A massive valuation for a "seed" round can be misleading. Often, insiders have participated in several unannounced, cheaper tranches. The headline number is just the final, most expensive tier, used to create FOMO and set a high watermark for new investors.

Casado argues that while VCs preach non-consensus investing, later-stage funding rounds become increasingly consensus-driven as check sizes grow. Startups that are too far off-consensus risk being unable to secure the necessary follow-on capital to survive and scale.

In early fundraising rounds, the "signal" from having a top-tier investor on the cap table is more valuable than optimizing for a slightly higher valuation. This signal builds credibility that makes subsequent fundraising rounds significantly easier, a long-term benefit many founders overlook.

More startups die from overfunding ("indigestion") than underfunding ("starvation"). Raising too much capital leads to operational indiscipline and sets an extremely high valuation hurdle for the next round. This creates a toxic situation, as new investors almost never want to lead a down round in someone else's company.

When a lead investor declines to participate in a portfolio company's follow-on funding, it signals a loss of confidence. This "big black eye" spooks new investors and can jeopardize the entire fundraise. Reserving capital for these rounds is critical for both financial and signaling reasons.

When a credible, external VC leads a follow-on round at what seems like a high price, it provides a strong signal of validation. This should prompt existing investors to overcome their anchoring bias and increase their own investment.

While multi-stage funds offer deep pockets, securing a new lead investor for later rounds is often strategically better. It provides external validation of the company's valuation, brings fresh perspectives to the board, and adds another powerful, committed firm to the cap table, mitigating signaling risk from the inside investor.

Contrary to founder belief, raising too much money is incredibly dangerous. It fosters a lack of discipline and operational "indigestion." A high valuation also sets a dangerous precedent, making future fundraising difficult as new investors are loath to lead a down round, effectively trapping the company.

When evaluating follow-on opportunities, the conventional wisdom is to look for a Tier 1 VC leading the round. However, a specialized fund with deep industry expertise leading a Series A can be an equally powerful, or even stronger, positive signal for a company's potential and market fit.