For all of you out there who are wondering, Amy is doing fine. We’re in Boulder, she’s happy, in some pain, but enjoying the delightful impact of Percocet, and making her way through MI-5 Season 8. Thanks for all of the support, emails, and kind words.

I’m about to head out for a five hour run (broken into three separate segments) in preparation for the 50 miler I’m doing in April after I help her take a shower (which ordinarily I would be excited about), but first I thought I’d write some thoughts about a call I had with an entrepreneur yesterday.

The call was about a potential financing he is considering. I’ve gotten to know him some from a distance over the past year and am impressed with what he’s created. He originally just called me for advice on his financing strategy but I started the call by telling him I was interested in exploring leading a round, would be willing to give him advice also, and would quickly tell him if I was dropping out so he could flip me into “advice only mode” if we weren’t going to end up being a potential investor.

We had a wide ranging conversation over an hour about the current state of the business and how he’s thinking about the financing. Several times over the course of the hour he sounded defensive about a particular issue – well – not defensive, but uncertain. He’d frame what he thought was a negative in the context of the way he’d heard it from a previous potential investor (let’s call them BucketHead Ventures) who hadn’t gotten to a deal with the company in the past.

One of these was around churn – he asserted that one of the clear weaknesses of the business was the high churn rate. I pressed him on what he meant and we went through some numbers. He didn’t have a high churn rate at all – in fact, his churn rate after a customer was paying for three months was minimal. The problem – described by BucketHead Ventures as “high churn” – was a combination of what happened in the first three months and BucketHead’s inability to do cohort analysis, so BucketHead looked at absolute churn on a monthly basis rather than on a cohort basis.

In my head, I thought to myself “bucketheads – they pretend to understand businesses like this but have a total miss at a basic level.” The entrepreneur understood the miss, but had internalized BucketHead Ventures feedback and was letting it color his view of his business. And, more importantly, it was making him gunshy. Instead of articulating a powerful story about low customer acquisition costs with minimal downstream churn, he lead with “the worst problem with the business is our high churn rate.”

I see this all the time. While some entrepreneurs think all VCs are bucketheads (they aren’t), other entrepreneurs think all VCs understand this stuff (they don’t). Even ones who seem to be experts, or should be experts, or claim to be experts. Especially the ones who claim to be experts. Often, they are just bucketheads. Listen to their feedback, but don’t let it make you gunshy if you think they are wrong.

I’ve always had mixed feelings about the importance of a company announcing a financing in the absence of any other activity. “Dear World: We Just Raised $X From Investors A, B, and C.” Ok, but so what?

In my book, there is only one real reason for this – to attract new potential employees: “We’ve just raised $X and are hiring 20 people including types A through types Q – see our jobs page at jobs.companyname.com and apply now.”

Unfortunately, very few funding announcements are focused on this for two reasons. The first is the stupid one – many entrepreneurs get tangled up in the ego dynamics of a financing (“look ma – we raised money’) and lose sight of the notion that raising money is just one tiny step on the path to success. In my book, once you’ve completed a financing, take a deep breath, tell everyone in the company so they know how much money is in the bank, and then get back to work creating amazing things for your customers.

The second is less stupid, but is something I see over and over again, even with companies we are investors in (and we know better). When you do a financing, you file something called a Form D with the SEC. This process is fully automated which means it is easy for our friends like Dan Primack at Fortune to see any new filings that are made. Dan was one of the first people I knew who regularly published Form D info – it’s now spread widely across most of the VC-based publications, but I’ve give Dan credit for being the most diligent with this (and with many other things he reports on.)

Once you’ve filed your Form D, the data is available on Edgar with a simple search. There are other ways to get it as well since there are plenty of services that republish Edgar data with a better UI for searching. Regardless, the info on Form D is out there on the web.

Some VCs I know claim that you don’t have to file a Form D. Having researched this, I think it’s a dumb move. Most credible attorneys that work with corporate securities, especially those in the VC industry, will insist that you file a Form D if you have more than one investor, or if you have investors in more than one state. In our world, we just tell companies we invest in to file it and not worry about it.

This takes us back to the beginning of the post. For some reason, some companies want to keep their financings quiet. That’s fine – just file your Form D and say nothing about it. It’ll get picked up in the daily VC publications, like Term Sheet and VentureWire. Maybe it’ll end up on TechCrunch if you’ve got some famous investors that they like to write about. And, if your local paper is on the ball, it’ll show up there also. But it’s meaningless – “Joe’s Company Raised $X From Investors A, B, and C according to a filing with the SEC.” Next.

