[tzaman]

This post misses one important point: Startups are playgrounds.

You don't need to be the next Facebook or Twitter. You don't even need to be profitable (although we all aim for it). What you need is a team that can execute. Even if it turns out the idea was lame and the startup fails, the team learns a lot. Then they can apply that knowledge at new startups or regular jobs they may take.

And from investors' point of view, most of them have plenty of money - they don't do it just because they want more (if at all), they want to share their expertise, get to know talented people and fill their schedules with activities they enjoy.

I can't imagine, if there would be no investments at all. The investors would be just fine, but the money wouldn't flow. Because of that, there would be too much risk involved and nobody would devote their lives to great ideas. Long term consequences for the whole industry would be bad.