The phrase “party rounds” refers to financing rounds where there is no lead investor. Instead, lots of investors - often including large VCs - put in $100k each or less.

Party rounds have been popular for a few years now, so there is enough history to know how they turn out. For investors, they’re usually bad. It’s hard to disentangle cause and effect here, but most likely there are a few causes: 1) higher-than-market valuations due to no lead investor there to negotiate and lower price sensitivity of investors “buying options” on the next round 2) small checks reflect lack of investor confidence which in turn reflect something else risky about the startups’ fundamentals 3) worse exits in the downside scenarios because investors don’t help out. 

Party rounds tend to be bad for founders too. If there is a tough financing or acquisition, no lead investor is there to step up. Instead, certain smaller investors who are in the investing business for the long haul tend to carry the weight. But this is changing: most of those helpful investors are tired of carrying the weight for the freeriding investors, and have stopped doing party rounds, which means party rounds will be even more problematic in the future.