1) has several layers of middlemen that all take cuts along with 2) and 3). Typical LPs for VC funds are often institutional investors like university endowmen

1) has several layers of middlemen that all take cuts along with 2) and 3). Typical LPs for VC funds are often institutional investors like university endowments and pension funds, or they are hedge funds that are themselves funded by university endowments and pension funds. So when #5 happens, the loser is oftentimes not an individual rich person (though family offices participate in this ecosystem as well), but a collection of not-very-rich people that have entrusted their money to a professional money manager.