Why would they do that? Venture capital isn't there to serve people like us or to protect any kind of common interest. There is only one thing they know - money.
Sure, but YC can enforce it if they want to. VC after all is a private body governed by private individuals, they can make moral choices. VCs could even support this by offering terms to offset the costs.
I cannot believe that a company cannot be profitable but at the same time not build for at least some better privacy guarantees.
They could do anything if they wanted to, but there's no point in discussing it, because they won't. Self-enforcing moral standards interferes with the money thing, which is the only thing they will not sacrifice. The goal isn't profitability, there's been plenty of profitable and moral ventures in the past. They need as much money as possible. They lie awake at night thinking about the cents they could squeeze out of a business if they just treated their customers way worse, partnered with a dictatorship or found loopholes in regulations.
To protect their future reputation. There's a civil rejection brewing about YC, and it will affect both Flock and Sam Altman.