"Listen, don't mention the war! I mentioned it once, but I think I got away with it. So! It's all forgotten now and let's hear no more about it."

-- Basil Fawlty, Fawlty Towers

Now that were safely ensconced in the 21st century, it finally feels safer to talk about the war. But whatever you do, don't mention the bubble.

I don't mean the bubble of the late '90s. I mean the one that lies ahead.

Nobody but the most cold-hearted of polar bears is willing to say it, but the making of the next great financial bubble is already under way. That's not to say it's 1999 all over again; it's more like the clock has been set back to 1997, when Netscape's stock was trading above $50, Google ( GOOG) was a fanciful gleam in Sergei's eye, and the foundations were being laid for a market that would launch -- and then destroy -- many a fortune.

Yes, we've all learned our lesson. But history shows that the inevitable result of swearing up and down that we've learned from hard times is that we end up repeating history all over again anyway. For most of us, it's just too painful to sit on our cash as the market spins out of control.

So, no, we aren't in another bubble -- yet. But like it or not, the signs of one are creeping back , with examples of speculative and irrational behavior that aren't threatening in and of themselves. But each is a milepost on the road back to excess and its constant sidekick -- regret. And some of those signs are showing up in the world of venture capital.

The VC industry had its share of retrenchment in the past few years -- lavish funds that returned money to limited partners because of a dearth of promising investments and the departure of nearly one-third of VCs employed in 2000. But just when VC firms are settled back into a cautious mindset, the buzz around hot tech start-ups is increasing -- and with it the interest of limited partners to invest in private equity again.

According to VentureOne, commitments to U.S. venture capital funds totaled $6.1 billion in the second quarter of 2005 (the latest figure available). That's still way below the record $27 billion in the fourth quarter of 1999. But it's the highest level since 2001 and roughly double the average quarterly commitments for 2003.

And, VCs say, if the figure isn't higher, that's only because VC firms remain wary about raising funds they can't invest -- and not because their limited partners aren't interested in investing much, much more.

"Even though the VC industry is still contracting, there's tons of money wanting to come in," says a general partner at a Silicon Valley firm who says some institutional funds are hoping to triple their venture investments this year. "People are shifting more money into private equity, and it's creating this big back pressure. People are getting desperate to get in."

So, why isn't this translating into a mad rush of start-ups back into the IPO queue? First, the venture firms left standing after the lean years are taking little of it. But you can only have billions of potential VC investments going begging for so long: Pretty soon, second- and third-tier firms will be willing to absorb the new surge in funds. And they're less likely to be judicious in investing it.

Second, the onerous costs of Sarbanes-Oxley compliance make going public expensive -- some estimate that the new laws add $3 million on average to a start-up's costs. So instead of grooming themselves for an IPO, today's impatient start-ups are grooming themselves for an acquisition. To some VCs, that's a big red flag -- the kind of cavalier strategy that heralded the dot-com excess of the late '90s.

"There isn't a huge public market bubble, or a sense that every idea with 'Internet' in it will be a success," says David Hornik, a partner at August Capital in Menlo Park, Calif. "So, there's more rationality in the market now than in the late '90s. But I am concerned about the growth of self-funded, small start-ups where the only real opportunity for exit is to be acquired."

What's wrong with that?

After all, companies like Yahoo! ( YHOO) have been snapping up small start-ups like del.icio.us. The risk, Hornik says, is that the company becomes locked in to a narrow exit strategy. If a buyer doesn't emerge, the VCs end up throwing good money after bad to keep the company going. Wiser investors will put money only into companies that can be scaled into larger businesses.

Or, to put it another way: Companies built to be bought are putting the cart before the horse by focusing on an exit strategy first, and an innovative idea second. Build the company on the foundation of a good idea and, if it's innovative enough, the exit strategy will present itself when the time's right, whether an IPO, an acquisition or going it alone.

Hornik shared his caution on VentureBlog, a popular read among VCs, and half-jokingly titled his post "Bubble 2.0." That caused a small stir among his readers, some of whom demanded to know why, if this is another bubble, they haven't been able to cash out yet.

Hornik followed up the controversial post with a podcast to clear up the confusion. "I wasn't calling a bubble," he said. "I was calling warning signs -- like when you see clouds forming off the coast, and you think you may be seeing interesting times ahead when the hurricane comes."

The problem is, it's hard to point out warning signs without pointing out the bubble they warn us about. And whatever you do, don't mention the bubble. It's all forgotten now and let's hear no more about it.

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