There's not much thinking. It's hype and portfolio theory, and mostly hoping for a quick acquisition by a bigger company.
Pump it with cash, then dump it on the public market with an ipo to all the less sophisticated investors that aren't reading the financials.
Sure, every once in a while, you'll come across a Facebook type business that ends up being profitable, but in the meantime you can still make money on the losers when you cash out.
Do these actually exist? My understanding is that retail investors aren't significant and I don't believe that institutional investors don't look at financials.
Many don't, like indexed funds. They just try and keep their shares ratios inline with the market and rely on it always going up overall.
What you're talking about with IPOs is not quick or easy, and definitely not guaranteed in any way. Taking a company public essentially counts as an exit for most funds, and if it was that easy to just sell up everything then the entire VC field would look different. That process is more for private equity and banking firms who maneuver through financial engineering rather than early and mid-stage VCs.