It sounds like you don't want to be a VC, you want to be an angel. I'd suggest you look at an angel network in your location and go talk to them about what you are thinking of doing.
"I'd be funding friends, but I don't have a lot of time myself."
He wants to be part of a "friends and family" round or two. No harm in that-- but I think most of the questions you need to ask are best answered by a lawyer.
Can anything significant come of something like this, or is it way too small time? I'm just a normal working schmoe, so I can only afford to support someone's basic living requirements and simple hardware.
