It is in VC funds in the narrower sense, because their LP agreements often forbid any individual investments in startups. VCs' LPs don't want the VC partners siphoning off the best of the firm's deal flow for themselves.
I also point this out because what I've found in business is that so many basic principles end up repeating themselves in different situations. Things that you don't learn in school or in books but by listening to others and real life experiences. One reason that certain people who have grown up in business families have a nice advantage over those that don't. [1] You have a seat of the pants feel for things because everything is just a variation of something that has already happened.
[1] But it's not just growing up in the family but also interacting and listening and thinking. My siblings grew up with the same parents but are vastly different than I am in their thinking and understanding even given the same trough of water.
Hmm. The way to effect this as a broker is to take comission, with 3rd part capital backing the acquisition. The broker "pump and dumps" the property and takes a comission. The structure is opaque to the purchaser, and avoids the signalling 'tell' alluded to in the narrative above. This isn n% as profitable as a outright "front-run" or "flip", but can be executed at greater leverage/scale, since it is easily repeatable and the conflict of interest is far less obvious.
Since YC itself doesn't do follow-on investments it doesn't have to worry about competing with its own partners (unlike the VC LPs).
This new policy seems to be addressing a specific problem: demo day is meant to be an opportunity for all the presenting startups, not a competition for attention between them. I.e. for YC's sake, it should never hurt a startup to present at demo day, so its a problem if not having a yc partner invest looks like a signal of relative weakness.