Isn't common or even expected for founders and 1st round investors to get diluted by subsequent investment? This comes off to me looking like YC just doesn't want to get diluted, but that happens. Is that not the case?
This is actually a "first round investor" coming in later in the first round and asking for better terms then previous (maybe only days previous) investors got. It's not an additional round of investing.
Traditionally you'd give later investors higher valuations/caps/etc, particularly if you were at or approaching the magical amount of money you need point.