But if you are going to announce your financing, do it right – in conjunction with your Form D filing. Have your jobs page up. Make it clear that you are hiring. If you have substantive stuff to announce around the financing, say an acquisition, a major strategic partnership, or a new product release, announce it at the same time. Substance matters here – the more the better.

Make your noise for a day – and then get back to work creating amazing things for your customers.

My friend Paul Kedrosky – who spends some of his time as a Senior Fellow at the Kauffman Foundation – has a thoughtful short video (as part of the Kauffman Sketchbook series) on where entrepreneurs get their money. While it’s easy to get confused and think that VCs are the center of the financing universe, Paul reminds us that most entrepreneurial companies are funded by the entrepreneur’s savings, cash flow, credit cards, friends, and family.

It’s a creative three minute video with plenty of meat to it.

I recently spent some time with a long time friend and entrepreneur who I’ve funded in the past. He’s working on a new company which I think is really neat and I’m already a user of. He called me for feedback on his fundraising strategy as well as to see if it’s something that we’d be interested in investing in.

It’s outside our themes and different than the type of business we invest in. Given our long relationship and the fact that he’s an awesome entrepreneur, I squinted hard at one of our themes, turned my head sideways, and decided to take a look. We spent a few days applying our process to it (each partner touches it and we give each other real time qualitative reactions) and quickly realized that it really wasn’t something for us as it was far outside anything that we felt like we could help much with beyond money and moral support (which my friend is going to get from me anyway.)

So – I sent my friend a note with my explanation for why we are passing. I offered to help with introductions because (a) he’s an awesome entrepreneur, (b) it’s a very fundable business – just not by us, and (c) I have a lot of confidence that he’ll build a successful business and there are several VCs who I know that I think would like what he’s working on.

His response was dynamite. It was

“No sweat. I knew it was a longshot, so I appreciate you even considering it. I know how many deals you have to pick from.

I’d like to take you up on your offer to help us get funded, but I have a better idea … help us avoid the need for funding (700 clients gets us to profitability).”

He then went on to detail a handful of things he’d like me to do assuming that I’m a happy user of his product. All of them are easy, low maintenance for me, and in several cases actually benefit me.

I love that my friend is much more focused on ramping up his customers than raising money. It’s easy to get lost in the soup of “X company raised $Y” and forget that it’s not about fundraising, but building a business. When I think of some of my favorite TechStars companies, such as Occipital, they bootstrapped for several years before raising any money (well documented in the book Do More Faster) and even then could have easily built their business without raising any money.

Don’t forget to bootstrap.

Last night I gave a talk hosted by SVB at their Palo Alto office. It was part of the “Never Ending All Old Is New Again Venture Deals Book Tour.” I had a ton of fun talking to and answering questions from about 75 entrepreneurs who – at the minimum – enjoyed eating the great food and wine that SVB provided on a luscious evening in Palo Alto. Oh – and I signed a bunch of copies of Venture Deals.

Several questions came up about Convertible Debt. We touch on it in Venture Deals but realized that we didn’t cover it in enough depth so Jason recently wrote a Convertible Debt series on Ask the VC. The series is now complete – here are the links to the posts in order.

• Convertible Debt Series
• Convertible Debt – The Discount
• Convertible Debt – Valuation Caps
• Convertible Debt – Conversion Mechanics
• Convertible Debt – Conversion In A Sale Of The Company
• Convertible Debt – Other Terms
• Convertible Debt – Warrants
• Convertible Debt – Early Versus Late Stage Dynamics
• Convertible Debt – Wrap Up

If you feel like we missed anything, or got anything wrong, or were confusing in our explanation, please chime in on the comments on the post. If you want to see an actual convertible debt term sheet or the actual legal documents, take a look at the TechStars Open Sourced Model Seed Financing Documents.

As a bonus to the evening, I got some direct, constructive feedback from one of the attendees via email later that night. While the “thank you” and “good job” notes are nice, I only learn when someone criticizes me (hopefully constructively, but I can handle it in any form.) The feedback was:

May I make a constructive criticism regarding your talk tonight? Your answers to audience questions tend to be overly long and rambling…..you “overanswer,” to invent a word.  You start strong and respond right to the essence, but then your focus blurs and you keep taking verbal baby steps away from the thought stream. If you trim a minute or two off each answer, you can call on more people and hear more questions, which sends more people home happy. I think if you self-critique a video of yourself in a Q&A session, you’ll arrive at the same conclusion. 

It’s a good suggestion. I often try to provide additional context to the question, but it sounds like – at least for one person – I went off on a few space jams that weren’t additive. I love the phrase “overanswer” – it’s a lesson from TV interviews 101 (e.g. just answer a question – any question – quickly). Something to ponder as I continue the Never Ending All Old Is New Again Venture Deals Book Tour.