Intel Capital President Arvind Sodhani and Silicon Valley Bank CEO Greg Becker devoted a good part of a Churchill Club appearance Monday night to the topic.
"In some areas I would say the valuations are pretty stretched," said Sodhani, whose corporate venture arm has scored the most exits by M&A and has secured the second most exits through IPOs since 2005, according to a recent report from PitchBook Data. "In some industries I have to ask myself if this is a software company or a services company?"
Software companies have traditionally sported higher valuations than services companies, but Sodhani said he is seeing the reverse in many cases today.
"I often have to ask myself if I am getting this wrong, but that is an area where I think valuations are stretched," Sodhani said, referring to services companies without naming any names. But he was quick to clarify that he isn't saying all companies bearing big valuations are undeserving of those lofty estimates of future success.
Hardware startups are pretty accurately priced, he said, because as data-intensive technologies like the Internet of Things, self-driving cars and drones take hold there will be a big need for the infrastructure that will make them work.
On a bubble scale of 1 to 10, Sodhani said he believes the market now is around a 6 or a 7. "That's not to say there aren't some 9's and 10's in there, or some 3's and 5's."
Becker, whose bank estimates it serves about 65 percent of all the region's startups and many of its venture firms, said he thinks the bubble needle is closer to a 7 or an 8, although he insisted that he isn't saying we're definitely in a bubble.
Becker has reason to focus on such things. His company’s stock fell more than 50 percent when the tech bubble burst 14 years ago.
"We have an office up on Sand Hill Road, and something I saw there recently was like it was came out of 1999," he said. "There was a tour bus in front of Kleiner Perkins."
"I'm also seeing a lot of companies with very healthy valuations of around $60 million or $70 million before they have any revenue, which is something we saw a lot of in 1999," Becker said.
There are also lots of companies which appear to be doing the same thing that all have big valuations, something Becker calls "copy companies."
When asked for a show of hands from the audience, a clear majority agreed with Becker's assessment.
Countering the worries about a bubble, Sodhani said that it costs much less now to build a tech startup than it did during the dot-com bubble, and the global market they can reach is much larger.
"Once upon a time, only the very largest companies like an Intel would ever think about selling in China," he said. "Now it's a lot easier, and in many industries that is a huge positive."
Becker said that previously companies like Uber or Airbnb would have been creating software to help the transportation or hospitality industries be more profitable. Now they are instead looking to disrupt the industries and are finding great success.
"Now they are saying we can destroy the way that an industry operates and change it completely," he said. "I think we are going to see more unbelievable companies formed in the next few years than we ever have in history, by a wide margin."
But the question for Becker is whether the valuations of those companies are correctly factoring in the risks of them successfully fulfilling their promise.
"Even great companies face great risks," he said.
Venture and late-stage investors have been enticed by the spectacular successes companies like Facebook and LinkedIn saw after going public, Sodhani said.
"There's a lot of capital trying to find the next Facebook, but we all know that there are only likely to be a half dozen Facebooks in the next decade or so," he said. "But the result is that everybody is chasing that big return and think they have found the next big, big win. I think that is dangerous."
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