It has to do with the scale of capital. If these are YC scale $150k investments you'd need more than 100k investments. Which means maybe you'd have to vet 10m companies at a 1% acceptance rate (which is less exclusive than YC.)

There aren't 10m seed stage companies, and the effort involved there would be insane.

I still think you're right that they should have gone for more smaller investments to the greatest extent that it was practical.

As you go for larger and larger investments there is less risk and less reward. Also a bigger chance of one mistake wiping out a huge chunk of the return.

Warren Buffett also has this problem and why his investment returns trend down over time as the amount of capital at play goes up.