I think the logic is "I like this company, but if I offer a down round then will I piss off their existing investors? Will those investors stop sharing good investment opportunities with me? ... Ah screw it, I'll just skip this down round and focus on other prospective investments."

I think multi-stage investors are probably best-positioned to address this, since they are both new and existing investors in the companies they back, so they should be able to offer market price down rounds for companies that are still promising but unable to attract external capital.