If something looks too good to be true, it may actually be too good to be true.
That old adage sums up Microsoft (MSFT) co-founder Bill Gates’ thoughts on investing in unicorns, which are private companies like Airbnb or Uber or Dropbox or Zenefits with valuations of $1 billion or more. (Fortune has a handy unicorn list here.)
Count Gates among the skeptics: “The need to discriminate is going to be there,” Gates told the Financial Times in an interview.
“It never should be a case of closing your eyes and saying ‘Oh, it’s a tech company, just throw money at it’. That strategy worked for about two years; now you actually have to open your eyes and look at the company.”
Fear and sadness in Silicon Valley
The problem with unicorns is that this $1 billion-plus valuation may be as mythical as the creatures themselves. Unicorns are the embodiment of a tech investment bubble where venture capitalists back a company not because it solves a problem but because it’s glitzy and could lead to a profitable exit, either by going public or being acquired by a big rich company—Oracle (ORCL), IBM (IBM), SAP (SAP), or Microsoft itself—that’s in search of “the next big thing.”
For more on unicorns, watch:
The idea that close scrutiny of a given startup’s fundamentals will help would-be investors sort winners from losers should not come as a revelation, but such are the times we live in. And the growing ranks of unicorpses, aka unicorns that have lost their $1 billion valuation, proves the point.
In one sign of changing times, Fidelity Investments last year re-valued its investments (downward) in such unicorns as Zenefits, Dropbox, and Snapchat.
Get Data Sheet, Fortune’s technology newsletter.
Gates knows a bit about making money. Microsoft, which he co-founded with Paul Allen in 1975, has proved a great investment over the years. With an estimated personal worth of $72.9 billion, he tops this year’s Forbes list of wealthiest people. Now he has challenged the world’s other billionaires to help him fight climate warming.
