The other thing going on is... the system is such that they have to spend the money on something, sooner rather than later. These VC funds made a lot of money

The other thing going on is... the system is such that they have to spend the money on something, sooner rather than later. These VC funds made a lot of money last year, and if they can't make up a reason to re-invest it they have to return it to the next layer up, who face the same decision. They are probably getting paid on assets under management, so their incentive is to support current valuations by swapping funding rounds at good valuations with other funds, and generally putting the money away before things get any worse.