I think this fits into the larger conversation around what terms to take in a funding round. The anecdote about all the YC companies bragging about valuation post-Demo Day rings true - but what else did they agree to in getting that high valuation? Ensuring that those who have partial control of your company and your future have interests aligned with yours does seem much more valuable than wringing every dollar out of a cap rate.
Actually high valuations tend to be correlated with clean terms. Which is not surprising since both reflect founders having power relative to investors.
I think this is a fallacy. In my experience of the big firms law firms have already developed very clean convertible notes, and there are many that are public, leading to a larger trend in easy terms. By having an entrepreneur friendly first investor (not necessarily lead) agreeing to "clean terms" (independent of valuation), it seems most other investors in a round come on with little friction, even if it might require a call from one of your existing investors/ commitments.
In practice, investors are either pretty upstanding, or kind of dirty. Upstanding investors tend to get the pick of the best because the best companies can choose who they want to do business with. Investors downstream tend to try to overreach on participating preferreds, pro ratas, and lower valuations. It's just how it seems to work.
Actually, to be fair, I did not mean to imply that anyone was "bragging". People may have been celebratory, and justifiably so, but I never felt anyone in particular was bragging.
