Handling rejection

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?

Just worked out a deal today that leads us into one of the two largest captive auto lenders and one of the three largest banks in the US.

But you’re not interested.

Go see the movie “Twenty Feet from Stardom”.

Then get that funding is more about who you know, pedigree, etc., than anything. Get how many talented entrepreneurs there are out there, that don’t make it. For no other reason, then they’re on the outside looking in.

One of these days, I’m going to write about it.

I could have a cure for cancer, you wouldn’t give us a dime. Because you don’t know us, you don’t anyone who knows us, and in my case, I’m too old.

You know how you could make the planet a better place? Start telling the truth to people.

I’m not angry, at least you were kind enough to reply.

Be cool.
or just be.

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.

Good luck with your idea and with your life. I’m sorry it has left you so bitter and angry.

____________________

</EOR>

Postscrip below. Final email from the entrepreneur below. Felt that I owed it to him to include it here.

Yes, rejection sucks.

Yes, I have feelings about VC’s that are…real for me and plenty of others.

For me, they come from how I grew up, poor. They emanate from coming into the tech world in 1988, the hard way. From being turned away at the door so many times, because I didn’t go to Stanford, didn’t come from the right family, didn’t have the right friends.

All these years I’ve financed my business with SBA and bank loans. So has everyone I know. So I don’t know anyone in the venture world, neither does anyone in my circle. You have no idea, how hard it is, to break into this world of yours from the outside. Nowadays, it’s just impossible. Throw in that I’m 54 now…

There’s discrimination in the tech world now. The tech world makes those on the inside richer, and it keeps those on the outside — there. It never used to be that way and yes, I’m angry about that. I need to deal with it.

No one talks about that the chances of getting funding if you aren’t in the know (went to the right school, worked for the right founder, know people in the VC world), are older, are slim and none. Instead, the VC’s have websites that create a false sense of hope. It’s bs and no, I’m not going to apologize for the truth.

That’s what you should write about. That’s, what no one writes about.

But I do apologize for making you wrong. You do what you do. I need, to deal with it.

Go see the movie. I drove two hours to see it. Background singers and entrepreneurs on the wrong side of the tracks, are on the outside looking in, have so much in common.

You’re right, I got anger.

Damn.

July 23rd, 2013     Categories: Fundraising    

What your “About Us” page says about your company

about_usMaybe it’s because I always love the back story of how an idea came together or because I’m particularly partial to team stories, but I love checking out the “About Us” or “Team” pages on websites. And while many (too many) are really bland, some companies really take the opportunity to show off their story, talk about their mission or present their team in an interesting way. I’ve been polling people for a while for pages that people particularly like. Here are a few that I think are really great. Please add to the list in the comments section. I’m also always curious about the right balance between mission driven About pages that talk about the higher calling of the company and team driven About pages that highlight the people that work for a business. I don’t know that I necessarily prefer one to the other, but it’s always interesting to see which a company chooses to highlight.

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Kickstarter‘s team page is fantastic. Funny. Quirky (no pun intended there!). Definitely original. I love this team presentation as it really brings forward the personality of the company.

 

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MondoRobot has the same idea, but with separate images. Be sure to mouse over the pictures. Same thing for sumall.

 

 

 

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I like both the Team and About pages of Maptia, both of which I think do a nice job of relaying the story of the company.

 

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Synapse has a great about us page packed with a bunch of history and cool graphics. A little surprising, frankly, for a 10yr old company.

 

 

 

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The minutes and hours stats to the right of each bio turn the team page for Harvest from a pretty standard team page into something that was fun to read (and kept me scrolling down to see more).

 

 

 

I don’t bring this up for kicks. I actually think how a company presents itself online is important. It conveys a certain personality (or lack there of) to potential customer, partners and employees (and investors) and if done right really offers an opportunity for a business to present itself in a way that’s quite different from its peers.

 

July 23rd, 2013     Categories: Design, General Company    

The best company vacation policy

VacationQuick note here before I jump in to remind you that I’m not your lawyer (in fact I’m not a lawyer at all). I’m not offering legal advice. You have your own lawyer for that…

I’ve seen all sorts of variations on vacation policies over the years (some harsh, some that famously pay you to take time off and everything in between). And I’ve come to a conclusion on the best PTO and vacation policy: none.

