>incentive for some to pursue something they shouldn't for longer than they should.
Looks like a good example of hindsight bias. If they have resources, and still think it's a good idea, why shouldn't they go for it? If they knew ahead of time that something else would be better, they would already be going for that instead.
Maybe, but if I were going to label a bias in this situation, it would either be confirmation bias or halo effect.
Confirmation bias-
Let's say you are in an incubator working on idea that deep down you just feel iffy about. All of the sudden on demo day someone wants to give you 100s of k to take it further. Your mind will start to contort itself all kinds of ways to convince you that the idea is great and you should take the money.
Halo effect-
Needs no real explanation. Success of past classes/graduates is going to put the thumb on the scale when investors size you up, whether they admit it (which would be better for them) or not.
Combine the two and I think that more money is being transacted and more poor ideas being worked on than if you were to somehow explicitly control for both of these biases. Also, examples like Greplin may just be exceptions that prove the rule. I'd wager that it's pretty clear by demo day which ideas are top 10% ideas and which ones are bottom 10%. The middle might be fudge ground, but there are known winners and losers at that point.
Looks like a good example of hindsight bias. If they have resources, and still think it's a good idea, why shouldn't they go for it? If they knew ahead of time that something else would be better, they would already be going for that instead.