I wonder if this financial reality is really the way it has to be or if it's a natural consequence of competition in the VC industry getting out of control. Whe

I wonder if this financial reality is really the way it has to be or if it's a natural consequence of competition in the VC industry getting out of control. When the intangible value-add a firm can provide is low, all they can really compete on is the financials and how favorable the terms are to the founders. This causes a spiral where the valuations go up (dragging up even the valuations of 'A' firm deals) but the dilution each round does not keep pace. Founders with unicorn ambitions benefit by growing faster and keeping more of the future fortune so they keep the inflation train going. Everyone else who wants to build a solid company or reward investors with a steadily growing stream of dividends and a good but not great ROI suffers from the pressure to grow faster than they or their business model are capable of handling. Of course there's a second pressure from the other direction as companies compete to acquire more nimble competitors in lieu of hiring slowly and risking internal R&D. Since M&A has become a more and more common exit strategy over the last few decades, there's more opportunity for those unicorn returns with less risk, further souring VCs' opinion of other deals. In other industries like biotech it's not that rare to see early rounds where founders give up 40-50% of the company so even though investments are bigger and riskier, the financials work out to returns as good or better than tech in general. The pharmaceutical industry has outsourced large amounts of R&D risk to biotech investors for a long time though, so the risk is usually scientific and not product-market fit or sales/distribution. If you're working on a drug for a certain disease or condition, it's pretty easy to calculate how much you can make or how much you'd be worth to a pharmaceutical giant at various stages of risk (seed, animal studies, efficacy studies, clinical trials, post approval, etc.).