Angel and seed investors take an early chance on startups, and hence should be rewarded, not screwed over. The reason why there are more seed and angel investors today is because the media has capitalised on VC celebrities such as Peter Thiel, Mark Cuban et al who have made original angel investments that have paid off quite well. If it becomes common practice for VC groups to recap seed rounds, there will be less of that wealth to go around in the long run due to a drastic decline of seed round funding in the next decade. This is a trend that should be weeded out before it becomes more widespread. There aren't any government laws against this sort of practice, and to be fair, I am against too many goverment regulations limiting what VC groups can and cannot do, because it doesn't solve the problem, merely masks it with legal loopholes. However, this is a practice that people should simply know is damaging to the entire venture capital community. There aren't laws either for spitting your gum out on the middle of the sidewalk (unless you are in Singapore) nor for defacing public works of art; people simply know that these sorts of actions have negative consequences for the entire community. When seed and angel investors are rewarded, then investments increase in magnitude and sets off a pattern of economic growth which creates a favourable climate for venture capital in the entire nation.