Update below with the final email in the chain where the entrepreneur apologizes (and talks about some challenges around fundraising that led to his frustration).

I just tweeted about an unfortunate email exchange I just had with a company founder, but 140 characters isn’t enough to really do the matter justice. And more important than my venting (and to be clear this post is definitely part that) is the real issue that many entrepreneurs face about how to handle a “rejection” email from a potential funder. This is an example of how not to do it.

I pride myself on answering all the legitimate emails that I receive (punctuated by the point that it’s 8:24 on a Tuesday night and I’m sitting here at my desk doing just that). I think this is getting more common amongst VCs, but I do hear from a number of entrepreneurs that they send notes off and get nothing back. I figure everyone who emails me their plan is really excited about what they’re doing and deserves a response. Sometimes it’s a quick no, sometimes it’s more extensive if I have an idea that I think is worth sharing back.

From the entrepreneurs perspective I can understand the frustration of hearing that the idea that you’re so excited about isn’t something that whoever you emailed wants to hear more about (and I can relate – Foundry raised money from investors and got plenty of “no’s” before we managed to pull together a syndicate of fund investors). But the reality is that not everyone shares your passion, not everyone is at the right time in their fund, not everyone has time vs. other things their looking at to take a closer look, etc. And with most firms having some kind of focus, there are plenty of ideas that simply fall outside of a firm’s investment bounds. And, of course, the math makes it hard as well. At Foundry we see something like 5,000 business plans every year of which probably 500 or more are clearly plans that will get funded by someone. So there is no lack of really interesting things to take a look at. But there is a lack of time and money. In our case that means making about 8 new investments a year (give or take). I’m sure many firms have a similar funnel.

Nonetheless, handling a rejection is important. Done well it can keep the door open to further engagement (I’ve had plenty of companies that I’ve turned down drop me notes with updates on their progress and asking me questions or advice) and can sometimes lead to a later investment (we have a company in the Foundry portfolio that we (I) turned down that we funded several years later). I strongly believe in the “no assholes” rule and try to live my life by it.

Below is the exchange in question (personal details redacted), posted in all its glory. Ironically in this case it looks like this is someone I gave some advice to about a prior business plan (I don’t remember the details – it was one of thousands of these sorts of emails that I have responded to over the years). Oy!

_______________________________

Howdy Seth,

Our social site based on privacy never went anywhere.
www.[redacted].com

We were right about the privacy stuff. But no one cares. Oh well, win some you lose some. I’m proud we did it, no regrets.

Check out our site:
www.[redacted].com

We make money, been around a long time, our customers love us.

There’s a big opportunity we need help with (not sure if that’s the right lingo or not).

Any interest?

Thanks

My initial response:

Sorry that the [redacted] idea didn’t take off. It’s hard to get people interested in a new social networking idea these days (even those who say that privacy is important). Good for you for moving on to something else.

.[redacted] is definitely novel, but doesn’t really fit our investment focus (see www.foundrygroup.com/themes). Big opportunity is definitely the right lingo (and what you’re searching for…).

seth

And then this is what I get back:

Howdy Seth,

Be honest.Did you even look at the site?

Obviously it totally pissed me off (thus the tweet and the rant here). This was my response:

I’m debating whether to answer or not given the tone of your email. But I didn’t want to let your belligerent, tactless note pass. I did look at the site – and you have no reason to rudely call me out on having not done so. If you looked at our website you’d understand why this isn’t a fit for us (seewww.foundrygroup.com/themes – we’ve written extensively on what we’re interested in and what we’re not). And yes – if you had a cure for cancer we wouldn’t be a good target for you because health sciences isn’t in our investment focus (which, again, you would know had you done any research on us). We get over 5,000 business plans submitted to us each year (and fund about 8 new ideas). That’s why we’re so deliberate about what we’re interested in (and good at) and what we’re not. We have entrepreneurs of all ages and “pedigrees” (whatever exactly that is). And have funded people we’ve never met before or who don’t have 1 degree of separation with us. You can believe otherwise if that makes you happy. But there’s no need to be an asshole about it.

