the board seats don't reflect the magnitude of the investment

Just out of curiousity, what would you propose instead?

On the term sheet, a valuation that gives the VCs 5-6% of the company and no company board. It's a reasonable valuation for an idea-stage startup when the investor is not YC. Most investors I know of at this stage offer better valuations than YC. A couple VC firms even give out free money. Of course none of the other firms are Y Combinator, where like Sequoia it would be a good deal to just give them equity for free. None of the other investors at this stage have been proven to provide a compelling value to their startups, but it seems obvious that a competent incubator that invests without asserting control is much better off for a startup than no incubator.

I think I would refuse to do the deal if they refuse to negotiate, though giving them 10% would be acceptable if they were reasonable about the process. Though it's really a bad sign that they proposed such a manipulative deal. I wouldn't want any of these guys on the board or to have a right to invest, because it torpedoes future deals if they don't do a follow-on investment. Lightspeed Summer Grants offers 500k investments to some startups coming through their program, but it's an offer, not an obligation.

But, if the idea was mediocre, no other investor would talk to me, I didn't have a job, I had no marketable skills, I had no place to live, and someone was offering me $25k dollars in check form, I'd probably just start the company and do whatever the VCs said. It's certainly possible that they will run the company well.

If the idea was the next facebook, or already was, I'd make a new post sharing the idea here as a document hosted on my site. At least one person has successfully raised funding by posting their executive summary here (slide deck or YC application would also be fine), I believe they offered to sell 5% for $25,000.

There are more investors out there, some even answer cold emails. Try asking for intros here, there are a lot of powerful lurkers. Or, make something great and wait until the next round of incubators.

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These guys have usernames here and talked to me: http://www.tandementrepreneurs.com/

http://crv.com/quickstart also responded to me.

The money they are offering is really awful. Also remember that the "outside expert" on the board is almost certainly controlled by them.

Also they have the second round defined because they know that $25k will not be enough and they will want to get more shares when you are in situation where you really need the cash.