Funny enough is true, always has been (speaking of the JP branch). When Hololive started, most of them were already established in the entertainment industry in diferent japanese media like Nico Nico, internet shows, early streamers and some on small TV programs. Most of them started out as acquaintances and friends of friends (good nepotism). It's obvious and there's nothing wrong with it in this case, because at the beginning, who is going to do auditions? Even today, I think there is a lot of influence if you already have someone known inside Hololive, and one or two "outsiders" in each generation.
Many were new to streaming but have talent as comedians, entertainers, show hosts, or even real idols, so it's not that far from reality.
I still remember an old archived stream where it's a karaoke on Nico Nico with several Hololive members in the flesh, and even some from Nijisanji