Assuming you're referring to service businesses like Uber, you're talking about competing with businesses that exploit these local legal monopolies in a corrupt manner to prevent competition and thus become local monopolies themselves. My first Uber ride was in Omaha, the week the service started there, and my driver was a (former) cabbie. She said there were four taxi companies in town, but all four were owned by the same person (faux competition). They regularly cheated drivers out of wages, overcharged customers, and used crappy vehicles. You'll find similar situations in cities all over the country - taxis as local monopoly, enforced by the police and depending on the taxi monopoly's cozy relationship with the local political machine.
Uber challenges the local regulations, but they win by offering a service that is less expensive and much higher quality than the monopolies they compete with.
Plenty of profitable businesses take a different path and don't try to be a Thielian monopoly. That's fine, it's not invalid as a business. But that's not what VCs are interested in investing in.
The extremely high startu failure rate means they need enormous returns on the very few investments in their portfolio that actually work. Such huge returns imply a Thielian monopoly business.