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The convertible note insists on a pro rata right on future rounds. Someone who removes that would be offering a slightly better deal.

Pro rata rights cause more dilution in later rounds, but they are pretty standard and at seed rounds most people don't think about removing that term.

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They don't intrinsically cause more dilution in later rounds. The buyer has to pay whatever the price is in the later round. So they'd only cause more dilution if the lead in the later round insisted on getting a specific percent of the company. VCs often insist on that sort of thing in A rounds, but less often in later rounds.

Agreed situation is the worst on the first round that involves a VC. It can also arise in later rounds if you take strategics or new VCs.

Given that most YC companies will still go on to raise a seed angel round after this 150k, they will be hit by extra pro-rata dilution. If we assume a $5m seed round post money, then the 150k translates to 3%. If you raise a VC round with a VC that insists on a 20% stake then the overall affect is 0.6% extra dilution. Every point hurts at that stage, but not that bad :).

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