I think the most interesting bit is that it decreases a sort of self fulfilling prophecy. Investors "treat investment by YC partners as an accurate sign of how

I think the most interesting bit is that it decreases a sort of self fulfilling prophecy. Investors "treat investment by YC partners as an accurate sign of how promising we thought a startup was." So then, the company raises more money - and appears to look more promising. Sure, partners may have less incentive immediately (as mathattack said) - but the real winners will be more clear to the partners after demo day (and three weeks). They will have a list of winners (in their mind) before demo day. Then, investors at demo day will pick a list of winners (who they invest in). And YC partners will see the overlap - those who are picked as winners by YC Partners and independent investors.