Chris Sacca, an investor in companies including Twitter Inc. and Uber Technologies Inc., said too much money is flowing to technology startups that will fail in a coming industry slowdown.
Mr. Sacca, who invests through his fund Lowercase Capital LLC, said he often passes on opportunities to back entrepreneurs who later find financing at rates he thinks are unreasonable.
"Bad deals are being done," he said in an interview Thursday. "It's kind of inevitable that the funds right now that are putting a lot of this money to work here aren't going to see it all back."
Mr. Sacca said he remembers the first technology bubble bursting - when everyone left Silicon Valley so suddenly it was hard to rent a U-Haul. This time, because the technology industry more directly contributes to the global economy, only some companies will disappear, he said.
The firms placing bad bets "aren't going to have the money to support some of those bets," Mr. Sacca said. "And so a lot of these companies are gonna go away."
''There will be some losers along the way, because I think there was hubris or bad decision making or naiveté about consequences,'' he said. ''I think there are naive investors with no discipline, throwing out term sheets at nine figures right now, with no diligence.''
More than 110 companies have reached a private valuation above $1-billion, according to venture data firm CBInsights. Uber is in discussions for financing that would value the company at about $50-billion, people familiar with the matter have said. Meanwhile, the pace of initial public offerings and large acquisitions has slowed since last year.
Mr. Sacca, an early investor in Twitter, has his own brand of due diligence in order to avoid bad deals, he said. He invites entrepreneurs to his home in Truckee, Calif., near Lake Tahoe, and sees how they act over a series of home-cooked meals, hikes, ski trips and hot tubbing.
Mr. Sacca and his wife "would see people who wouldn't actually get up to put their dishes in the sink, and immediately be like, 'No way. Like, there's no way we're getting in and doing business with them.'"
Travis Kalanick, chief executive officer of Uber, the San Francisco-based car-booking service, had better manners -- and impressed Sacca in other ways.
"Travis can spend eight to 10 hours in a hot tub," Mr. Sacca said. "I've never seen a human with that kind of staying power in a hot tub."