I don't think investor money is the main driver of increased demand for hackers. The biggest sources of demand are the big companies, like Google and Facebook, and they're paying the hackers' salaries out of revenues.

So conversely, more money is needed to compete with those who are already profitable.

It's the same money as before, but it's just being distributed towards higher salaries for developers/designs because the other infrastructure costs of starting a company have come down so much.

Even with the salaries being 20-40% higher, the initial costs for a startup are still at a historically low level, so more startups are being funded. As more players enter the ecosystem, they start competing for talent, hence driving the wages up even further.