The toy explanation for how it works is that we have people who take risks, and they have to be rewarded now and again, otherwise why would anyone do it? So it has to be possible to trade that risk too, so that the risk ends up in the appropriate place. It needs to be possible to run a business at a loss in order to search for profits (product-market fit, etc).
We seem to have taken this to an extreme that rewards people who haven't made something useful. If I have a great idea for new kind of lemonade stand, I can get it started at a loss, but if I can convince someone else to buy it, I can cash out with more than I put in. They can go and "develop" the idea and sell that up to someone else. Sounds fine, and should be fine, in theory. Most people could probably think of a few defenses: they're only losing their own money, losses impose a disclipline that forces them to listen to customers, and it's everyone's interest to make money in the end.
The downsides are not so obvious.
Everyone can start a lemonade stand, and sure enough there are loads of them all over. But who gets to try? People who can get access to the risk capital. It's not quite the same as the alternative world where ventures need to make money reasonably fast, or sink. It also means if you try on your own, you are competing with much more patient people who can afford to lose for longer. So now, you can't even try your own without giving a piece to someone else, who gets to decide who gets a shot and who doesn't.