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"How the public market meltdown could affect venture capital.\n\n  \nAlan Patricof\nLegendary venture capitalist Alan Patricof is distressed by the political conditions that have created our economic morass, but doesn&amp;#8217;t believe it will have much of an impact on his early-stage investment business.What follows are excerpts of a conversation he and I had last night:\nWhat was your day like? \u201CIt was a typical Monday. We had three companies come in and did our regular portfolio review. I\u2019ve been through so many of these situations that I\u2019ve learned you just ride through it.\nI wasn\u2019t going to watch the market open and check my Blackberry every hour. Most companies in my world are at such an early stage of growth that this doesn\u2019t affect them, and with my personal portfolio the worst mistake you can make at this time is to make decisions irrationally. So had I been paying a lot of attention, I still wouldn\u2019t have done a thing.\u201D\nMacro impact on VC market:\u00A0&amp;#8220;The concern, if anything, is that the people who are now buying positions in companies they think are in the pre-IPO last round have some very exorbitant ideas about where valuations deserve to be. I can\u2019t blame them, since they\u2019ve looked around at LinkedIn and others that have gone public, but my experience is that this part of the market will quiet down\u2026\nA lot of people have adapted their practices to have big funds that put lots of money to work in order to ride that pre-IPO wave, and investment bankers are chasing everybody and putting sugar-plums in their heads. That carousel may be about to stop turning.&amp;#8221;\nOn the possible decline of angel investors:\u00A0&amp;#8220;Fewer angels would\u00A0be a very positive trend as far as I\u2019m concerned, because\u00A0that&amp;#8217;s where a lot of the irrationality has come in. A lot of earlier-stage deals that would have been priced at $2 million six or twelve months ago have risen to $7 million pre-money\u00A0because of angels, particularly\u00A0here in\u00A0New York.&amp;#8221;\nWorried about the IPO window closing?\u00A0&amp;#8220;I think I\u2019d take issue with your characterization of the IPO window having been broadly open. The market has been pretty limited, to Chinese issuers, oil drillers, metal companies and tech companies in the consumer business. Most importantly, almost all of those companies have valuations in excess of $250 million, whereas 90% of business in digital media, where I focus, have sold for under $100 million. That\u2019s why IPOs are never part of our exit strategy when making an investment.&amp;#8221;\nThoughts on the political situation: &amp;#8220;I was very disappointed by the decision that came out of Congress last week. I thought it was almost the worst of all worlds. The problem is clearly bigger than $2.5 trillion or even $4.5 trillion. Until Congress and everyone else finds a way to deal with our fundamental problems, then things could continue to get worse\u2026\nIt\u2019s a shame. If you look at all the people who make a lot of money and who were willing to accept higher taxes because they felt it was justified, even the farmers, it\u2019s amazing to think something couldn\u2019t get done just because a bunch of Congressmen signed a silly pledge to Grover Norquist\u2026\nI don\u2019t know if S&amp;amp;P did the right thing, but if nothing else it was a courageous position to take.&amp;#8221;\nWill the \u201CSuper Congress\u201D be effective?\u00A0&amp;#8220;I think they\u2019ll get done what they need to, because I don\u2019t think they have a choice. To do something more substantial, however, I think they\u2019ll have to wait until the next go around.&amp;#8221;"^^<http://www.w3.org/2001/XMLSchema#string>
<http://fortune.com/2011/08/09/alan-patricof-vc-business-mostly-as-usual/>