It's a quote from a very famous baseball player/funny man Yogi Berra [0]. It's sarcastic -- normally, a place being very popular would be considered a sign of success. But Yogi describes it as a negative -- as if the place is a failure because it's "too crowded".

Likewise, it's normally considered a positive thing for a company to get a high valuation from investors. This suggests that investors think the business is very valuable. But Vinod has described high valuations as a negative. PG is using a famous quote to point out that it's not something one would normally view as a negative.

[0] http://en.wikipedia.org/wiki/Yogi_Berra

He's just refuting Khosla's agument and pointing out that if VCs were really repelled, then the valuations could not be high (since these are determined by the demand of the market).