

Ask PG/YC: Why doesn't YC take a convertible note instead of equity? - tossed_aside

With the emphasis on convertible notes for startups (http://paulgraham.com/hiresfund.html), why doesn't YC take one? Why push one set of standards for other early investors but extract another for yourselves?<p>$20k may not be much, but in the context of a convertible note, even with a significant discount, YC's contributions could be properly valued by the market rather than set as an arbitrary standard.
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ohashi
Probably because most of the value isn't in the money they are offering. Thus,
offering a convertible note would undervalue their contribution to the
startup.

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ActVen
I'm not sure about YC's case. But, at the base of it: Convertible Notes =
Debt. Even though they provide a chance at equity in the future, that is not
guaranteed. I have heard more than a few Angel Investors indicate they are in
the business of investing in companies, not lending money.

