When you raise funding at a startup, you're usually creating new shares which dilute old shares. If a seed round VC is able to get out with a 20% loss then they

When you raise funding at a startup, you're usually creating new shares which dilute old shares. If a seed round VC is able to get out with a 20% loss then they might be happy, but what will actually happen is that the seed round VC's 10% share turns into a 8% share AND they look like they've taken a loss because the 8% share is worth less. In growing markets, the 10% turning into 8% doesn't matter because it was 10% of a $1M company vs 8% of a $10M company. You're still richer (at least on paper) than you used to be.