Final answer:
Venture capital valuations tend to increase due to the high-risk, high-reward nature of investing in startups with the potential to become immensely successful, alongside the changing economic and technological landscapes which influence the demand for financial capital.
Step-by-step explanation:
The tendency for venture capital valuations to increase is influenced by several factors. Venture capitalists are aware that while many startups may fail, participating in the success of a rare few can yield enormous returns. Significant investments in venture capital, such as the $48.3 billion in 2014, reflect the high-risk, high-reward nature of this realm. These investors seek to discover the next big success, such as Netflix or Amazon.com, which can provide substantial returns that more than compensate for several failures.
Another contributing factor is the evolving economic landscape. During times of technological innovation and economic prosperity, there's a greater confidence in new ventures leading to increased demand for financial capital. Conversely, during economic downturns like the 2008 recession, the demand for capital decreases. Overall, the upward trend in venture capital valuations is fueled by the potential for high returns and the dynamic state of the economy and technology sectors.