VCs aren't banks and startups (in the SV sense) aren't seeking funding to do something tried and true in a new place. A VC invests expecting most of their investments to fail.
Banks expect returns, and the things they fund are expected to turn a profit. There are systems in place to claw back assets and funds in the event it fails to do that; and most will, but they're expected to come to the bank with a plan for profit in hand. There are different kinds of bankruptcies to address different kinds of failure. Banks tend to not give loans to people who fail a lot, and the terms get worse with each failure.
Meanwhile, in VC-land, the 1/10 startup that brings the profit for the fund could very well be started by the person who failed the other 9/10 times.
It seems like if the expectation is, with rare exceptions, most startups won't turn a profit, and there's no real penalty or punishment for repeat failure (because it's expected), it's not a for-profit system. It's a patronage system that periodically mints new patrons.
Banks expect returns, and the things they fund are expected to turn a profit. There are systems in place to claw back assets and funds in the event it fails to do that; and most will, but they're expected to come to the bank with a plan for profit in hand. There are different kinds of bankruptcies to address different kinds of failure. Banks tend to not give loans to people who fail a lot, and the terms get worse with each failure.
Meanwhile, in VC-land, the 1/10 startup that brings the profit for the fund could very well be started by the person who failed the other 9/10 times.
It seems like if the expectation is, with rare exceptions, most startups won't turn a profit, and there's no real penalty or punishment for repeat failure (because it's expected), it's not a for-profit system. It's a patronage system that periodically mints new patrons.