This seems to suggest that these investors are doing some form of value investing in VC.

VC doesn't work like that. In order to survive (and prosper) as a VC it takes picking and investing in Apples, Googles, Facebooks, Amazons, Airbnbs, etc.

I could be wrong, but this feels like there's too much money chasing too few good companies.

That seems to be true even in Silicon Valley itself.