In a nutshell, you're right. This looks like, on paper, a bad investment market, and it might be.

Indie Fund doesn't have to turn a profit and they'll be successful: they're fundamentally about funding the games that they want to see developed that otherwise can't for financial reasons.

Look at their submission setup. You won't find the word "market" there in any form. Not once do they ask about the potential upside. This is not an angel fund in any traditional sense.

I think it makes more sense to think of the "IndieFund" as funding Art and not businesses. They care about how the product will change them and the people around them.