No Red Lights

Stick to the fundamentals, stay curious, and never stop adapting – everything else will follow.

1. Always Start with the Fundamentals

A solid foundation is vital in any field, and Alan Patricof highlights the importance of mastering the basic principles of your industry. For example, in venture capital, understanding net free cash flow is essential—it's the cash that remains available for stockholders after expenses. This metric can make or break the decision to continue investing in a company. Without demand for the product that creates this cash flow, immediate changes or divestments might be necessary.

Alan developed his own four-point system to decide on investments: a sizable market, a product that addresses a real need, stable economics, and capable leadership. Applying this framework helped him achieve success with companies like Office Depot, Venmo, and HuffPost. This systematic, disciplined approach kept him grounded and significantly reduced unnecessary risks.

Mastering the fundamentals isn’t limited to the numbers; it’s also about mindset and decision-making. Knowing when and when not to invest or move forward requires clarity that only comes with a strong grasp of the basics. Fundamentals serve as the compass that guides you through even the most chaotic business scenarios.

Examples

• Net free cash flow as a key measure of business health.
• Alan’s four pillars for investment success: market size, need, economics, and management.
• Wins like Venmo and Office Depot validated his fundamentals-first approach.

2. Keep the Big Picture in View

When making decisions, it’s easy to get stuck in local thinking. Patricof admits to major oversights, like passing on Starbucks because he thought New York City already had too many coffee shops. By not considering the broader concept—coffee shops as social hubs—he missed an enormous opportunity.

Similarly, he met with Uber and WeWork early on but didn’t see their potential, failing to foresee their industry-changing impacts. However, his investment in Apple turned into a rare win. He bought shares when they were priced at $10.50 each, which eventually ballooned into $6 million. With patience and a little longer vision, this success could have grown even larger.

Missing out or underestimating potential is part of being human. Patricof concludes that what really matters is learning from such mistakes, staying resilient, and recalibrating your decision-making processes so the next opportunity isn’t missed.

Examples

• Passed on Starbucks due to a narrow local focus.
• Misunderstood early business models of Uber and WeWork.
• Turned $315,000 into $6 million (and much more if held longer) with Apple shares.

3. Relationships are Gold

Business relationships are an asset, and Alan built lasting ones from an early age. At six years old, he sold magazines outside subway stations and, later during World War II, worked to collect tin for recycling. His connections deepened when he attended Horace Mann, a private school, which allowed him to network with future business heavyweights.

Networking isn’t about simply exchanging cards at events. Instead, Patricof advises making it personal—meet for meals, attend conferences, and prioritize face-to-face discussions. Building bonds requires stepping out of your silo and connecting with people outside your immediate circle or industry.

These relationships serve as a lifelong safety net and launching pad. Whether it’s finding future clients, co-investors, or mentors, personal connections keep new opportunities flowing, often in unseen ways.

Examples

• Childhood ventures like tin-can collection honed networking skills.
• Lifelong friends from Horace Mann became business allies.
• Regularly meeting new people at events or lunches broadened his circle.

4. Cultivate Curiosity and Keep Learning

Many business grads want to launch companies immediately, but Patricof urges them to hold off and learn on someone else’s dime first. He himself spent years as an employee before launching his own company, Apax. He valued job roles that gave him new insights and left only when there was nothing more to learn.

Even after founding his own companies, Alan kept studying emerging trends. He read constantly, stayed informed about evolving industries, and sought out new innovations. He also made a habit of asking questions and challenging himself to understand the unknowns.

Curiosity, more than ambition, separates lasting success in business from failure. Alan reminds us that while curiosity is admirable, clear goals and actionable interest are even better routes to meaningful breakthroughs.

Examples

• Dedicated early years to learning under mentors before launching businesses.
• Investigated new areas such as podcasting before investing in Wondery.
• Sought new skills and technologies through ongoing reading and research.

5. Judge Products and People Wisely

Not every product is ready for venture investment. Alan’s first encounter with virtual reality in the 1980s—an industry now worth billions—didn’t blossom because consumers weren’t ready. He invested sparingly, and VR didn’t mature until decades later.

