

Ask HN:  How to start a VC bidding war (when two are already interested)? - d4ft

Hi all-<p>A good friend approached me with this problem and I didn't have a good answer. I figured you guys would have some perspective.  His company is raising a seed round.  He is currently in talks with a few VC's and has had strong interest from two (like talking finance, mentions of term sheets, etc.).  Recently he was told to get out there and start pitching to other VC's and use the current situation for leverage both ways.  So three questions:<p>1) Is this indeed the best course of action?<p>2) How should one pitch these "new" VC's without sounding like a total dbag?<p>3) Any other tips on how to do this most effectively?<p>Thanks!
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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?

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redthrowaway
At the seed round, your friend should be focussed on getting whatever money
they need to move forward with the business, while giving up an acceptably
small part of it in return.

After those conditions are satisfied, a good relationship and shared vision
with an investor is worth more than extra cash or lower dilution. These people
will be your business partners until the sale, IPO, or death of your company,
and so you should put almost as much care into choosing them as you do your
cofounder(s).

A bidding war is fine, but huge weight should be given to the VCs themselves,
and not necessarily their offers.

