Nobody is going through the significant work of raising VC and then TRYING to fail. All for the sake of temporarily using some fancy office furniture.
A typical bootstrapped business wouldn't dream of spending money on equipment that wasn't absolutely essential because it pointlessly burns valuable runway. But when you're spending someone else's money and don't see this startup as your one shot—when you can always start again with a new VC when this one fails, and the new VC will be totally understanding of your past failures because that's just how the dice roll—the need to be careful isn't there, creating an incentive to live it up while you're flush with cash.
I don't see how VC funding is being syphoned away by fraudsters at all. Syphoned away by incompetence yes, not deliberate fraud.
The issue is if they don't create a desirable work place, they will have trouble attracting and keeping talent. Further most of the luxury items pale in comparison to a single engineer's salary. E.g. 10 engineers with cushy job setup, or 11 engineers with a very lean one. The former may be more attractive to the kinds of engineers you want. The trick of course is identifying the talent, IMHO and IME this is why most startups don't make it.
Pay me competitive salary. Allow me to WFH. Spare me all the cheap benefits.
But up to you what kind of talent you want to attract.
But often the company is either stingy or generous, and they view the chairs and the engineer comp as both things to invest in, or neither.
I think the big reason why this is so common is because the type of talent a lot of these startups want to attract is explicitly immature talent. People who are drawn to fluffy perks without realizing that they (a) don't actually benefit from them in any real way and (b) are actually a warning sign of what's to come financially.
It's just a matter of budget and efficiency.
Unfortunately there are individuals who do almost this. Their names do travel in the VC circles. Their goal is to get VC money, enjoy the funds and preferably fail within a year or so; rinse and repeat.
Spend 3 to 9 months securing the funds, be boss, leading lavish lifestyle for 12 to 18 months, while getting paid and have lots of perks.
edit: @lolinder wrote it better "..they're not trying very hard to succeed."