My impression is that some of this has changed. The VCs I know are either domain experts or ex-engineers. Some are both. There also isn't a dearth of angel f

My impression is that some of this has changed. The VCs I know are either domain experts or ex-engineers. Some are both. There also isn't a dearth of angel funding any more. Many angels are ex-entrepreneurs. This doesn't solve some of the principal-agent problems, but it's not as dire as the dot-bomb bust.