Legendary VC Alan Patricof says valuations still have further to fall

He believes he will live until he is 114 years old. In November, he will attempt to jog (or walk) the New York City Marathon for the sixth time. He says that every day, he waits to see if the next Steve Jobs or Elon Musk will walk through the elevator of his office on 55th Street.

Patricof, who had recently returned from Burning Man when he sat with me over a Zoom call earlier this week, likes to take a positive spin on everything. That’s why 2021 was so difficult.

Last year, when valuations were surging to new heights and billions of dollars were being thrown into cash-burning ideas, Patricof says it was noticeable that none of the people sitting around him had lived through the Dot-Com Bubble.

“It’s no fun to be the only one that has,” he says, noting that the 2008 financial crisis was merely a “blip” in comparison.

Patricof has been investing in the private markets for more than 50 years—before investing in startups was even called “venture capital.” In the 1970s, he founded the private equity shop Apax Partners, which is now a $51 billion firm, with Sir Ronald Cohen and Maurice Tchénio, then went on to found the early-stage VC firm Greycroft in 2006, where Patricof is now Chairman Emeritus and still works with about 10 portfolio companies. Two years ago, Patricof opened a new firm, dubbed Primetime Partners, with Thrive Global veteran Abby Miller Levy to invest in startups that serve senior citizens. The firm has already backed 27 companies.

Over the last year and a half, Patricof says he has become very vocal in Greycroft and Primetime meetings, recollecting his own lived experience during the Dot-Com Bubble, when he says at least one of his portfolio companies was unable to make payroll nearly every week.

“When you’ve only seen upcycles, you get carried away by the euphoria of valuations,” Patricof tells me. “As a result, we’ve had a lot of excessive valuations, particularly at the later stage, because funds have gotten bigger and they’ve got to put their money to work. And they love the fact that someone’s raising more money and kind of discard…what the pricing is.”

In that euphoric state, it becomes easy to disregard the risk-reward ratio or what exit potential actually looks like. Apart from a few exceptions (such as Adobe planning to aquire Figma, which will be a major win for Greycroft), prices have largely dropped or flattened for new funding rounds—and exits have stalled. 

“Valuations are more sensible than they were six months ago,” Patricof says, “but I still think they have further to go down to get to a more normal level. That said, if you take a long-term perspective, there’s some very good opportunities. There are already some good opportunities.”

Patricof offered some sage advice he has learned from investing for the last 50 years. 

“An old friend of mine used to say something…I learned was true: You can’t count on a cascade of miracles… Revenues are going to go up. Margins are going to go up. Profitability is going to go up. These things don’t all work in unison.” 

Other lessons are that the valuations don’t count as much going in as they do going out. “If you go in at too high a price, you’ll never be able to get an adequate return,” Patricof says. 

Thus far, 2022 does feel different than two decades ago, Patricof says. Startups have kept their spending in control and been more disciplined.

While the broader venture industry may have slowed down the last few months, Patricof hasn’t. He has been training for the marathon, which he is jogging to fundraise for CaringKind, a caregiving organization for Alzheimer’s and dementia patients, that helped his family after his wife was diagnosed with Alzheimer’s 13 years ago. She passed away about a year and a half ago.

The day we spoke, Patricof had walked five miles for three hours at the park that morning. He said his trainer won’t let him walk longer just yet.

“[That’s] what I really got to do to see if I can hold up,” Patricof says. “I think he’s afraid to find out.”

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
Submit a deal for the Term Sheet newsletter here.

Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

– Therabody, the Los Angeles-based Theragun maker, raised $165 million in funding led by North Castle Partners. 

– Opto Investments, a New York-based solution for private market access for independent investment advisors, raised $145 million in Series A funding. Tiger Global led the round and was joined by investors including 8VC, MSD Capital, Clocktower Ventures, FinVC, HOF Capital, and others.

– Sardine, a San Francisco-based fraud prevention and compliance infrastructure company, raised $51.5 million in Series B funding. Andreessen Horowitz’s Growth Fund led the round and was joined by investors including Sound Ventures and Activant Capital. 

– 4M Analytics, an Austin-based subsurface infrastructure mapping company, raised $45 million in Series A funding. Insight Partners and ITI Venture Capital Partners co-led the round and were joined by investors including Viola Ventures and F2 Venture Capital. 

– Knoetic, a New York-based people analytics software platform, raised $36 million in Series B funding. EQT Ventures led the round and was joined by investors including Menlo Ventures and Accel.

– Scratch Financial, a Pasadena, Calif.-based patient financing solution, raised $35 million in Series C funding. Norwest Venture Partners led the round and was joined by investors including Alumni Ventures, Companion Fund, Struck Capital, SWS Venture Capital, TTV Capital, and others. 

– SecurityPal, a San Francisco-based security reviews platform, raised $21 million in Series A funding. Craft Ventures led the round and was joined by angels including Andreessen Horowitz’s Martin Casado; Okta executive vice chairman, co-founder, and COO Frederic Kerrest; Asana COO Anne Raimondi; Incredible Health CEO Iman Abuzeid; and investor Dev Nag. 

– DoorLoop, a Miami-based rental property management software company, raised $20 million in Series A funding from Alpine Software Group. 

– Zartico, a Salt Lake City-based data intelligence, analytics, and visualizations company for the tourism industry, raised $20 million in Series A funding. Arthur Ventures led the round and was joined by Peterson Partners. 

– Superb AI, a San Mateo, Calif.-based training data platform, raised $16 million in Series B funding. Korea Development Bank and Premier Partners co-led the round and were joined by investors including Duke University, KT Investment, and Halla Group. 

