...Such investments have fueled Silicon Valley’s favorite parlor game, namely predicting the next collapse of the economy. After almost 15 years, many of the key statistics of the region have risen to peak dot-com levels, including the number of investments and venture capital going into high-tech startups. Those numbers are even more incongruous given the declining rate of entrepreneurship in the economy that was reported on this week. Venture capitalists, like all investors, can certainly succumb to herd mentalities and groupthink. But they also face the same set of incentives in the marketplace, and it is there that we will understand more about the dynamics of high prices and what it means for startups today.

http://techcrunch.com/2014/08/10/the-logic-of-crazy-valuations/