From the data I’ve seen, even in venture, lower zeros is a positive predictor of fund returns. It seems to be because a) Manu’s point about being really selective and investing in truly great companies but also b) it’s an indicator of the the ability an early-stage VC to affect the outcome positively.
An ability to create outcomes comes from strong relationships and from beneficial assistance.
A VCs trusted relationships increase the odds of the company raising a series A from a great investor (which reduces the probability of an absolute zero).
Less obvious is that relationships increase the odds of an exit when a company is struggling. Every exit like this helps a founder in a tough situation and eliminates a zero. Equally important, yet more subtle, is it enables VCs to dedicate more time to portfolio companies that are still growing. The obvious effect is to turn a zero into a small return. But the secondary, and more powerful, effect is to increase the value of the rest of the portfolio.
So while you are right that fewer zeros might be a sign of not taking enough risk it also may be a sign of the the ability of an early-stage venture firm to affect the outcome positively — the hallmark of a VC.