To paraphrase Matt Levine: the fact that you lost a billion dollars means someone else trusted you with a billion dollars, and that’s reason enough for financiers to trust you with yet another billion, thinking surely you’ll get it right this time.
Oh they went to __ school, they must be good. Oh they worked at __ co, they must be good. Oh they worked under __ [team/manager], they must be good. Oh they launched a [fund/startup] before, they must be good.
Once you get the foot in the door once, it's easier to get your foot in the next 10 doors.
The real reason is that dropping him after the first big losses would make it clear that you f'd up by backing him in the first place.