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.

Every day I get emails from folks either raising money or telling me about their new idea and asking for feedback.  The conventional wisdom is that VCs rarely invest in things that reach them randomly (or “over the transom” in someone’s VC vocabulary – I can’t for the life of me figure out why that phrase hangs around.)  However, this isn’t the case for us as 10% of the companies we’ve funded in the past two years were initially from “cold call” email inquiries (Brightleaf and Organic Motion).  So – I’m very happy to get a steady stream of random emails – keep them coming!

I’ve noticed a trend toward more video presentations lately.  I looked at one this morning and it reminded me of the old writers adage “show don’t tell.”  This applies nicely to every pitch you ever do.  Specifically, I don’t want to hear you describe what you are going to do, I want to see it.  Or – if it’s not built yet, see an example of it.  It’s always better to point me at a URL, even if it’s a very rough prototype, as I can usually get a much quicker view of what you are doing by simply playing around. 

The video I watched today was a two minute segment of the entrepreneur looking into the camera and describing his business idea.  The idea was fine although I could tell within 15 seconds that it wasn’t something we’d invest in given the market he was going after.  I ended up watching the full two minute video to see if he ever shifted from “tell” mode to “show” mode.  He never did – the two minutes ended and the whole video was the entrepreneur describing his idea. 

In my book, this was a wasted opportunity.  I could have read one paragraph that contained the same content.  The entrepreneur didn’t take advantage of the medium (video) in any way.  While he did a nice job on the monologue, he wasn’t trying out for a TV commercial, a TV show, or a movie.  He missed the goal – get my attention and hopefully get me to engage to the next level.

For most of the great VCs I know, the way an entrepreneur makes a connection when there is no pre-existing relationship is to generate an immediate interest with the product.  That’s what happened for us in the case of Brightleaf and Organic Motion.  The entrepreneurs were highly credible, but more importantly we immediately got excited about their products, which caused us to be more interested in going deep and exploring an investment.

This is a repeating theme that for some reason isn’t said strongly enough.  The great entrepreneurs (and sales people) “show”.  Just think of how Steve Jobs does it.  Show me!

The National Venture Capital Association regularly has webcasts aimed at various members of the venture capital community.  On January 23rd from 12:00 to 1:00 p.m. Eastern they are having one titled Beyond the Limited Partnership Agreement – Issues For Challenging Times.  The description follows:

The current global financial crisis is impacting the venture community in ways that no other economic crisis has. For the first time in our industry’s history, some of the most committed, long term investors in the private equity asset class are reevaluating their commitment, shifting strategy and making the future uncertain. Join us on January 23rd for a provocative discussion as our panel discusses many of the provisions that define the relationship between General Partners and Limited Partner investors, and how these are impacted by challenging economic conditions. In addition, our panel will cover some of the inevitable consequences that may affect the internal operations of the venture firm.

The panelists are:

Howard Rosenblum, Partner, DLA Piper LLP (moderator)
Eric Fitzgerald, Director of Venture Capital Investments, MetLife
Michael Greeley, General Partner, Flybridge Capital Partners
Tom Hodge, COO and General Partner, Frazier Healthcare & Technology Ventures

If you are interested, register directly on the NVCA site to participate.