VC's are typically raising money for their funds from even larger funds -- ie hedge funds, private equity firms, endowments, pensions, etc. Any funds with a lot of capital that are looking to diversify. These larger funds become LP's (http://en.wikipedia.org/wiki/Limited_partnership) and generate a return typically at the end of some time period -- something like 5 years. So any money from acquisitions/IPOs etc will be returned at that point.