You are right in the fact that new startups should be looking at new and innovative ways to fund themselves and I hope that people take that point away from reading articles like this.
My point is that there is a value judgement here. VCs are being overvalued, and founders are being undervalued. This serves to demoralize and demotivate the founders, ultimately hurting the value of the company. It doesn't need to be that way.
They're asking for money that can potentially make the VCs very, very rich. Or at least make a good return on investment. The VCs are choosing to make that investment. They're not just being asked; they're answering in the affirmative, at which point they ought to be working in all parties' best interest.
VC's are not in the business of coddling founders.
I think you're making this guy's point. That is the problem. They should be in that business; they'd be helping themselves.
Judging by the number of up-votes, I wonder how many VCs lurk here. They can't be PG fans, considering what PG has had to say about VCs:
There's no rule that says founders get to keep large percentages of their companies.
1) the VC system needs to be reformed. If founders are being screwed like this (and I think it's reasonable to say this is a screw), they're going to find other ways to raise capital. (And they are!) VCs should be in the business of cultivating founders, of encouraging and then rewarding them.
2) This is all the more reason to sell your company; it's more realistic (post-dot-com-bust) anyway, and obviously, it's the way to profit the most. Plenty of companies are buying these days. You just have to find a way to make something worth buying (and that's the rub, isn't it?).