No; on several occasions we've invested in startups that had already raised money.
Technically it depends on what size financing triggers conversion. In practice investors tend to be willing to waive converting regardless, because of the advantages to the startup of doing YC.
Awesome, thanks pg - now I'm looking forward to getting the app in shape for applying.
Side note: I'm impressed with the speed and helpfulness of the answers on HN - I asked the same question on linkedin, twitter and facebook and got vague repetitive answers explaining the basics of how convertible debt works instead.
Technically it depends on what size financing triggers conversion. In practice investors tend to be willing to waive converting regardless, because of the advantages to the startup of doing YC.