Truth is, it is not their money. They are borrowing it at low rates. The most important point is that the private capital is fuelled by cheap public money. When that money dries up, so will the funding for the startup scene.
Could you explain to me the funding chain a little better? From what I understand, VCs raise money from "Limited Partners", but I never understood who those guys were and how they got their money. Pension funds and such?
You got it: Pension funds, endowments, foundations, union retirements funds, rich families, anybody who has a lot of money and wants to diversify into a high-risk, high-return fund.
They basically trust smart people, who have presumably succeeded at this in the past, to pick more net winners than losers and earn a return on their money.
