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.
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.