I'm sorry, I really don't know enough about the Italian Wars to agree or disagree with the assertions made regarding those.
In short, everyone in and around Italy fought for over half a century for control of Northern Italy. Alliances shifted on the drop of a dime (the War of the League of Cambrai saw the Venetians fight the Pope, France, Spain, etc. Then the Venetians and Pope fought the French, then the Venetians, Scottish, and French fought the Pope, Spanish, English, all in the course of one war). Most of the fighting the Italian Wars were in, well, Italy, which ravaged the region pretty badly. It was the beginning of the end for Italian independence, as all of Italy would be put under French, Spanish, or Austrian control/influence and only escape that in the 19th century.
I still feel at the end of the day, the primary factor was the reliance on galleys, though I'd like to get inside the heads of the merchants, businessmen, and venture capitalists of the Maritime Republics and say, 'Hey, why don't you outfit a few ocean-worthy vessels and find the source of the riches yourself rather than relying on the Middlemen?' As the Portuguese did and the Spanish attempted to.
Eh, the Venetians were the Middlemen in this context. They'd been middlemen for quite some time and it was stunningly profitable so that's a bit of why they kept on that particular path, I imagine. Plus, Portugal and Spain are much better positioned to go and find an alternate route, as said a bunch already, whereas Venice is located in the part of Italy furthest from the Atlantic.
IIRC, the founder of the Austrian East India Company tried (and succeeded insofar as gaining a commission and charter) to convince the Kaiserin that Trieste (a two hour drive from Venice) was a feasible place to trade with the East Indies through. . .
. . . Did the colony fail, yes. But it wasn't by means of distance.
A further point I might disagree with is that a few, short-lived sugar plantations might have occurred. I don't see why an intrepid Venetian or Genovesi (either wealthy in his own right or with backers & investors) or whathaveyou might outfit a small expedition to a particularly profitable looking area in the East Indies. They might not get the most prime real estate, but they might be profitable to keep up a trade colony for a good clip of time (Napoleon and Garibaldi notwithstanding).
The Austrians went ahead and had their East India adventure in the late 1700s, which is a bit far along (Venice's glory days were long past by this point and colonization was a bit of a pricey affair).
I wouldn't say that a few colonial ventures couldn't be made but I doubt that they could hold it for long, especially with all the piracy, warfare, and difficulty of protecting such colonies. Seeing as Venice would only continue to lose its economic standing as time went on, colonization becomes more and more untenable the later the POD.
I don't particularly know but Venice's orientation favors eastward attention. I'd say one thing that would really help push Venetian colonization is beating Genoa early and getting dominance over Italy asap, before it becomes a warzone, so as to get a quicker route to the Atlantic and get more money+manpower for the effort. Otherwise, it's just not going to be able to compete with the bigger, better-located nations.
Maybe getting Venice a bit more involved in the Trans-Sahara trade might help (take Genoa's place in funding Granada). From there, establish a presence near the Atlantic in Gibraltar and, once Granada falls, the Venetians start an exploration race with Portugal?