When is a bubble not a bubble?  According to Ted Schlein and Randy Komisar, both partners at Kleiner Perkins Caufield Byers, it's when the potential fallout from the inflated-self-contained gas-bag-thingy going bust doesn't do the widespread damage that occurred in earlier downturns.

The two investors were recently discussing the tech bubble-- or lack thereof--on Ventured, the firm's podcast series. Komisar will also be speaking on Thursday at Inc.'s Vision 2020 conference in Palo Alto, Califo.

Schlein rattled off evidenced to support the notion that we're indeed in a tech bubble. He cited a Reuters report that said five of the 12 U.S.-based technology companies that had IPOs this year priced their shares at or below  the price of their last private round. He calculated if the 90 U.S. unicorns were to go public at a 20 percent premium to their most recent valuations, investors would have to create a staggering $131 billion in new equity. And they're probably not that stupid. 

So, Schlein asked Komisar, are we in a bubble? In response, Komisar questioned the the  concept. "I don't believe in questions about bubbles," he said. "We're in a cycle. The cycles come and they get overheated and they peter out. The question is, 'how far down does it go on the other end?', and I suppose if it goes really far down someone calls it a bubble. But it's more like a deflation." But the rest of the conversation made that seem like a matter of semantics.

The two seemed to agree that some unicorn companies' high valuations are more tied to flexibility at the negotiating table than to underlying value. Creative term sheets allow investors to "stretch the terms... to provide [investor] protection on the downside and to allow the ego-stroking of being a unicorn company." (Translation: entrepreneurs make concessions, and investors fudge the valuation.) He later said, "I think you're going to see more and more public offerings priced below the last private round."

Komisar pointed out that even in the last, um, down cycle, valuable companies such as Google and Amazon emerged. Here's a short excerpt of what followed:

Komisar: I think the debate is, really, 150 companies valued at over $1 billion, now?

Schlein: It seems crazy.

Komisar: The math doesn't work. It's a tiny fraction of them that have been able to get public at a price greater than $1 billion.

Another hint that we're in a bub...  sorry,  cycle:

Komisar: There are just too many companies carrying these [billion-dollar] valuations to be absorbed by the public markets or in private acquisitions.

Schlein: The idea that if these unicorns went public today, that $131 billion worth of new equity would have to be created--there's no precedent. It's impossible. It just could not happen.

Both investors worried aloud about companies that are still burning cash based on the assumption that more capital will always be available. These entrepreneurs have been told for years that growth is all that matters, but that will absolutely not be true once money gets tighter. Said Schlein: "The thing that really irks me is you'll go to a board meeting at a time like this and they'll say, 'we're behind on product, we're behind on revenue, but we're doing really good on hiring.'"

It's not our job to be rational

Both Komisar and Schlein agree that a key difference between the dot-com bust and today's landscape is that the dot-com bust was a stock market swoon--  shares of publicly traded, profit-averse  tech companies cratered. This year, it's private companies that have seen their valuations slashed, and private company shares aren't in the 401ks of most investors.

And as long as the dysfunction stays in the private market, they seemed to be saying,  it might be okay for investors there to go a little crazy. "As long as the public markets stay sane and act as a governor, it will force the private companies to build something substantive," said Komisar.

The same logic applies to acquisitions, with Schlein saying a public company acquirer "isn't going to do something stupid" and overpay for a company just because the last round of private investors did. As Komisar said, "There is no one to blame other than ourselves. It won't last.... You can't blame the entrepreneur. They're acting rationally in an irrational environment."