[ig1]

It is an issue. It's even worse for big VCs because they have the funds to do the follow-on for any seed company they think is doing well. So it's not just a signal of being "top 3" it's a signal of being good.

[There are other reasons why VCs chose not to do follow-on, such a conflicts-of-interest, disagreements on valuation, etc. but any other VC you speak to will ask you why your seed investor isn't following-on]

Founders will often take money from seed-only funds or will take money from several multi-stage funds in order to mitigate the signalling risk.