VC Exit Incentives

What's the reasoning for that though from the VC perspective?

Generally speaking, VC's aren't interested in getting their money back with revenues from the company they're funding. They aim for a 'big exit', in the form of an IPO or acquisition by another company.

Sure, and optimizing for those massive returns is the VC's problem, not the founder's problem. You're one out of dozens, if not hundreds of their investments. They'll be fine.

Because they took money from VCs who want an exit.

If you take VC money you are on a different track. VC's place thousands of bets with a %99.9 failure rate. But the hits, are so huge, they cover all their bad bets. So they want you to take the money and swing for fences.

Not an expert here, but I have worked at a couple startups. The answer I would give is probably not: VCs basically work on a premise like this: 1 in 25 investments will return 100x, 5 in 25 will make they're money back, and the rest are just a wash. The only way the make money is if the company is mega successful, so they're not really interested if that's not a possibility. That being said, not every person at a VC is going to be super greedy or anything like that, it'

Because VCs want their money back before they're dead.

what else would VC money be for other than a sweet vendor lock-in?

Sounds a little unlikely tbh. A VC fund exists to invest in a small portfolio of ventures to maximise returns over a fixed period to the Limited Partners who have invested in that particular fund. The Limited Partners aren't donating their money to help the wider ecosystem, and if they suspect the VC firm is investing in businesses without massive profit potential because they might assist the growth of startups in their other VC funds, it's lawyer time.

VC are not donating money. They are investing. In order for them to be successful, there must be a return on their investment.This means that either companies need to be acquired, or they need to go public. If someone is investing a billion dollars, you'd want to be acquired for 10+ billion in order to have been a good investment. I think this makes IPO a more likely outcome at those investment levels.