I have a theory that extreme levels of VC investment mean, relative to whatever ownership shares the employees doing the actual work get, the original VCs have extreme ownership over whatever profits the business might generate (including from an IPO/sale).

Well, that’s just a fact. But my theory is that this ultimately incentivizes the employees to invest in their own skills and maximizing their salary-earning potential, rather than making the business succeed - the behavior you’ve described here.

If the market were sane, I think VCs would be averse to investing in already-highly-invested-in companies that don’t have clear paths to profitability. But, well… our markets aren’t really sane or sensible in that way. Many VCs and managerial types would rather crack whips or institute OKRs/other MBA-type nonsense than simply make sure employees are both adequately salaried and adequately invested in the success of the company.