I recently wrote a blog – The Power of Location – about Quova (one of the companies I work with) and the idea of “place” on the Internet.  In response, Dimitar Vesselinov (who has a great blog) dropped a couple of comments to the post. My sense is that not everyone pays attention to the comments section of blogs, so I thought I’d post the links he suggests here. I also want to be sure I’m clear on the differences between digital identity (the subject of Dimitar’s comments) and geolocation (the subject of my post) as well as how the two ideas overlap.

First the comments. Below are some sites that Dimitar sent over for those interested in learning more about digital identity:

Schneier on Security
http://www.schneier.com/blog

The Identity Corner
http://www.idcorner.org

Identity Woman
http://www.identitywoman.net

Kim Cameron’s Identity Weblog
http://www.identityblog.com

Presentations & Audio :: Digital ID World 2004 Conference
http://conference.digitalidworld.com/2004/attendees/downloads.php

I’ve seen a couple of these sites in my travels on the Internet and checked the rest out after he sent along the comment – there’s good information here that’s worth checking out. The notion of digital identity, which seemed to lurk in the shadows for the past few years, is really starting to take off – especially now that the ever-feared Microsoft has given up on Passport (I don’t think I know anyone who actually used this service for anything close to what Microsoft intended; signing up for messenger or MSN through passport doesn’t count).

There’s clearly overlap with the world of geolocation – particularly in the realm of security and authentication (just as your digital id can be used to confirm that you are who you say you are, so can geolocation data be used to support your claim of who you are). There are important differences, however and the markets really aren’t heading in the same direction. Who you are is different from where you are. While its important at times to know who is involved in a transaction, its often just important (or more important) to know where they are (for example in validating taxes in an on-line transaction – in the off-line analogy, I don’t get charged Boulder taxes when I buy something in San Francisco just because I’m from Boulder – where I am is more important in that case than who I am).

Also, digital id is great for people who want other people to know who they are, but only works when they are part of the equation. Put it another way, digital id is for the most part an active technology – you (or your administrator) needs to actively participate in creating your digital identity. Very useful if for when you are trying to validate on a network or manage access to an array of applications. Its not useful at all if the user wants to remain anonymous or for whatever reason doesn’t want to participate in actively identifying who they are. Geolocation is passive – it doesn’t involve cookies or user defined parameters, just a look-up on an IP address. And while you can run your address through an anonomyzer service to mask your address, you ultimately have an IP address assigned to you (which may mean that a service like Quova can only tell that you are trying to hide where you are vs. telling where you are). This makes the potential universe of traceable events much higher – since every transaction on the Internet involves an IP address (even if its attempted to be masked or anonomyzed in some way) but clearly there will be only a small subset of events that involve digital id (and they will be easier to mask). I imagine that Damitar gets all this, however I wanted to add some context with which to look at the two markets.

Here are a few links worth taking a look at: Google Trends – www.google.com/trends (thanks to Jason for the pointer).  I played around with this a while ago – they’ve improved it so you can compare search trends for different terms at the same time and also see what region the searches are coming from. Woot – Think you can’t make a business based on one product sale at a time? See www.woot.com. splunk’d – You may have heard that AOL released their search database (that actually had customer identifying information attached to the search terms – oops).  www.splunkd.com will let you search against this database to see what people were actually looking at – compare your searches to the population at large.

Enjoy!

Dave Sifry, CEO of Technorati, has another of his series on the evolution of the blogosphere up on his site.  Most interesting to mere were the results on the dominant languages of blogging.

Here are his key takeaways (quoted directly):

Technorati is now tracking more than 57 Million blogs.

Spam-, splog- and sping-fighting efforts at Technorati are paying dividends in terms of the reduction
of garbage in our indexes, even if it does seem to impact overall growth rates.

Today, the blogosphere is doubling in size approximately every 230 days.

About 100,000 new weblogs were created each day, again down slightly quarter-over-quarter but probably due in part to spam fighting efforts.

About 4% of new splogs get past Technorati’s filters, even if it is only for a few hours or days.

There is a strong correlation between the aging and post frequency of blogs and their authority and Technorati ranking. The globalization of the blogosphere continues. Our data appears to show both English and Spanish languages are a more universal blog language than the other two most dominant language, Japanese and Chinese, which seem to be more regionally localized.

