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Comment by rudiger | Hacker News Reader

I always hesitate when someone says there's "no downside" to accepting large sums of money.

I don't understand. They aren't diluting shares, they aren't liable if the company fails to reach Series A, and by all accounts there do not seem to be any strings attached with regard to oversight (ie. the founders don't need to "answer to" the investor in any way). All they are doing is giving a portion of their future shares to that investor now, at the same value as they would later. It's a no-brainer - what is the downside in your opinion?

What people are pointing out is that nobody outside of this batch in Y Combinator has seen the paperwork, so nobody can actually verify that there isn't something hidden or sketchy present.

I trust Paul implicitly, and I suspect most YC Founders do, and that probably has a lot to do with the acceptance rate. I wasn't in the meeting obviously, so I can't know how I would have reacted to the specifics, but I can say knowing only what I know now I probably would have at least taken the weekend to do my homework.

That makes sense. After re-thinking my previous comment, I suppose another potential downside might have to do with somehow missing out on the numerous copycat offers that I imagine will arise. At any rate, although I'm surprised that everyone has signed on so quickly it does seem like a really good deal for all involved.

Edit: phrasing.

Do angel investors seriously give terms like "you can have this convertible note, but only if you don't already have a convertible note from Yuri"?

What rational reason would an angel investor have to avoid investing in a company that has taken this investment?

Probably not. But I imagine that when it comes to the details some angels might be a better fit than others for certain companies due to their networks, etc. Also, if I had a company that needed about $200k and I had one offer for $150k from Yuri and one for $200k from another similar investor I might only take the $200k instead of both - it would represent a (hopefully small) difference in available shares once it was time for Series A. This is all speculation though - while it seems like fun, I haven't yet been on either side of the investor equation.

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