Adding intrinsic (as opposed to extrinsic) switching costs is usually a bad idea over the long term, but only if your customers (actual or potential) are savvy enough to notice. With that in mind, the approach is much more difficult to pull off with Open Source software.
So, investors want (even demand) barriers to entry (for competitors) and/or exit (for customers) to enable extraction of attractive rents. It can work very well over the medium term, although it will typically increase CAC, and lengthen the sales cycle.
Still, over the time period that VCs care about, a cash warchest can be used to fuel hockey-stick growth and provide an attractive multiple upon exit, after which growth will often slow or even stall without fresh infusions of cash.
The annoying thing about the way this unfolds over and over again, is that it's a cheap trick that isn't really necessary. Equivalent (and far more sustainable) barriers can be erected that don't mandate nuking the developer community around your code.