In the wake of the TechCrunch party held at August Capital on Friday evening, discussion has perked up about whether the Web 2.0 startup financings comprise a bubble waiting to burst. Dave Hornik, Paul Kedrosky and John Battelle all have good posts on the topic.

To me, a few things indicate a startup bubble:

Lots of capital being invested in features, not companies.
Lots of me-too companies being formed.
Lots of investments at such high valuations that any return will be minimal.

So far, most startups haven't raised that much capital. In aggregate they have, but not on an individual basis. Aside from Zillow and Jobster, few Web 2.0 startups have raised more than $20 million. That's either a good sign that they can grow into large companies without raising a lot of money or it's a bad one that they aren't even trying to build large companies.

Either way, while valuations are frothy, we're not talking about huge sums of money relative to the amounts being raised by venture capital firms. And while certain sectors such as teen social networking sites and online video sharing services are completely overinvested and headed toward carnage, other sectors haven't suffered from over-investment.

Until Facebook, YouTube, Bebo or Digg achieve their long rumored nine-figure exits, we won't know if it's a bubble or not. But, if you believe that exits of that magnitude are coming for at least a few Web 2.0 startups, then it's less of a bubble than most think. Whatever it turns out to be, the debate will not be exhausted until we find out.

Tags: bubble, web2.0, vc, venture capital.