Its going for last 3 years. Meaning it started in 2009 when we were in deep recession. Money has been floating around valley forever. When general public (via IPOs) buy into frenzy then we can call it a bubble. How this program is different from Andreesen Horowitz seed investments?
A classic sign of a bubble is when you start getting unsophisticated (non-professional) investors that only see money and start chasing the successes of others. Two huge examples from the past 15 years:
1. Tech bubble. Everyone and their brother became day-traders, chasing the hot stocks and trying to make their fortune. People were throwing their retirement savings, spare cash, anything they had into tech companies trying to make a quick buck.
2. Housing bubble. Everyone and their brother became flippers, chasing the hot properties and trying to make their fortune. People were throwing their retirement savings, spare cash, anything they had into properties trying to make a quick buck.
"A classic sign of a bubble is when you start getting unsophisticated (non-professional) investors that only see money and start chasing the successes of others."
I agree with this, which is why I am confused as to why you see this program as evidence of a bubble, since it's pretty much the exact opposite of what you're describing.
FYI, Sequoia investing is not at all an example of both the points you've mentioned.
Sequoia doesn't choose duds as their scouts. These are all experienced entrepreneurs who have "done things" (like YC choosing its alums as partners). And Sequoia is not investing in millions. They hare investing in thousands. Their returns on Instagram alone can take care of this program for years to come. They are helping budding, young first time entrepreneurs to get started. They are creating network of budding entrepreneurs and budding angels. Many companies may fail but you have hardened entrepreneur out of this program.
Forgetting the fact that there is very little evidence* for a large scale bubble, I think most people want to believe in a bubble.
"How is it that SV can have so much money changing hands when the rest of the world is suffering. There must be something wrong!"
If the accusers spend a few minutes thinking about the facts, the probable conclusion is SV is an outlier of the economy. Not only is it relatively insulated in terms of geography, it also seems to attract a whole different breed of investors. Instead of trying to scrutinize why this is happening maybe we should try and study how we can replicate this sort of mini-economy else where.
* Seen the Zynga/Groupon stock? The market still appears to evaluate companies with a non-bubble mindset.