A group of "B" talent or "C" talent startups get funded - so what?
The only people who lose out are the investors, who have plenty of chance to evaluate their investment before making a decision (I imagine), so they can only blame themselves for making a bad investment.
Seconded. The economics probably make sense even if 90% are "Cs." One or two winners per batch is enough given the relatively small investment for the relatively large stake. Keep in mind that these investments typically result in an initial valuation of somewhere around $300 - $500k. 6% of something that size for relatively low cost makes room for quite a few losers. My only advice is to make sure that there's a lot of focus on getting great advisors and mentors for the program. That piece is easily as important as the funding.
The only people who lose out are the investors, who have plenty of chance to evaluate their investment before making a decision (I imagine), so they can only blame themselves for making a bad investment.