Cheap capital searches for a return. Venture funds pump up valuations of privately held companies to show mark to market valuations (paper returns) increasing. Allows funds to show good IRR without actually returning capital to LP’s. Allows funds to raise more capital for new funds based on prior performance.
It’s basically an unsustainable financial mess that will collapse.
Not that big of a bubble though compared with the student loan fiasco no one is really talking about these days.
LPs are much more sophisticated than you give them credit for. LPs are not stupid and know how VC works. They woul easily recognize the tricks you are proposing, which is why it's not actually how the industry operates.
It’s basically an unsustainable financial mess that will collapse.
Not that big of a bubble though compared with the student loan fiasco no one is really talking about these days.