10/31/2011 02:59 pm ET Updated Dec 31, 2011

A Tech Bubble, Boom or Bust?

Not a day goes by without another doomsday prediction for technology companies and investors.

The sky is falling! The tech bubble is about to burst! Get out while you can!

Comparisons to Nasdaq's 5046 March 2000 peak -- and subsequent crash to below 2000 -- rule the day.

What does this mean to entrepreneurs and everyone that determines their fate?

The truth is, the bar is rising for startups looking for funding. It shouldn't be a surprise to see AngelList report that out of the 50 to 100 startups who apply for funding daily, only one or two companies reach the finish line. And while more than 60,000 startups received angel funding in 2010, less than 3000 raised venture capital. Unfortunately, we can expect this trend to continue for a while.

While corporate VC investing is strengthening, the NVCA is releasing some pretty bleak numbers, largely due to policy changes that are critical to growth and job creation.

And while technology bellwethers Amazon, Apple and Netflix remain very good companies, each disappointed Wall Street during their most recent earnings reports.

It will all likely get worse before it gets better but thankfully this time it's not a bust.

Here's why:

A decade ago, we lived through a true technology bubble. The bubble was created by greed -- shared greed. Greedy entrepreneurs started businesses with fundamentally bad business models (like selling dollar bills for $.80 cents). Greedy venture capital firms funded them because they knew a greater fool would buy them out quickly if they had enough "buzz" and market "traction." Greedy investment bankers took these flawed companies -- many with little or no revenue, little operating history, and no plan to profitability -- public and made money off the fees. And greedy investors gobbled them up, thinking the stock price could only go up. Then the party crashed in early 2000 when the truth came out: these companies were mere shells without business models.

Technology stocks as a whole collapsed and remained virtually flat-lined for a decade. But out of that pile of failed companies arose a new set of public technology companies with revenue, earnings, market share and great business models. Apple, IBM, Google and VMware brought some respect back to technology stocks.

2010 saw a new crop of private technology companies with staggering valuations. Sophisticated venture firms paid for their shares at these valuations, as did wealthy investors, who bought them on private market exchanges, such as SecondMarket and Sharespost. And the companies themselves signaled what they thought they might be worth in public markets. Facebook - $82 billion. Twitter - $7 billion. Groupon - $12 billion. Zynga - $20 billion. Living Social - $6 billion. And then a few of them went public. LinkedIn - nearly $8 billion. Pandora - $2.6 billion. Fusion IO - $1.4 billion.

Are we watching Back to the Future, and seeing 1999 unfold again before our very own eyes?

No. Because today's crop is different.

A decade ago, we had a volume of bad companies -- with little revenue and no earnings -- going public or being acquired at prices that ranged from $100 million to one billion. The bubble consisted of bad companies trading or being sold at even worse prices. The bubble had to burst because the underlying companies did not have real business models.

Today, we have good companies -- with real revenue, many with earnings, all with substantial customer reach and market dominance -- that are trading at high prices. Whether $82 billion is the right value of Facebook is open for debate. Whether or not Facebook is a real business is not open to debate. Facebook rivals the traffic of Google. (My colleague Scott Johnson sheds some light on one of the real opportunities here.)

There is a clear distinction between now and then. Ultimately, the market will set the right price if a correction is due. But I have no doubt that all of the names I mentioned above will be around in five years. We're not in a bubble. We're not in a boom and we're definitely not going to bust.

We're watching a new ecosystem emerge, albeit prudently, which presents fairly fertile ground for entrepreneurs with sound business models and opportunity aplenty for those with the patience and persistence to ride the next wave.