Overvaluation is fine if they have put in place protections for their capital, like liquidation preferences and anti-dilution clauses for down rounds.

In that case by pumping up a companies valuation in a financing event they're able to win the deal and put a stake in the ground for any acquisition offers.

If the company is acquired for less than the last valuation they still get all their capital returned to them under the liquidation preference as well as a percentage of the proceeds.