Wasting other people's money until the end of time is not a sound business model. If they are not designed for profit the design has to change at some point in time, even if it this means morale hits and keeping people up at night.
As for why these companies deign to exist at all, they're just like most actual business: they make enough to keep going, perhaps some growth on the horizon, people put food on the table, and build careers.
Not every venture has to end in an IPO and unending explosive growth, nor are those that don't "failures".
If every funded company had to pay back every dime of VC investment upon "failure", no one would take risks. That's the game and VC's are OK with it.
The most likely outcome is what VCs call "zombies" - companies that can cover their operating costs, but can't pay back their investors. They're a headache for VCs, because they won't die and require attention. YC seems to be designed for force startups to fail fast, so they don't end up with a huge portfolio of zombies.
And even if a company folds after (say) 30 years, that still means 30 years of jobs, of people making things. So maybe investors lost money? Name of the game for them. Obviously for the last employees its not too great though (all the more reason for nicer safety nets)