Technology companies flush with cash are renowned for luring top engineers with cushy perks like catered lunches, free gym memberships and pingpong tables. But as Silicon Valley gets crowded with unicorn companies valued at $1 billion or more, one veteran venture capitalist warns the "party" won't last forever.
"I suspect there's way too much capital in the system," Chamath Palihapitiya of The Social+Capital Partnership said Monday on CNBC's "Squawk Alley." "Many companies that frankly shouldn't get funded will have a longer half life than they probably should. We have this crawl of capital that leaks into these companies and keeps bad ideas up a little bit too long right now."
Palihapitiya said there needs to be a more disciplined approach, where founders funnel money toward hiring top talent —not buying real estate—and retain staff with great ideas, not perks.
"When you are forced to focus on the quality of offices, or at things other than the product, I think what you're really saying is, 'We don't have a great product,'" he said. "So you're going to spend money on things that don't matter. When we reduce ourselves to selling on window dressings, we are basically saying that we don't believe in what we're doing."
These aren't the first choice words Silicon Valley has heard from Palihapitiya. The veteran venture capitalist riffed on the future of start-up funding last week at an event in San Francisco hosted by industry group StrictlyVC. And Palihapitiya is far from the first technology investor to raise his eyebrows at recent Bay Area trends.
"There's no question that we're in a private market valuation bubble," Theresia Gouw of Aspect Ventures told CNBC earlier this month. "There's 117 privately valued billion-dollar-plus companies. ... There's no question those companies are worth less than their public market counterparts."
Palihapitiya also said entering the public market can show investors that a company is serious about gaining credibility and becoming a leader within its market. Investors, in turn, should focus on business models beyond services that cater to millennials, he said.
"Great ideas win," Palihapitiya said. "The reality is, we need to separate ourselves from the window dressings that we think drive value, and focus on product market fit and ingenuity that actually drives value."