The normally party-happy but press-shy tech entrepreneur Sean Parker was a bit of a buzzkill on the subject of Silicon Valley Tuesday.

The 31-year-old Parker—co-founder of Napster, founding president of Facebook—told an audience at Technomy in Arizona that "little start-ups are ridiculously overfunded."

"The market is ridiculously overcrowded with early-stage investors," he said. "A lot of these early-stage investors will fund literally anything." (Parker's Founders Fund bankrolls early stage start-ups.) He described this as "the assembly line approach to investing."

What's the problem with that? "This results in a talent drain, where the best talent gets diffused and work for their own start-ups."

According to the National Venture Capital Association, first-stage investments in start-ups were $1.6 billion in the third quarter, a 68 percent jump from the same time last year. Total venture funding is $6.9 billion, a 31 percent increase.

Parker is also involved in fbFund, Spotify, ooma, Causes, Plaxo, Yammer, Asana, and Element Payment Services, and has a pre-launch project called Airtime.

Onstage, Parker laid on the war and revolution analogies awfully thick.

He believes the Internet will eventually consolidate in the same way the PC industry did in the 1980s and 1990s—to disastrous effect.

"What comes after the revolution is inevitably bureaucracy. Whoever wins the revolution builds a bureaucracy," he said.

And with power consolidating among giants like Facebook, Google and Apple, it's hard for fledgling firms to take them on. "For young entrepreneurs, it's really not helpful for some guy to come along and write you a check," he said.

Parker also said that conditions in Silicon Valley "now resemble the conditions preceding World War One,” he said.

"It's kind of hard to decipher who's working with whom and who's at war with whom."

Parker himself is working with Napster co-founder Shawn Fanning on Airtime.

His description: "Without getting into details on what this product is—basically, that's the concept. How can we intelligently allow people, who wouldn't otherwise have met, to find each other?"

Part of the inspiration: "When I was in high school I was desperately searching for a girl who was into punk rock who was also into Spinoza and Nietzsche," he said. "I came up empty handed every time….I didn't have the tools to find her."