In a new interview with Yahoo Finance, venture capital pioneer Alan Patricof warned investors to “exercise caution” toward upcoming tech IPOs — including those of ride-sharing giants Lyft and Uber.

Criticizing an atmosphere of “irrational exuberance,” Patricof said onlookers “want to have a piece of what they read about or hear about.”

“They're not focusing as much on the metrics ... what the revenues are and the losses are,” says Patricof, the managing director of Greycroft Partners.

He made the comments to Editor-in-Chief Andy Serwer in a conversation that aired on Yahoo Finance in an episode of “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.

In 1967, Patricof was an early investor in New York Magazine. He followed in the 1980s and ‘90s with larger investments in Apple and AOL, before either company was a household name. Meanwhile, he founded global private equity firm Apax Partners, which to date has raised over $50 billion in funds.

Patricof returned to venture capital in 2006 when he founded Greycroft, which has specialized in digital media companies with stakes in companies such as Huffington Post and Venmo.

‘Buying in the public offering is a leap of faith’

The 2019 IPO lineup is a who’s who of buzzy tech companies. In addition to Uber and Lyft, the list includes Pinterest, Slack, and Palantir. But Patricof said such companies will likely struggle to sustain the blistering growth they saw as smaller, private enterprises.

“Buying in the public offering is a leap of faith in the ability to continue this momentum that they've shown as private companies,” he says. “But they're getting big—and it's hard to have those same kind of percentage growth rates.”

Even as they’ve grown, Uber and Lyft have failed to turn a profit. Lyft lost $911 million in 2018, even as it doubled revenue in the same period. The company is seeking a market valuation of more than $20 billion. Uber, meanwhile, has lost billions since it was founded.

When public, such tech companies will bear increased scrutiny, Patricof said.

“The next issue is going to be, ‘Will they meet their stated forward-looking statements about their first or second quarter or third quarter after they’re public?’’ he adds. “Because if there is a shortfall, if there's a disappointment...you get the ‘The Night of the Living Dead.’”

Andy Serwer is editor-in-chief of Yahoo Finance.

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