It makes sense to not be cash flow positive in the 2nd and 3rd year if you can show that investing in R&D or sales/marketing will accelerate growth by a nice factor. I think you're oversimplifying.
More startups fail than exit successfully. "Investment years" are a gamble.
Yeah but that's the point. :)
No, it's a terrible idea for the founders. "2 out of 3 businesses fail. So investors need the third to make up for the other 2." Remember, all three of the companies got pushed into a stupid business plan by the "hockey stick" requirement, when a less risky plan could still have made the founders millionaires.