The logical extreme of Y Combinator is indentured servitude.
In the old days, an indentured servant was someone who had to work for a certain period of time to pay off his bond.
Today Paul Graham is betting on people, via the form of a corporation. If their first startup fails, Y Combinator will invest in the next. Paul's investment lets the founder do what they want for a time and hopefully produce something good and useful at the end of it.
Subtract the intermediary corporation and you have what looks like an indenture contract. Paul would invest directly in the founder, saying "Here is enough money to live on for two years." Something like a Macarthur Genius Grant. But, unlike a grant, Paul might say "Over the next seven years of your career I want you to pay me back, in the form of 10% of your yearly earnings or whatever; the repayment would be capped and structured so that you and I both feel like it was a good deal. If you get rich, I get rich. If you bust, that's okay; enough of your cohort will win big that it won't matter."
In Asia people send money home to support their parents. That is less done in America, and perhaps that is why this model has not occurred to Paul. But it is a lot like parents investing in their children for a time, and then their children paying them back, except Paul's not actually related to his "kids".
If David Bowie can do it, why not anybody?
