Great post here by Mark Suster at Bothsid.es
Lots of good stuff here.
My key takeaway is here:
The vast majority of this recent boom in prices is not being driven by VCs but rather by hedge funds, mutual funds, corporate investors and other sources of non-traditional venture funding. In the chart below you can see that a decade ago for every dollar a VC raised from LPs a dollar went into a startup. Now for every dollar a VC raises $2.50 goes into a startup.
Many moons ago, I wondered where the hell the money was originating. Mostly non-VC money chasing yield has descended on the valley. And like the sub-prime mortgage crisis, the non-VC money figured out that using preferential terms allowed them to invest in riskier assets with less risk.
Shifting risk, and increasing the value of assets without increasing their value never ends well.