My guess as to the dynamic is this. If a VC knows that SOME other VC is interested in you, they can't feel out other VCs to see who it is because it might get a third VC involved.
But if one VC knows who the other VC is, then collusion is simple and clearly in the VC's best interest.
No, again it isn't. If you are looking to raise $1M on a $3M pre and you're talking to two firms seriously with the idea of picking one investor (who would end up with 25% in that scenario), you might negotiate some of that point, but its pretty unlikely you will end up taking 1 on 1 ( with the investors each putting in $500K, which would get them to that same 25% ownership threshold as in the original scenario).
they really don't. I realize this is one of those conversations entreprenuers think VC's have a lot, but most VC's have ownership and $ thresholds they are aiming for in an investment - just splitting the baby in half with another VC firm doesn't get you there, and you'd be surprised at how many firms like working with firm a / b / c but hate d / e / f. The better argument for not revealing this is that its leverage - ie, the investor might think your other option is AH/Sequoia/Accel/Benchmark/Khosla/some other top-tier firm, while in reality it might be some relatively podunk firm - you get some potential benefit from that (and also potentially some downside if its the other way around).
The compromise position here is being honest but guarded - ie, especially if you are talking to one of those above - As a founder / CEO's, come back to the investor here and say we're talking to a couple of top-tier firms, which gives the signal effect to the investor that they need to sell / convince quickly while maintaining your leverage as an entrepreneur.
