[mikekchar]

This also struck me. It seems as though YC gives you $120K, advice, contacts and exposure. Obviously it's worth $120K plus whatever the other happens to be worth. They take equity from the company in return.

Paypal offers a necessary service to a company (payment). They charge a service fee.

I'm not going to say YC isn't useful or worth the equity for some people. However, you've got think that a $120K loan is pretty damn cheap these days. Also, I pay my accountant a few thousand a year and he gives me incredible business advice. Possibly I'm just lucky, but I suspect that young founders do not really understand the options they have open to them for growing a business.

I view my accountant as a necessary business expense. I even get to write off the money I pay him from my income. That's more like Paypal. Similarly, on a loan, I have to pay interest. That's a cost (and possibly necessary expense). If I need to pay a consultant to help me improve my image or make contacts, that's a cost.

Giving away part of your company for a service? Not at all like Paypal :-) Personally, I'd rather pay an expense than give up part of my company. Obviously depends on the situation, though.