Coincident with a rise in blog posts about escalating Middle East tensions throughout the summer and fall, Farsi has moved into the top 10 languages of the blogosphere, indicating that blogging continues to play a critical role in debates about the important issues of our times.

AdExchanger just posed an interview that I did with them that touched on some of our ad-tech investments as well as our overall investment philosophy. I’ve cross posted an unedited version of that interview below.

1. Why get into the venture capital side of the business? Do you ever get the entrepreneurial "itch"?

I first got into venture capital about 10 years ago and I love my job. I was running a few business units for a small public company and while I enjoyed the operational side of my job, I was also responsible for M&A and partnerships and had a particular affinity for the transactional side of my job. While I consistently have the entrepreneurial itch, I actually think this makes me better at investing – it reminds me of why I’m in business (to support entrepreneurs who are the real stars of the show). I’ve also co-founded a few companies (including Trada which is a company in the Foundry portfolio that helps advertisers better execute paid search campaigns; I wrote about that experience recently on my blog: https://www.sethlevine.com/wp/2010/08/trada-from-the-beginning) and I’m very close to many of our portfolio companies at an operational level which helps to satisfy the entrepreneur in me.

2. What is Foundry Group’s investment philosophy?

Unlike many venture capital firms that invest in certain geographic regions or specific technologies and sectors, Foundry Group’s investing activity is largely driven by a thematic approach. The themes we pursue tend to be horizontal in nature and are often driven by underlying technology protocols and standards or emerging market trends and customer needs. Rather than looking for short-term hits, we focus on themes that have the ability to drive a cycle of innovation (and hence provide multiple investment opportunities) over a period of five to ten years or more. My partners and I have written extensively about this thematic approach on the Foundry Group blog: https://www.foundrygroup.com/wp/category/themes/

3. You’ve invested in AdMeld, Triggit, Lijit, Medialets and Trada among others in the ad space.  Foundry Group is an advertising start-up "bull" it would appear. Thoughts?

I’m extremely excited about the portfolio of companies my partners and I have put together at Foundry Group which includes some great ad tech companies which you list above. We think of these investments as part of our “Glue” theme – meaning that they’re all essentially connective technologies that help increase the velocity, accuracy, transparency and availability of online advertising. I believe that online advertising is going through an important transition with the rise of real-time bidding platforms and advertisers increasing ability to buy audience vs sites. Our investments in many of the companies above follow that idea. Additionally, mobile is becoming an increasingly important platform as devices become more powerful, more flexible and better connected. Obviously our investment in Medialets – the market leader in rich media mobile advertising – reflects our belief that mobile in general, and rich media on mobile specifically (which is really the kind of advertising that mobile was made for) is a rising area in advertising. We’ve been fortunate to be able to work with some of the companies and people that are at the leading edge of digital media and I think we’ve put together a great portfolio of companies in this area (and I’d add Mandelbrot Project to your list above, although we’re not talking much about what they’re up to yet).

4. What are some key overall, characteristics that Foundry companies share?

I’ll resist the temptation to answer with some superlative VC cliché about how great all our management teams are or disruptive the underlying technologies are becoming.  Rather, I’d say that the one truly common trait across our portfolio of companies is the obsession these businesses have with their product. This product obsession starts with the CEO and pervades the management teams and operations of our companies. They eat, sleep and breathe product.  From my perspective the results of that obsession is obvious when you look at what each of our companies is doing to change their respective markets.

5. Can you identify a couple of common errors that entrepreneurs make when raising funds?

I think there are two relatively common mistakes that entrepreneurs make when fundraising. The first is trying to do too much in the first meeting. The goal of that meeting isn’t to sell the investor on making an investment, it’s to whet the investor’s appetite and leave them wanting to learn more. Entrepreneurs should structure that first interaction to do exactly that. The second most common mistake is not asking what the process is on the investors side and as a result mistaking activity for progress. Every firm (and angel) has their own process – understanding that process and making sure you know how a firm reaches a decision (who has to be won over, in particular) is extremely important. The adjunct to this point is that while relatively few entrepreneurs methodically do it, it’s important to perform due diligence on the investors you’re talking with, just as they’ll be performing due diligence on you. Find entrepreneurs they’ve worked with before, in particular those at companies that didn’t work out as planned, and ask how the firm and the specific partners were to work with. You can also use this as a chance to understand from a third party both the partnership dynamic within the firm as well as what their perspective of the investment process looks like.

