Interesting point re: not staying at the seed stage long enough for a bubble. What we're seeing instead is multiple preferences layered on in subsequent rounds.
So seed/A investors think they're doing well when the company raises B,C,D,E rounds at higher valuations, when in fact many will be washed out when the company eventually IPOs or is acquired at a lower valuation than their last venture round.
That's what I would expect -- the more crowded the market, the less leverage you have, and the lower your eventual payoff.
There are lots of people willing to provide companies with small amounts of money in exchange for a gigantic potential payoff. As payoffs decrease, lenders will exit the market.
So seed/A investors think they're doing well when the company raises B,C,D,E rounds at higher valuations, when in fact many will be washed out when the company eventually IPOs or is acquired at a lower valuation than their last venture round.