So while you might disqualify some poor companies in the 99%, what are the odds you don't just get another poor company? The odds that the money you didn't spend will now go to a successful company doesn't really change since the hyped companies would already have the money and the rest are a complete crapshoot.

Meanwhile, how much does that diligence cost? If it's more than Z across your portfolio then you're actually down a shot and have lowered odds for the whole fund. If 99% are going to fail anyway, why spend more money just investing in a different 99%? Remember the entire fund has to be invested, you can't return or rollover the money so this is actually the optimal strategy. It's strange math but it works.