I think you're confusing some concepts here. Dilution happens when new shares are issued causing your percentage ownership to go down. In general it's not a bad thing - when there's a new funding round the new cash will increase the value of the company to balance out the dilution and you end up with your equity being the same value. The thing people forget about when they talk about dilution from new rounds is that the cash added to the balance sheet increases the value of the company, probably even more than 1:1.

Liquidation preference is what happens when the preferred shares have a clause that says they are guaranteed 2x or 3x what they put in on any liquidity event. So if you take $10mm at 3x liquidation preference then that means any exit has an immediate $30mm taken off the table. A $30mm exit now becomes a $0 exit for the employees. Remember that generally the founders are holding common shares.