This article touches on, but doesn't explore very much the main problem that there's only a limited number of companies that are actually worth the investment. It's not necessarily a given that if there is more money in VC more great companies will succeed.
There's a limited number of companies that will be Great, more money doesn't increase that supply. Instead, more money chasing deals means companies with somewhat suspect business models are allowed to go on longer than they should, wasting of course cash, but more importantly the time of those working tirelessly at those companies.
It's really unclear that the answer to "public markets are hard to predict and have limited upside" is "let's invest in a more risky, more opaque asset class".
The only thing I would add to this would be how hungry the capital machine is for growth. Public equities are simply not outrunning the bear in a way that certain well placed and timed companies are. And those companies command astronomically high market capitalizations because of growth. Not profit. Capital doesn't need profit right now. There is plenty to go around.
First, private investors often have what would amounts to insider information if the company was public. Investors who are close to the company can take advantage of information asymmetries. Second, if you're a private fund then you have more freedom to value your own investments annually. Compare that to public markets where investors may start asking for redemptions after a bad week and a 10% decline. Private capital is more patient. Third, private markets are the new public markets. No one wants to go public and deal with the regulations and short term market jitters. If you can access capital in the private markets you'll do it as long as you can. I expect liquidity in private markets will greatly improve, if so we could see significantly more capital enter the space.
There's a limited number of companies that will be Great, more money doesn't increase that supply. Instead, more money chasing deals means companies with somewhat suspect business models are allowed to go on longer than they should, wasting of course cash, but more importantly the time of those working tirelessly at those companies.
It's really unclear that the answer to "public markets are hard to predict and have limited upside" is "let's invest in a more risky, more opaque asset class".