private-equity firm Apax Partners for more than three decades. Greycroft led $5 million investments in Huffington Post in 2006 and 2007.
Patricof, 76, started Greycroft in New York, and later opened an office in Los Angeles. Since its inception, Greycroft has focused on digital media and entertainment. That’s set it apart from other firms in venture capital’s Silicon Valley center, 3,000 miles (4,828 kilometers) away. Now Patricof is taking stakes in digital-media companies that are trying to turn millions of viewers into advertising dollars.
“In New York, Alan is the godfather of VC,” said Joe Fernandez, founder of Klout Inc., a Web startup that received funding last month from Greycroft and Kleiner Perkins Caufield & Byers. “He’s so respected and so connected in the media world that I knew we had to work with him.”
Huffington Post has grown to 25 million users a month since its debut in 2005, according to research firm ComScore Inc. Co-founder Arianna Huffington, who gained prominence as a conservative commentator before her views moved to the left in the 1990s, will become president and editor-in-chief of the Huffington Post Media Group.
Patricof says Huffington asked him to write a blog for her website several years ago, prompting him to approach her about making an investment in the firm.
“I thought she was a star, with the right combination of personality and depth of knowledge in the political area to make something like this work,” Patricof said. He declined to say what return he made on the investment in Huffington Post.
Known for his ties with top Democratic leaders such as former President Bill Clinton and U.S. Secretary of State Hillary Clinton, Patricof raised money for them at various times, including for Hillary Clinton’s 2008 campaign for president.
Patricof, who gets into work well before 7 a.m. and typically doesn’t leave until after 7 p.m., says he stays in touch with trends by tirelessly seeking out entrepreneurs and technology companies, sometimes meeting executives on weekends.
“Being in this business means you have to be alert and on your toes,” Patricof said.
Greycroft raised $75 million for its first fund in 2006 and followed that with a $130 million fund in 2010. The firm has raised smaller funds than many of its top Silicon Valley competitors for two reasons, according to its website. First, the Internet has made it cheaper to start companies. And second, large firms tend to “over-capitalize” startups, limiting the opportunities to make money from an acquisition.
“When you make an investment today in the venture world in an early-stage company, your focus is not specifically on taking it public,” Patricof said in a Dec. 20, 2007, interview with Bloomberg Television. “You have to really think about an exit strategy, which involves a sale to another company or merger in order to get big.”
The firm is focused on Internet companies, digital media and the delivery of content through mobile devices, Patricof said.
Another online content site Greycroft invested in early was PaidContent.org, a news service that covers media and technology companies. U.K. publisher Guardian Media Group Plc purchased paidContent.org’s parent, ContentNext Media, in 2008 for an undisclosed price. Greycroft’s portfolio also includes investments in online ad companies Ad.ly and Glam Media Inc. and Web publisher Crowd Fusion Inc.
Patricof founded his eponymous venture-capital firm in 1969 to invest in early stage companies that needed money to grow. Prior to that, he was vice president at Central National Corp., the pulp and paper company owned by the Gottesman family. He founded and was chairman of the board of New York magazine, and he oversaw that magazine’s acquisition of The Village Voice.
Patricof was among the earliest investors in Apple, the company started as Apple Computer in a garage in California’s Silicon Valley, and Office Depot Inc.
In 1977, Patricof’s firm joined forces with another investment firm, Multinational Management Group. In 1990, the European business of that firm was renamed Apax Partners, derived from Alan Patricof Associates, cross-border. Patricof & Co. changed its name to Apax in 2001.
Greycroft has helped New York’s venture industry gain momentum in recent years. The city is home to Union Square Ventures, which owns stakes in Twitter Inc. and Zynga Game Network Inc. Accel Partners, one of the first investors in Facebook Inc., announced plans to open a New York office last month. FirstMark Capital, also based in New York, is one of two venture firms that invested in Riot Games, which was bought last week by China’s Tencent Holdings Ltd. for more than $350 million.