This is called a bubble. Where a lot of these start-ups are getting their funds is from the Bank of Mom&Dad, regular old credit cards, or they are 'bootstrapping' out of their jobs at places like Starbucks. Not many investors are actually doing this, it just seems like it because most of the people are lying, trying their best not to lie per se, really good at saying their cousin is a big time investor because he gave them 20$ for pizza and they got too stoned to buy pizza.

Do not believe the hype out of SV, this is going to crash no sooner than 4 months from now and no later than 16 months from now. Evidence: Housing prices. The property bubble is back, because people think they can flip houses again and make a quick buck. Why is it back? Because people think that other people are actually buying houses to live in for that price because they think there are 100,000 people that FB employs because they are, like, as big as Boeing, right? And, like, they all have like bucco bucks from all the stocks, right?

Surprisingly, Mark Twain has written a lot about this kind of stuff. His "Roughin' It" talks about his time in Virginia City, Nevada and all the leeds that folks would buy and sell from adventures in the silver country. The lessons there are very good.