– Federato, a San Francisco-based RiskOps platform for the insurance industry, raised $15 million in Series A funding. Emergence Capital led the round and was joined by investors including Caffeinated Capital, Pear, and others. 

– TrovaTrip, a Portland-based travel planning and booking platform, raised $15 million in Series A funding. Madrona led the round and was joined by investors including PSL Ventures, Oregon Venture Fund, Elevate Capital, and Portland Seed Fund. 

– CURE Group, a Berlin-based health care on-demand app, raised €15 million ($14.95 million) in Series A funding. Breega led the round and was joined by investors including Abstract Ventures, J12 Ventures, and PiLabs.

– Higlobe, a Palo Alto-based international payment transfers solution, raised $14 million in funding led by Battery Ventures. 

– Loctax, a London-based collaborative tax governance platform, raised $12 million in Series A funding. Index Ventures led the round and was joined by investors including Cavalry Ventures, Seedcamp, and other angels. 

– ENACT Systems, a Pleasanton, Calif.-based solar software development company, raised $11.5 million in Series A funding. Energy Growth Momentum, NB Ventures, ARKA Venture Labs, Olympus Capital, Alumni Venture Funds, and other angels. 

– Alitheon, a Bellevue, Wash.-based optical A.I. technology company, raised $10 million in Series A funding co-led by BMW i Ventures and Imagine Ventures. 

– Aura Bora, a San Francisco-based sparkling water company, raised $10 million in Series A funding. Siddhi Capital led the round and was joined by investors including Consumer Ventures, Gaingels, Seaside Ventures, and Simple Food Ventures. 

– The Muse, a New York-based job search and career development platform, raised $8 million in funding led by MBM Capital. 

– RKVST, a Santa Clara, Calif. and Cambridge, U.K.-based digital supply chain operations platform, raised $7.5 million in Series A funding. Ridgeline, Acadia Woods, Cyber Mentor Fund, and Long Run Capital invested in the round.

– Sparrow, a New York-based financial search engine for student loans, raised $5.83 million in seed funding. Sozo Ventures led the round and was joined by investors including Good Friends VC, SHAKTI, Dash Fund, Ripple executive chairman Chris Larsen, and Stash CFO Adriel Lares.

– Sloomoo, a New York-based slime playground operator, raised $5.8 million in Series A funding. Nicole Shanahan led the round and was joined by Raptor Group and others.  

– Lynk, a Vancouver-based credit card processing fee reduction platform, raised $3 million in seed funding. Samsung Next, Plug and Play, Tribe Capital, Simplex Trading, N49P, and others invested in the round.

PRIVATE EQUITY

– Atlassian Ventures acquired a minority stake in Robin, a Boston-based hybrid workplace platform. Financial terms were not disclosed.

– British Columbia Investment Management Corporation acquired a minority stake in Authority Brands, a Columbia, Md.-based residential services franchising platform. Funds advised by Apax Partners will retain a majority stake. Financial terms were not disclosed.

– Cadrex Manufacturing Solutions, a CORE Industrial Partners portfolio company, acquired IDL Precision Machining, a Mukilteo, Wash.-based precision components and assemblies manufacturer for the aerospace and defense end market. Financial terms were not disclosed.  

– Eir Partners acquired Helpware, a Lexington, Ky.-based B2B digital engagement, experience, and support platform. Financial terms were not disclosed.

– MiddleGround Capital acquired HLC, a Lévis, Quebec and Lexington, S.C.-based bicycle parts and accessories distributor. Financial terms were not disclosed.

– Watterson, a portfolio company of Highview Capital, acquired Armstrong’s Restoration, a  Malabar, Fla.-based restoration and emergency response provider. Financial terms were not disclosed.

EXITS

– Walgreens agreed to acquire the remaining 30% stake in Shields Health Solutions, a Stoughton, Mass.-based pharmacy integration and care services provider, from Welsh, Carson, Anderson & Stowe for $1.37 billion.

OTHER

– Cority acquired Reporting 21, a Paris-based SaaS platform and consultancy. Financial terms were not disclosed. 

– Quorum acquired Capitol Canary, an Arlington, Va.-based grassroots digital advocacy platform. Financial terms were not disclosed.

IPOS

– Zhejiang Leapmotor Technology, a Hangzhou, China-based EV maker, plans to raise as much as HK$8.1 billion ($1 billion) in an initial public offering in Hong Kong. 

– IdeaForge Technology, a Mumbai-based drone maker, is considering a $125 million initial public offering in Mumbai, according to Bloomberg. Qualcomm backs the company. 

FUNDS + FUNDS OF FUNDS

– Razor’s Edge, a Reston, Va.-based venture capital firm, raised $337 million for their third fund focused on technology companies for national security. 

– Union Capital Associates, a Greenwich, Conn.-based private investment firm, raised $309 million for a fund focused on U.S. founder-owned businesses where Union Capital is typically the first institutional investor. 

– Boost VC, a San Mateo, Calif.-based venture capital firm, raised $90 million for a fund focused on aerospace, energy, climate, robotics, crypto, biotech, and VR. 

PEOPLE

– Ara Partners, a Boston, Dublin, and Houston-based private equity firm hired David Touhey as managing director of the firm’s portfolio services group. Formerly, he was with Kent.

– Base10, a San Francisco-based venture capital firm, hired Jackie Chen as senior associate. Formerly, he was with Silversmith Capital Partners.

– GP Bullhound, a London and Menlo Park, Calif.-based technology advisory and investment firm, hired Kelemen Papp as partner. Formerly, he was with Alantra.