There's an assumption that people who invest $200 million have information you don't have or that they're smarter than you are. I worked for eToys and watched the company simply run out of money after raising $250 million. I worked for Jobster and watched the company become walking dead after raising $55 million.

The Madoff investors are also a prime example of what economists call "asymmetric information" at work.

There is an odd inverse correlation where the larger the deal, the less insider info the investors have.

Today Twitter burns cash at a furious rate, has only 25 million uniques on their website, has a product riddled with bugs, has a terrible uptime record and after years of trying to scale, continue to have terrible uptime and app performance.

But most important of all: Twitter do not yet have a business model, and the experiments they're doing, like the groupon twitter clone, demonstrate that they are flailing around in the dark.

It's quite possible that Twitter may go the way of eToys.com and other big busts: After raising a spectacular amount of money they will simply run out of cash and have their assets bought for a pittance.

So lets explore this scenario briefly: If twitter does simply implode, it will be catastrophic for our industry because the press will brand it as a wider systemic problem and will most likely describe it as the "second dot-com bubble bursting". The mainstream press have been particularly kind to Twitter, so expect them to be just as unkind if it dies. VC and angel money will dry up for a time and the correction that guys like Fred Wilson have been predicting (see his recent comments re an angel investment bubble) will come to pass.

Lets hope Twitter becomes profitable and sustainable or we will all be hurt badly by the shrapnel.