Looking backward from the Internet revolution's nuclear winter, it seems ever more stunning that the US technology sector and financial system were able to construct a house of cards even faster than the phenomenon itself could progress.

Of course, the financial industry didn't do it alone - it took a whole nation. And the Internet phenomenon was uniquely self-reinforcing.

Nonetheless, it was still an impressive achievement. Only 10 years ago Silicon Valley remained a world apart, fuelled by nerds and financed by a small cadre of tough, street-smart white males. It was a pain to get there, and the Valley was, well, different. There were no good restaurants. Huge fortunes and catastrophic reversals depended on arcane technologies.

And then there were the people. The technologists were brilliant, quirky, unmanageable and wildly funny; the business types calculating and driven, but with no apparent fear of consequences. Nobody wore ties, and you couldn't predict what they might do.

Take Larry Ellison, the founder and chief executive officer of Oracle. He has had the usual trappings, but he also has supersonic combat aircraft - admittedly, only an F86, because the Defense Department, being small-minded, turned him down when he tried to buy an F16.

Although nobody in New York realised it, these people made serious money - far more than pitiful wage slaves such as George Soros. Venture capital was small, clubby, informal and stunningly profitable.

Before the Internet, venture technology investment rarely exceeded $3 billion a year. Yet those investments turned into Intel, Microsoft, Cisco, Oracle, Compaq, Sun and 1,000 others now worth - even during nuclear winter - more than a trillion dollars.

For 30 years, the industry lived in charmed seclusion. When I started my first company with Randy Forgaard in 1994, we had trouble raising $4 million, mainly because nobody knew what the Internet was.

But then, virtually overnight, the Web was growing by 25 per cent a month and Netscape, Yahoo and Amazon were worth billions. The investment bankers awoke, and the world followed.

In January 1996, I sold my company to Microsoft, and became an "angel" investor. As I wandered the industry, I realised that we had entered a strange new universe.

The most obvious signs, of course, were valuations. Yahoo, then with $100 million in revenue, was valued at $70 billion; Amazon, still losing money on every book, at $30 billion.

Equally telling, however, was what happened within the industry itself. The strangest people were launching companies, raising astounding sums and spending wildly. People from Harvard, Yale and even Princeton. People with blow-dried hair, backwards baseball caps, driving sport utility vehicles. Tall, slender, gorgeous people dressed in black Armani. People who wouldn't know good technology if it hit them in the eye.

In early 1996, I went to check out a Web start-up. They had remodelled an entire floor, at enormous cost, in something I might describe as high-technology bondage - huge chains hung where more parochial people would have put walls. These people had serious attitude, great clothes and cool music.

When I was so indelicate as to interview them, however, I realised they didn't have the faintest idea how to build commercial software. What kind of moron would invest in these people, and what kind of customers would give them business?

We have a problem here, I thought.

Once the explosion began, it was in virtually everyone's interest to perpetuate it. The silliest start-ups could raise money at astronomical valuations; venture capitalists could raise enormous funds and pay themselves 2 per cent a year; any company at all could go public; the public companies could make billion-dollar acquisitions with cheap stock; investment banks handled initial public offerings and mergers; day traders, and then everyone else, made fortunes on the stock market.

The losers would be those who remained standing when the music stopped. And so everyone pitched in marvellously - start-ups, the media, VCs, investment banks, mutual funds, PR companies, business schools, head-hunters, property developers and, of course, the general public.

Venture capital flows went from $5 billion in 1994 to $50 billion last year. Start-ups threw half-million-dollar parties in museums; analysts recommended stocks without great discernment; even the silliest IPOs received multi-billion-dollar valuations.

All this drew the greedy, the cool and the merely naive in vast numbers. Launching real companies grew difficult, because you were in a financial arms race, and people couldn't tell the junk from the jewels - or didn't care.

In these regards, the Internet bubble was like most others. However, several unique factors contributed to the suddenness of this one.

First, people finally realised that this peculiar industry in California was making a huge amount of money. Second, the Internet revolution was real, and US productivity growth rapidly tripled to more than 3 per cent a year. The US economy boomed, corporate profits grew even faster, and technology came to dominate capital spending. Thus the development spread to the entire technology sector, and the bubble followed.

But third, the Internet bubble was uniquely propagated by the Internet itself. The revolution was not merely real - it was also self-advertising because it was universal.

Suddenly, anyone could trade stocks virtually for free - via the Internet; you could see financial reports and stock research about Internet companies - on the Internet; every company could prove that it had an Internet strategy - on the Internet; you could tell your friends about your marvellous adventures - through the Internet.

To be cool, you needed to get an Internet account so you could send e-mails to your cooler friends who already had one. Very quickly, you could experience the joys of free international telephone calls, massive copyright infringement, instant messaging and buying things below cost on great websites.

Well, it was a wild party. And I confess that I prefer the quirky, witty, socially inept, brilliant, unmanageable technologists of yesteryear. However, the Silicon Valley restaurants are much better now, so it wasn't a total loss.

Charles Ferguson co-founded Vermeer Technologies in 1994 and sold it to Microsoft two years later for £133 million. His book, High Stakes, No Prisoners, is published in the UK by Texere.