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Has convertible debt won? And if so is that good for start-ups? Good for investors?

September 1, 2010 /

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Paul Graham, founder of Y-Combinator, sent out a tweet on Friday saying: “Convertible notes have won. Every investment so far in this YC batch (and there have been a lot) has been done on a convertible note.”

It’s an interesting data point on Y-Combinator companies, but is this truly a macro trend? Have convertible notes really won? And if so is that good for start-ups? Good for investors?

I think the answer to these questions are that 1) it’s not at all clear that this trend is as definitive as Graham suggests; 2) it’s a mixed bag for entrepreneurs (more positive in the short run, potentially negative in the long term); and 3) it’s clearly not a positive trend for early-stage investors.

Seth Levine

Full Story: http://www.sethlevine.com/wp/2010/08/has-convertible-debt-won-and-if-it-has-is-that-a-good-thing

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