The problem is that no one can predict the future, so VCs end up backing people who promise billion-dollar potential. More realistic people who say, "yeah, this could do $50 million, maybe a little more", get hosed. But the either/or dichotomy ($50M lifestyle business vs. billion-dollar world-changer) is stupid. There's nothing that says that one can't get to the $50M point and then, once out of the gravity well, make a bigger and bolder play.

All these numbers are bullshit when starting out, anyway.

There exist angels and other seed-stage investors who would not be unhappy with a $50 million exit, to put it mildly. (To say nothing of the founders and the employees.)

Actually, $50m exits under current conditions are horrible for employees, just because employee equity is so low. After preferences, it ends up being equivalent to the kind of bonus bankers get when the firm's trying to get rid of them.

Aside from just regular greed, I think one of the reasons VCs push for pathetic option pools is to create a company where a $100 million exit will piss off almost every single employee, which means that even if the founders would prefer it, there are plenty of key players who'll only do their best in a quest for a $10B+ result.