Venture capitalists and institutional investors need big returns and therefore they fund companies pursuing a big market (investor returns follow a power law). Fund sizes have increased and investors need larger and larger returns. However, there is a tension with founders' incentives to have a wide range of exit outcomes. An exit in the $100s of millions is life changing for a founder, but not a good enough outcome for investors. Investors are incentivized to push founders to riskier, but bigger opportunities even if the set of possible positive outcomes for the founder are significantly smaller (e.g. a highly competitive winner-takes-all market).
See also:
- This is somewhat related to the principal-agent problem, investors do often act on behalf of founders (and even entire markets).