When respected venture capitalist Bill Gurley said tech startup investors are taking on a level of risk not seen since the dotcom bubble days, the reaction in Silicon Valley was a collective sigh of relief: Finally, someone was saying what everyone was thinking.

In a piece published last week, Gurley told The Wall Street Journal that the huge amount of capital pouring into startups—and the great expectations all that money represents—is forcing new companies to spend more, and faster, than they have in 15 years. So much spending sets companies up for a fall if the funding dries up and they still have big bills to pay.

>'Saying we're not in a bubble because it's not as high as 1999 is like saying that Kim-Jong-Un is not evil because he's not Hitler.'

Despite Gurley's warning, however, many companies and investors are in too deep to restrain themselves. If your competitors are spending, you must spend too. According to public data, the industry doesn't appear to be as overextended now as it did at the height of the dotcom bubble. But Gurley isn't reassured.

"Saying we're not in a bubble because it's not as high as 1999 is like saying … Kim-Jong-Un is not evil because he's not Hitler," Gurley, a partner with big-name VC firm Benchmark Capital, told WIRED during a recent sit-down at his San Francisco office. "It doesn't have to match 1999 in order to be madness."

The Dollars That Aren't Counted

At the height of the bubble in 2000, according to the National Venture Capital Association, VCs poured more than $105 billion into startups—nearly double the amount of the previous year and almost 10 times the amount invested during the web's earliest days. A year later, even after the dotcom downturn had already taken a firm grip, venture capital investments still topped $40 billion.

By comparison, funding over the past five years appears to have hummed along steadily in the modest $20 billion to $30 billion range. But this year could see a significant uptick. During the second quarter of 2014, venture capital funding hit its highest level since 2001—nearly $14 billion, according to venture capital research firm CB Insights. And there's no reason to believe that pace is slipping.

Funding already has hit more than $23 billion for the first half of 2014. And Gurley believes those figures don't reflect all the money sloshing around in Silicon Valley. "I would argue that a lot of this late-stage money isn't being counted in those venture dollars," he says. "If you look at the bigger rounds that are being raised, the majority of the dollars there aren't being counted."

Uber CEO Travis Kalanick. Uber is one of the most well-funded and highly valued tech startups since the 2008 crash. Jon Snyder

'It's a Rather Bizarre Situation'

He also feels the capital "burn rate" among startups is much higher than during the first dotcom bubble, though he's not sure there's a way to prove that. You could look at how frequently companies are raising money, but as he notes, many companies will take funding even when they still have money in the bank. "With the companies that have access to this type of capital, there's a long list of people that will just hand it to them. It's a rather bizarre situation," he says. "They may not even be in the market for money and people are proactively trying to give it to them."

An apparent irony in Gurly's anxiety about burn rates is his firm's stake in Uber, one of the most well-funded and highly valued tech startups since the 2008 crash. From its vast new San Francisco offices to its blistering expansion into hundreds of cities around the world, Uber is not shy about spending its billion-dollar war chest. Clearly, the Uber investment reflects that Benchmark motto: "Be the first venture investor in technology companies that seek to create new markets." The question is how hard Uber will have to work—and how much it will have to keep spending—to maintain its hold on the markets it's created.

As Gurley tells WIRED, there may not be a good way for Silicon Valley to get out of this situation. "You're forced to play the game on the field," he told us. "It becomes an arms race, and that's the real problem...If you say 'I'm going to be prudent and I'm not going to have a high burn rate' and then the other guy hires four times the sales force you do, it might not work for you."

Gurley says that the best you can do is remain "pragmatically aggressive."

The El Niño Effect

In his interview with the Journal, Gurley recalled a recent trip to the Galapagos Islands and the book he read, Beak of the Finch, a study of evolution in action among birds of the islands. During El Niño years, Gurley said, floods bring massive food surpluses, allowing the finch population to explode. The problem, he said, is the excess resources mean individual finches needn't be as hardy to survive. When food levels return to normal, many of them die.

In the same way, Gurley said, too much cash in the startup economy means weaker companies can survive without having to generate cash for themselves. In a post praising Gurley's remarks, high-profile venture capitalist Fred Wilson said he too worries about his own portfolio companies, some of which are burning millions each month. He says he's pushed back on excess spending, in effect trying to encourage fitter finches.

"At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital," Wilson said, "and start producing value the old fashioned way."

Additional reporting by Cade Metz.