Every week, someone in Silicon Valley writes an essay (or rant) questioning the sanity of investors who are pouring money into tech companies at higher and higher valuations.

I have a different question: What about the sanity of entrepreneurs who are raising more money at ever higher valuations?

Sure, a juicy valuation is hard to turn down; all founders want to minimize dilution for themselves and their existing shareholders. But in all the madness and jockeying to one-up each other in the press with headline numbers, some key logic seems to have been lost.

Consider some math. Take an e-commerce company that raises around $35 million in a Series C at an implied valuation of $250-350 million. For VCs to get a 5X return from the middle of that range, the company has to be worth $1.5 billion.