Fun fact: Stripe is backed by three out of five Paypal founders.

In my layman's view, that's a prudent move, similar to neutral/risk reversal stock trading strategies. Of course VC is about more than just money, but still.

Is that true? Isn't that basically what hedging is?

The simple fact is that over the long (enough) run, there is no such thing as sustainable competitive advantage – markets change, grow, shrink, die – if you're not actively exploring what will replace your offering or share the market with it, you can rest assured that someone else is and eventually, they will enter your space.

So, IMHO, the smart money finds the best alternatives and bets on them too, at some point... (or they exit, if the market is simply going to die, but that's another angle).

I could invest $100 in two competitors, assuming that one will fail, but the other will be worth $1000. Risky - of course. A third company might come along and I end up with nothing. But still a reasonable strategy.