Mark Pincus, in his comment to a Matt Marshall post,  touches on the bubble debate and comments:

I would characterize the present environment as one of saturation which
is not necessarily unhealthy. vc’s are paid to place bets.
entrepreneurs are paid to create betable plays. seems to me that
everyone is doing their jobs right now.

I think a critical issue to spend time on is the definition of a bubble.  I characterize a bubble as an environment where bets are placed on not the traditional return expectations, but the expectation that someone will buy the bet from you prior to finding out the final outcome.

With this definition, I don’t think there’s a bubble going on.  Mark calls it saturation, I call it declining return expectations.  The demand in the VC industry is getting more elastic and it’s lowering the price of capital.