Too much cash infused into a new or developing start-up can actually destroy the incentives needed for the start-up to be successful. Not needing to budget well and prioritize features (because we have cash to do them all) fights against the do the first things first, and do them well mentality needed to move a budding idea into an actual revenue stream.

You might be right if they invest in small enough amounts. But if they try to invest at the size necessary to matter to their own portfolios, that's when you would have issues.