I know there have been cases where startups have decided to shut down and return their remaining cash to investors (including some YC companies, I think); what happens in the case where a convertible debt holder thinks a startup should take that option but the founders aren't ready to give up?
Or is it standard practice when a company raises a second round of convertible debt to extend the maturity of the first round?
In your experience, would most startups survive if their angel investors with convertible debt wanted out, even if the cash wasn't there to repay it anyway and there were no tangible assets to sell?
Adeo's post reads to me as being a warning about the potential fallout in a context where people want out. I don't think there is much argument that the Angels wouldn't recoup much anyway. But neither is that the case when people sell public stocks that they've acquired at the top of the market when it hits the bottom. But even professional investors do that too with predictable regularity.