When a VC veteran condemns their own industry, it’s worth hearing them out. Chamath Palihapitiya, the head of venture firm Social Capital and a former Facebook executive, did not bite his tongue in a recent letter to investors, likening today’s VC and tech start-up economy to a Ponzi scheme.

One gripe is the transition from a scarcity of capital to an oversupply. “…we seem to have arrived in a new, distinct third phase of venture capital where money is no longer scarce at all. Rather, it has become plentifully available. The collective returns reflects the new reality that venture capital does not deliver a premium for its investors,” said Palihapitiya, citing outperformance by the S&P 500 over various time horizons.

He also lambasted the trend of tech start-ups spending the proceeds of their funding rounds on user acquisition, showering platforms such as Facebook, Google and Amazon with money in an advertising arms race that puts scale above all else.

Palihapitiya sees what some have called a tech bubble as a fee opportunity for VCs. By investing in one another’s companies during later rounds, VCs bid up rounds to valuations that allow for generous markups on their funds’ performance.

“So even if paying or marking up sky-high valuations will make it less likely that a fund manager will ever see their share of [carried interest], it makes it more likely they’ll get to raise larger funds – and earn enormous management fees,” he said.