There's some natural experiments that show that this happens, and is successful, when funding dries up a little. The early to mid 2000s were marked by a huge amount of bootstrapped companies that were quite successful. But VCs can distort a market to a huge degree and have huge effects on the labour market and even things like sales by preferring insider deals and introductions that it can crowd out smaller companies who can't outspend the VC-led companies.