Sometimes. But as always with advice you read on the Internet, it’s more nuanced that it might appear.
The bottom line is for venture investors to be happy, and for drama to be low — each round should be at least 2x the price of the last. And ideally for early stage stuff, 3x.
If I invest at say a $10m “post money” valuation (i.e., after the deal closes) … I’ll only do it if I believe the next round can be at least $30m pre. It’s OK if it doesn’t really end up panning out that way. But I have to believe it will, at least at the time of the investment. If I don’t — I pass. Even if the opportunity is otherwise quite appealing.
And as that post-money nudges up, it gets harder and harder to do 3x. If that exact same deal is at $15m post, now the Series A has to be at $45m pre. Very, very few Series A rounds are at $45m pre in SaaS. Very few.
Similarly, Series A investors are looking for a B round at least 2x higher. So if they invest at $40m post, they want the next round to be at least $80m. Or higher.
Now, if you never need another round — this does not matter.
And if you raise money in tiny drops, from investors that don’t care about price (e.g., hobbyists), it probably doesn’t matter.
But if you want to raise money from professional venture investors, it matters.