They can absorb a tremendous amount. The total market cap of the S&P is ~$18.5 trillion. [0] Total VC investment is ~$50 billion annually. [1] Let's say that each VC investment returned a 3X return (a reasonable average) then the S&P would only need to dilute itself by 1% per year to buy the entire stock of VC companies in that year.
Another way to look at it... In just one quarter [2] the S&P 500 spent more than $150 billion in stock buybacks, that's triple the annual amount of VC investment.
There is a tremendous amount of room for the market to absorb innovative real companies.