and anyone smart has already left the business since it's not a good way of making money.

Can you elaborate? The impression I've gotten from multiple converging lines of evidence is that there are basically two kinds of VC firms: (1) a minority that actually know what they're doing, make money, and don't need any more investors and (2) the majority that exist because lots of rich people and institutions want to be invested in venture capital, can't get in on investing with the first group, and can't tell the two groups apart.

A similar pattern appears to occur in the hedge fund industry. In both cases, if you just look at the industry-wide stats, they look terrible, but that doesn't mean that Peter Thiel or George Soros aren't smart because they're still in the game.