Page 146 - Leadership Lessons of the White House Fellows

LEADERS TAKE RISKS

finance new businesses, among other things. “I didn’t have a management
team, but I had the prospect of recruiting some former colleagues. I also
didn’t have what you’d call a Harvard Business School–style business plan.
It was just a three- or four-page narrative, but I took it down to Warburg
Pincus to see what they thought,” Patricelli said. “I told them that I had
some specific targets—two or three entities that I wanted to acquire—so
I had the outline of some platform companies that could be bought into
to start this new organization. Warburg Pincus had made several previous
major investments into the changing nature of health care, and they signed
me up. From this experience I learned that it’s all about the people. It’s not
about the specific business plan and financial models of the moment,
because those will change. It’s about whether or not you’ve got good peo-
ple, and whether or not it’s a good market opportunity, because then the
good people will work their way through the inevitable problems and pro-
duce a positive result.”
One of those “inevitable problems” surfaced a bit more quickly than
Patricelli would have liked. As he was negotiating with the acquisition pros-
pect, a mental health management company, they gave him an ultimatum:
commit to buying a 40 percent share of the company within the next two
weeks or the deal would be off. That company was to be an essential part
of Patricelli’s new organization, and he wasn’t about to give it up because
of bad timing. He called upon the greatest lesson he’d learned from his
White House Fellows principal, Secretary of State Dean Rusk, and kept a
level head while he gave calm consideration to his next step. “I wasn’t even
done with my paperwork for Warburg Pincus yet, but I did something that
I don’t think would happen in this day and age. I took out a personal loan,
a demand note from Warburg Pincus for $4 million, so that I could go
ahead and make this investment in the new entity before we were even
done with the Warburg Pincus paperwork,” Patricelli said with a laugh.
“The loan was all done on handshakes and trust. It was a very big risk for
me. Fortunately, about a month later we got the legal documents straight-
ened out and just converted that loan into the initial equity investment.
But that’s how I got started back in 1987.”
Warburg Pincus invested approximately $25 million in Patricelli’s ven-
ture, Value Health, Inc., which was listed on the New York Stock
Exchange. For ten years Patricelli served as Value Health’s chairman, pres-
ident, and CEO until 1997, when the company was purchased by

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