6. Given the scope and size of Foundry Group’s investments today, it would appear you’re at an inflection point.  At the very least, your current group can only manage so many investments after all and the fund itself is nearly fully-invested is it not? What’s next?

We have a very specific, and somewhat non-traditional view of the firm we’re building at Foundry. Our intention is not to create a legacy or have a business that survives the 4 founding Foundry partners. We have no associates at the firm and all do our own work. Our current fund is $225m and our intention is to raise a series of funds of the same size and then be done. As we like to say: “last one finished shuts off the lights”. To be clear about where we are as a fund and a firm, we have plenty of capacity to continue to make new investments.

7. Can you talk a little bit about the growth of the Boulder startup community and what makes it unique to other startup communities such as Silicon Valley, NYC, Boston, etc.?

I think Boulder is increasingly becoming known as one of the leading start-up cities in the United States (for example, here’s a recent BusinessWeek story naming Boulder the #1 city in the country for start-ups). And I can tell you from living here that there is a ton of great energy in this community – from TechStars (which started here) to the Boulder Open Coffee Club, to our local NewTech Meetup to Ignite Boulder. Interestingly (and somewhat different than other markets) the Boulder start-up scene is both very distributed (there are a large number of leaders in the Boulder start-up community) and collaborative. I don’t know that I’ve ever been in a city where people involved in start-ups were as willing to help each other out as they are in Boulder.

8. What are your thoughts about M&A and IPOs – and a successful exit for ad tech startups? Do you see a window developing?

We’ve all seen the global statistics – August was an unusually strong month for mergers and acquisitions. The interest rate environment as well as the relatively large cash balances of many large corporations appear to be driving somewhat of a resurgence in acquisition activity. I’m cautious that these high level data (driven by large global transactions) will be both sustainable and mean an more favorable overall environment for venture backed businesses. The time I’ve been in the venture capital business has been perhaps the worst IPO environment since the venture asset class came into being, so I’ll refrain from making any predictions about whether we’ll see any kind of sustained resurgence of the IPO market (but we can all hope together….)

9. If a startup wants to get a meeting with a VC for potential investment, any tips? Any tips on pitching Foundry Group in particular?

If you have a direct (or indirect) path to an introduction – through another entrepreneur or someone else you know – that’s always the best way in to any VC. It provides additional context which is helpful. That said, many VCs these days (Foundry included) are pretty open about what they’re interested in. I always appreciate it when people engage with me on topics that I’m writing or tweeting about. And to give this some additional context, Foundry has funded several companies that first reached out to us because of a blog post (including one company where our first communication was through Twitter).

I have to admit that when I set up my Twitter account I thought I’d be turning it off after a few days for lack of interest. Instead I was calling up T-Mobile ordering a higher volume sms package.

I have to say there’s something addicting about it – I like the short message format; I like hearing what my friends are up to; I like the record of my day that it creates for me and for people that are following me; in short – it’s just fun. My Twitter ID is Sether (www.twitter.com/sether) if you want to see what I’m doing.

A few quick comments, in case this post finds its way to the Obvious gang (creators of the Twitter app):

• it’s too hard to find users and even harder to add them to your network. seems like this should be much much easier. and while we’re talking about it, what’s the difference between friends and followers?
• i’d like to be able to reply to the individual sender – replying to a twitter message sends a note back to twitter (meaning it gets broadcast as a twitter message to your friends and followers) rather than sending a message back to the poster. at a minimum a reply should trigger a ‘comment’ like feature (that would keep it w/in the twitter ‘system’ if that’s what the issue is), but ideally, you could reply directly to the message originator.
• it would be great to be able to twitter pictures.

If you really get into the service, check out TinyTwitter (www.tinytwitter.com) – an app written by my friend Kevin Crawley which will save you the hassle (if you think of it that way) of constant IM pings. Very slick and in typical Kevin fashion both simple and extremely useful at the same time.

