That sound you hear is big mergers sucking the air out of the industry
VCs fail all the time, that's why they go in together with others and place their bets and they make lots of bets on different companies with different technologies in sectors they hope will break through. The big winners more than cover the biggest losers. If that ever changes then we are probably all screwed.
The biggest thing that has changed is the consolidation in the industry. There are fewer potential acquiring companies, which means there are fewer big time exit paths. For me, that's the scariest thing about a potential EMC/ HP(Enterprise) merger. Its hard enough already trying to pick promising startups to work for when there are numerous acquirers. Less competition to acquire the next big thing means that the next big thing has to prove itself over a longer period of time and show much more market penetration - hence the longer gestation period for the winners.. That will probably produce fewer, but much larger, IPOs too.