On the other hand, passion and flexibility in leadership can sometimes outweigh flaws in a product. Consider Larry Saper’s heart-monitoring device. When Larry faced challenges selling the device for its original purpose, his decision to refocus on hospital settings led Alan to back his company. It was a huge success.

Evaluating leadership potential, adaptability, and timing is as vital as judging the product itself. Entrepreneurs who can pivot effectively often achieve success irrespective of the initial product’s flaws.

Examples

• Early VR tech like Virtual Reality, Inc., lacked public readiness.
• Datascope pivoted under Larry Saper’s leadership to achieve success.
• Timing played a key role in evaluating readiness for investments like podcast startups.

6. Build Cultures Over Hierarchies

Hiring talent over experience worked wonders for Alan. He hired Patricia Cloherty, a graduate with no professional experience, on day one of his venture. Patricia went on to become the first female venture capitalist and a force in the industry.

Alan believes companies thrive when junior employees are given exposure to high-level meetings and allowed to grow. By involving them early in decision-making and client interactions, he ensured both loyalty and energy, which is rare in many hierarchical business cultures.

A respectful culture where partnership takes precedence over competition can inspire trust and long-term service. Alan’s ethos of shared success prevented internal disputes and helped retain top talent.

Examples

• Patricia Cloherty became an industry pioneer with Alan’s mentorship.
• Encouraged juniors to attend client pitch meetings, lunches, and board discussions.
• Avoided cutthroat dynamics by profit-sharing among team members.

7. Stay in Your Lane

When Clay Felker tried to meddle in the business side of New York magazine, chaos ensued. His aggressive moves created rifts and, ultimately, led to the sale of the magazine. Felker’s reign illustrated one major takeaway for Alan: stick to what you know best.

On the flip side, investors like Alan were expected to avoid interfering in editorial matters. When Alan suggested articles for publication, they were both rejected because editorial decisions weren’t his call. Trusting expertise makes companies run more smoothly.

Setting defined roles and boundaries leads to mutual respect, fewer conflicts, and stronger outcomes. Keep lines of decision-making clear to avoid unnecessary drama.

Examples

• Clay Felker’s business meddling caused internal friction at New York magazine.
• Rejection of articles suggested by Alan reinforced editorial autonomy.
• Misaligned roles between investors and managers caused frustration.

8. Anticipate Industry Shifts

Alan noticed the evolution of podcasts after a casual conversation with a publishing executive. He began digging into the audio industry and decided to lead funding for Wondery, a podcast company. Amazon later purchased the company, creating gains for his firm.

By observing consumption trends and attending accelerators like Voicecamp, he uncovered other opportunities in supporting technologies such as headphones and smart speakers. Alan reminds investors to watch for shifts across entire ecosystems, not just individual products.

However, he warns against investment "hype" without substantive proof. Companies like Viddy, falsely touted as "the next Twitter," are reminders to keep grounded when trends emerge.

Examples

• Wondery turned into a profitable exit after an Amazon acquisition.
• Monitoring trends in supporting industries, like headphones for podcasts.
• Avoided hype bubble investments like Viddy through cautious evaluation.

9. Honesty and Integrity Go a Long Way

Whether it’s giving your honest opinion to a president or sticking to ethical business practices, Alan advises sticking by your values. He refused to spare favoritism for family, even when his father requested help.

Core beliefs shaped his businesses from day one. Greycroft’s rule of working only in syndicated investments, for instance, set it apart in an industry obsessed with exclusivity. Reputation, Alan argues, is earned daily through actions that align with personal and corporate ethics.

Walking the talk defines lasting brands. For Alan, sticking to principles wasn't just right—it was profitable in the long term.

Examples

• Refused nepotism by not routing orders to his father’s business.
• Greycroft focused on syndication, ensuring shared accountability in investments.
• Integrated honest feedback during collaborations with international leaders.

Takeaways

1. Make networking a priority by participating in events, meals, and collaborative projects regularly.
2. Build frameworks and principles for decisions, and return to them consistently for clarity.
3. Stay curious and always learn about new trends—but avoid being swept up by hype.