[davetong]

Do you know how your friend feels about the two current interested VC's? Does friend not agree to their terms, are the VC's open to negotiations, does friend want to go after larger funding? If you can gauge friend's response to these questions, then you should be able to answer Q(1) and be comfortable doing Q(2) without burning bridges.

Friend should also give VC's more credit than to play them against each other or use them as bait. VC's are in their business because they know their stuff and can smell a good/bad idea a mile a way... when they don't understand an idea, it's because we as entrepreneurs have failed to help them understand.

[d4ft]

I would argue that often VC's can't smell a good or bad idea "a mile away". If they could, they would be seeing much better returns. That, I think, is why expanding the VC search once you have a few interested parties makes sense. Sometimes they want a piece of the pie, because everyone else says it tastes good.

Regarding the terms, it's just like anything else. If you can get better terms (terms that won't hinder you if you need to raise a series A) or get a deal with a firm that is more involved in your niche, through competition, you shouldn't settle for "agree"-ing, you should do the best for yourself that you can.

[shanedanger]

It seems like it makes sense, and they probably expect you to be shopping around to other VCs (why put all eggs in one basket). But as far as "is it dick to shop around once you have an offer?" I'm not sure, as I've never raised capital before. I'm curious how long a VC would give you before you've got to say yes to an offer. Like, can you take a month to "think about it" while going around and pitching other people? Will they know that's what you're doing?

[yanivf]

from my experience, there are several VCs that actually can smell a good or bad idea "a mile away" and it usually works for them (at least by their returns). But the main thing you need to consider is that most VCs that invest in an early stage do check your idea, but they care a lot more about you and your team (since your idea will probably change a few times during the process).

While it is acceptable to "shop around" when you are looking for funding, it usually doesn't look good if you start "shopping around" after starting a serious process (aka getting a term sheet) with a VC, unless you see a major gap between what they offered and what you think you need. Most people tend to forget that this is a small world (and an even smaller industry) and if you try to "trick" someone, it might come back to hunt you in the future when you need another round of funding or even contacts.