[jparker165]

Clearly you think "post-YC" investments are a good deal, and I agree in aggregate. But the problem is that they can always be a better deal and some companies will be better than others.

Let's look at a company who takes $120k from YC in exchange for 7% equity. On demo day they get term sheets for (A) $10mm at a $20mm post-money valuation, and (B) $10mm at a $250mm post-money valuation

In either case the pro-rata vehicle has to take down $700k of the $10mm to keep the 7%. As long as the pre-demo day and post demo-day money are coming from the same fund, it's all good

But let's say the terms sheets are: (C) $10mm at a $250mm post-money valuation, and (D) $50mm at a $250mm post-money valuation

Term sheet (C) requires the same $700k, but term sheet (D) means YC has to shell out $3.5mm.

If you're less than excited about this particular company, would you be more likely to mention that "$10mm is plenty of cash and term sheet (C) lets the founders maintain far more equity"?

I doubt it. And conflicts of interest don't necessarily cause problems. But, this clearly going to cause friction at some point.

[vasilipupkin]

This is not going to be a problem. The company either needs 50 mln or it doesn't need it. if it needs it, then talking about how 10mln cash is plenty is pointless. And if it doesn't need 50 mln, it really shouldn't be raising it in the first place. In practice, YC will probably stay away from maintaining pro rata in some rounds, especially if there is no issue with negative signaling