Look at it this way. A VC fund has a finite number of investments to make. Typically a partner gets to say yes once or twice a year. They usually take a board seat and spend lots of time helping the company.
Knowing that many of those investments will be worthless, they want to maximize the number of shots they get towards a billion dollar company.
If 1/3 of their companies are a 3x return, and the rest become worthless, the fund has failed. They’re all aiming for the one company that will deliver the big returns that offset all the failures (and the high fees they charge LPs.)
Seed stage investors are different. YC, for instance, spends much less time with each company, and therefore can take lots of shots.
Growth stage venture is different too. They aim to invest a few years before a company goes public, and are fine with a 3x-5x return. They are taking much less risk.
The VC model also creates a fundamental tension with the founder. Founders get one shot at a time. $50M exits represent life-changing money for them (as long as they didn’t raise too much money.) VCs pressure them to take greater risks than are rational for the founder. This is why you want to look for VCs that will truly put the founder first. Or keep control of your board.
Joel Spolsky explained this well 15 years ago, so we knew about it going in and chose a founder-first VC firm.
Here’s that post: https://www.joelonsoftware.com/2003/06/03/fixing-venture-cap...
Thoughtful VCs will do what’s right for the founder. It’s rational because their reputation matters so much when competing for investments. This has changed for the better since Joel’s post.