NY Times reported today that Alan Patricof is leaving Apax Partners to start a venture capital fund, named Greycroft Partners, focusing on digital media ventures.  The key story here is this:

• Apax has over $20 billion under management.
• Patricof is as big a VC name as it gets.  He’s a co-founder of Apax (which was named, at one point, Patricof & Co. Ventures).
• Greycroft has raised only $50 million.
• Patricof has declared that:

"When you get into larger companies, you get into financial engineering
and leveraging models.  There is a market down
there at the smaller end that we shouldn’t ignore. If you happen to hit
it right, there can be an exponential growth factor."

I have shared my thoughts on Media2.0 and VC in this blog.  In a later post I speculated that we’ll see:

…smaller, more specialized VC outfits.  One example I can think of is Union Square Ventures.
Fred Wilson and Brad Burnham are experienced and reputable enough that
they could have raised a larger fund with broader ambitions, but I
think they recognize their competitive advantage well and will be more
effective in their current set up.

The creation of Greycroft Partners now gives a much stronger validation to this argument.  Patricof could have raised any size fund he’d like, and he chose to stay small and focus on earlier stages.

There has been various discussions of the smaller VC model.  One leg of the conversation was started by Stowe Boyd, where he distilled the advisory value offered by VC firms, and proposed separating it.  Even thought there were those disagreeing with Stowe, I think the launch of Greycroft emphasizes the value of attention and soft value in the early stage investment model.