Sorry – meant to have this one up a little more proximate to the actual event . . . You go to Gnomdex? Me neither.  I was bummed I missed it, so I spent some time rummaging around on Google and Technorati looking for some links.  Here’s a few that I found that, while they don’t replace the experience of attending in person, at least give you a little bit of the flavor.

Here’s the conference site. – http://gnomedex.com/

Here’s the conference update site (scroll down and track the action) – http://gnomedex.com/updates/ Here’s the conference blog roll (links to attendees who blog) – http://www.gnomedex.com/updates/2005-04.phtml

Here’s some photos put up by “laughing squid” – here and here.

Of course the big announcement at Gnomdex was Microsoft’s broad support in Longhorn for RSS. Nick Bradbury had a great review here.

I’ll see you there next year. <g>

One of my favorite services is unsubscribe.com. It’s a gmail plug-in that with one click lets you rid your inbox of unwanted newsletters. I recently analogized newsletters to tending a garden. You have to stay on top of the weeds or they get out of control. Unsubscribe.com lets you do that.

With this as a backdrop, I was pretty surprised to receive the following in my inbox last week:

Thank you for being one of our paying customers, your trust and support helped propel us to where we are today.

With that being said, I’m excited to tell you that beginning yesterday, August 4th, 2011, we have made our full suite of products (Email Unsubscribe and Social Monitor) completely free, which means we owe you the pro-rated amount of $9.62 and have discontinued any further billing.

Please fill out this quick form on your Account Settings page so that we can send you a refund check. We would like to simply refund your card, however that is not something we can do with our current payment processor so we will instead have to send you a physical check, sorry.

Thank you again and we look forward to keeping your inbox clean and your social networks secured.

Team Unsubscribe

I was blown away. Here was a company that was deciding to stop charging for it’s product. That’s not all that uncommon (although see my post with some thougths on free models here for a few ideas on pricing). But giving back my pro-rated unused account balance? Now that’s really taking it to another level. Here was my response:

Hi. You guys rock. Seriously. I love your product. I think it’s great that you have a model that will now allow you to offer the unsubscribe product for free. I think it’s even greater that you decided that if you were going to make the product free that you should grandfather in existing customers (even though we all signed up with no expectation that we’d receive a later discount). I’ve personally received much more value out of the unsubscribe.com service than I realized I would at the time I signed up (I’ve even tweeted about my love of unsubscribe.com a few times!). You’ve saved me countless hours either deleting emails I never had an interest in reading or trying to navigate the labyrinth of dozens and dozens of companies “unsubscribe” processes. Please keep the balance on my account. I couldn’t be happier with you guys and I couldn’t possibly accept anything back given the tremendous value I’ve received by using your product.

I love it when companies do the right thing. Even if I’m not planning on taking them up on their offer…

With thanks to Ross for actually pulling everything together, I’m launching a new look and a new site today. Seth Levine’s VC Adventure is now hosted on my own domain – www.sethlevine.com – and is sporting an updated look. My old TypePad site is still active (although I’m no longer posting there) and in theory (at least until it breaks) is redirecting traffic to my new site (and should be directly specific posts to their respective post here at sethlevine.com). Let me know if you find anything broken or in need of editing/updating/improvement/better design.

Ok. I can’t say that I’ve ever heard of OutsourcingTV.com but apparently it exists and they did an “interview” with Hans Bukow, the CEO of eWork on the recent eWork/ProSavvy merger (see my last blog post). You can check out the interview at the following link:

http://www.outsourcingtv.com/ot/index.jsp?movieid=13688&channel=

I’m in the middle of writing a post on whether blogging means an end to traditional media and, not to steal my thunder, but I think this interview backs up the point I’m going to make – there’s lots of room in the world for niche media (or point media) to exist along side more traditional media sources. Clearly enough people care about the outsourcing market for there to be a website that supports it (and magazines, etc.). While the merger of two companies like eWork and ProSavvy won’t necessarily make it to traditional media (other than perhaps an inch blurb in the business section), it’s clearly important to people who follow the industry and, as this piece shows, warrants further discussion/elaboration.