An incubator bubble isn't "scary," per se, but it can lead to inefficiencies in the tech sector over the long run. Given that acquisitions -- seldom IPOs -- are the end game for most of the new breed of startups, a bubble in the financing stages of the startup world would naturally make startups much pricier to the end-stage acquirers (Google, Facebook, et al.). The cost of buying a feature, team, or technology goes up over time.
You could make the argument that this creates wonderful incentives for the startup environment in general, thereby attracting much more talent to the space. But in large part, this talent is poached or drawn away from existing tech companies. Increasingly, you're even seeing talent bounce from one pre-exit startup (!) to another. In addition, there may come a point where the end-stage acquisition market dries up, because the price of acquisitions gets too high for positive payback/ROI on would-be-acquirers' balance sheets. Once that happens, the bubble officially pops.
You could make the argument that this creates wonderful incentives for the startup environment in general, thereby attracting much more talent to the space. But in large part, this talent is poached or drawn away from existing tech companies. Increasingly, you're even seeing talent bounce from one pre-exit startup (!) to another. In addition, there may come a point where the end-stage acquisition market dries up, because the price of acquisitions gets too high for positive payback/ROI on would-be-acquirers' balance sheets. Once that happens, the bubble officially pops.