[kg4lod]

I'm an entrepreneur, so it all sounds great for me, but why would investors go for this? It seems like they give up a lot of down-side protection: (1) No ability to convert or abort in the absence of a QFE, (2) no more first creditor protection -- if the company goes under, but also has outstanding loans, investors don't participate in a share of the liquidation proceeds as they would as debt holders (3) no interest = less equity at conversion? Am I wrong here? What am I missing? Thanks YC for your ongoing efforts!

[tptacek]

I'm assuming that the theory here is that the good investors are more concerned about being in on the next Snapchat or Airbnb, and a lot less interested in bolstering downside protections that only apply if an investment is going to be one of the unproductive ones anyways.

Meanwhile, the good companies aren't going to be likely to entertain financing on anything but terms like these, so fighting them just incurs an adverse selection penalty.

The same thing seems to have happened with convertible debt, which was preceded by financing mechanisms that were way, way more onerous for entrepreneurs.

[kg4lod]

Completely agree with you. The article seems to make the point that investors would welcome these changes, when in reality, we will be forcing these changes on investors. That was precisely my experience with the series AA.

[not_that_noob]

With the progressive reduction in the cost of creating a startup, there is a shift in the leverage fulcrum toward the entrepreneur away from investors. This is a milestone that marks this progression. Yes it's marginally worse for investors, but honestly the investors who would care about such minimal edge-case benefits typically don't understand how startups work, and are thus not the ones you want anyway.

[gsharma]

> (3) no interest = less equity at conversion

This will be taken care by the market via the caps put on the Safe.