It doesn't cost a fortune to start your own business.
“I think you could start a business with a quarter of a million dollars collecting it from a number of people,” Patricof said, putting a number to his earlier hyperbole.
Patricof noted a change in the way startups raise money today versus years ago. He said it used to be the case that companies had a seed round, followed by A, B and C rounds of fundraising. Now they start with pre-seed investment. They begin raising money with family and friends — and it really works — Patricof noted.
He added that these upstarts are helped by legislation like the Jobs Act, which has set new definitions under which one does not have to be an accredited investor.
“You can be an average citizen as long as you comply with some basic rules,” he said.
Patricof said his company looks for revenue growth, not profits before it decides to invest in a new business.
“No one makes money that we look at, but they have extrapolated huge growth in revenues,” he said.
Many of the companies Patricof invests in have had annual revenue growth between 40 and 100 percent.
“The question, ultimately, is what they’re going to bring down to the bottom line,” he added.
When investing in a company, Patricof and Greycroft generally take a 10 to 15 percent equity stake in the company, he said, adding that they will, however, take as big an ownership position as it takes.