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Comment by drusenko | Hacker News Reader

you have to understand that YC & the start fund has little to no control over the companies, except perhaps moral authority.

YC has common shares (and a small minority at that) while the start fund is arguably even worse off with a convertible note.

so, if the founders decided to, they could just pay out the rest of the money as a bonus. immoral? yes. illegal? i don't think so.

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Definitely illegal. http://en.wikipedia.org/wiki/Duty_of_loyalty

Thought I'd doubt it would be litigated, unless the founders are particularly stupid in addition to being immoral.

I don't see how fiduciary responsibility holds if the company is in the process of dissolving.

Besides, there are plenty of now very successful founders that didn't have any of the luxuries that we have with StartFund. Somehow they have survived. Survival of the fittest is a good thing.

I seems weird to me, like the whole debt component of the convertible note pretty much ceases to exist unless it is able to be successfully converted to equity.

I guess investors of the type investing in start fund tend to think of it more as a gamble that only converts to anything if the company raises and don't care much about recovering relatively small bits and pieces in the even the company fails.

A Start Fund investment comes with a buy-in for next round. Don't think they're planning to generate huge returns on the initial investment, it will get diluted eventually anyways, but a buy-in gets its participants the front-row seats on next Dropbox and Heroku.

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