Jim Breyer. Michael Seto/Business Insider

Jim Breyer, the venture capitalist who made a fortune investing early in Facebook, is optimistic about the long-term picture for the technology industry.

He's particularly bullish on artificial intelligence, and he says his firm isn't investing in anything that doesn't have a smart data analytics piece to it. He likens the new artificial-intelligence era to the social-networking era, which changed the entire digital landscape.

But in the near term he sees pain.

We spoke with Breyer briefly at the World Economic Forum in Davos, Switzerland.

He says there is "blood in the water," and we are entering a 90-10 situation for the unicorn class of startups with billion-dollar valuations in which 90% of the startups will be repriced or die and 10% will make it.

When asked why valuations got so out of control, Breyer said a lot of deals in the past year had ratchets and downturn protections to give founders the lofty valuations they requested from venture capitalists. Those lofty valuations were often driven by greed and short-term visions (It's cool be to worth $10 billion!).

Those terms can be OK for entrepreneurs as long as the company continues to be a rocket ship. Facebook, for example, could have survived with downturn protections worked into its term sheets when it was a startup. But if things take a turn for the worst, the investors come out fine and the founders and employees take hits in terms of both stock and morale.

Breyer was responding to a question from us about the state of Silicon Valley.

On Wednesday, we spoke with a Silicon Valley CEO who said he was looking forward to a downturn in the startup market. This CEO said the Valley used to be a place of "quirky people" but was now filled with "arrogant" people, so he was happy to see some of these companies falter as a way to flush out some of the bad actors.

Breyer says the Valley is still filled with quirky people. He also said arrogance had no place in the Valley, especially since the biggest tech companies, such as Facebook and Amazon, are better than they've ever been. He says humility is extremely important right now.

That said, if people in the Valley are arrogant, they're about to be humbled if Breyer is right about the death of unicorns. There are about 144 unicorns right now. If only 10% break out, that's only 14 companies that will really make it.

Despite this dire warning, Breyer thinks numerous companies will break out over the next 10 years. He sees artificial intelligence as a big opportunity. He says we will see massive returns for investors in that space, in everything from medical to entertainment applications.