Of course I’m not suggesting that you not let employee take time off, nor am I suggesting that you not have a formal policy. But after seeing all the variations – and importantly have had to unwind companies with various PTO policies – I think the best practice is to have a formal policy of not having a formal policy. In such a plan employees don’t have a set number of days that they can take off; there’s no difference between a day you take off to go to the doctor or sit on the beach; there’s no need to track days off; there’s just an agreement between the company and employees that they’ll take time off appropriately (and after checking with their manager). Here are a few reasons why I like the “no policy” policy:

- There’s no need to track days. In my experience most companies do a horrible job of tracking employees vacation usage. Having a policy of not having a policy eliminates the need for this. There’s also no difference between a sick day a personal day and a vacation day. They’re all just days out of the office.

There’s no vacation accrual. As a result of not tracking vacation days, there’s no vacation accrual (which is inevitably wrong – see bullet 1 above). Vacation accruals in my experience turn into a perverse – and often unearned – “bonus” when employees leave a company. And they’re a huge pain to deal with if things turn south. But most importantly I think they set up the wrong incentive/expectation. Companies shouldn’t put employees in the position of choosing between the monetary value of time off and actually taking time off. Companies have vacation policies because employees who take vacations are better employees (this is at the heart of FullContact’s paid paid vacation policy that I referred to above). The value of vacation is the actual vacation, not in some artificial bank account that grows as you grow more miserable in your job.

It’s better for employees. It’s good for people to get out of the office once in a while, for sure. But the other benefit of having a no policy policy is that you’re saying to your employees that you trust them to make good decisions. You’re empowering employees and managers to do their jobs and to manage their time off appropriately. That’s a powerful message to send to the people who work for you.

It’s easier. For all the reasons above, not having a formal policy is simply easier. There’s no tracking, no accounting, no paperwork.

The vast majority of the companies I work with have formal vacation and PTO policies (this includes Foundry Group itself, actually). But a few don’t (as is true at many other companies I know) and I think that’s best.

Would love to hear your thoughts on this.

July 15th, 2013     Categories: General Business    

Forget about the rest. What makes a good VC?

I should preface this post with the caveat that a VC describing what it takes to be a good VC runs the obvious risk of falling into a trap of vanity and lack of self-awareness. I hope I haven’t, but you be the judge…

There’s been a real uproar over Andy Dunn’s recent missive slamming venture capitalists. In it Dunn asserts (I’m paraphrasing here and I’d encourage you to go read the full post) that 98% of VCs suck. And his last line pretty much sums up his feelings: “98% of VCs who read this post self-identify as being in the top 2%. The other 2% are actually the top 2%.” There have been some good rebuttals of his overall critique – and especially of the 98/2% split (which, interesting, is perhaps an admission that certainly by track record, and implicitly by some of the other critiques Andy offers, there is some split between good and bad VCs -or Dumb and Not Dumb in Andy’s parlance; by the way, his math is completely wrong – the majority of venture returns are generated by an order of magnitude more than 2% of VC firms). I particularly like what Mark Suster had to say on the topic in his response - especially his opening point, about liking the VCs you know and hating the rest (Andy calls out his own VCs as being great in his post, to Mark’s point).

But this post isn’t a further rebuttal to Andy. Instead I’m interested in starting a conversation around what makes a good VC – specifically from an entrepreneurs perspective. Why might an entrepreneur choose to work with one VC over another (and as Andy suggests in his post there’s plenty of information out there to help entrepreneurs make informed choices). And in what ways can VCs actually be impactful on a company’s business (Andy suggests that this is by staying out of the way, although implicitly he suggests that his own VCs actually are quite involved with his company – I strongly disagree that being uninvolved is the answer).

Here are a few idea

May 29th, 2013     Categories: Venture Capital    

The ten year entrepreneur

It’s easy to get lost in the celebration of high flying companies that quickly take an idea to market, scale and sell. It’s exciting, financially lucrative and makes for great reading. We’ve been fortunate enough to have a few companies like that in the Foundry portfolio (Zynga, AdMeld and Gist all went from idea to sale/IPO in a relatively short period of time). But the reality is that most companies take years (and years and years) to develop – the average time from company founding to exit event is now approaching 10 years. And in many respects, being a great entrepreneur isn’t about coming up with company ideas and executing against an initial product spec. Its really about the perseverance, dedication and stubbornness that is required to see a company from that point just after the initial exuberance of getting a product into market and having a few people use it, through the realization that building a scalable business is going to be really freaking hard (I called this period the “trough of disillusionment in a post years back), to the point where you (hopefully) have proved the skeptics wrong and despite the obstacles, mistakes and miscalculations find yourself with a real scale business.

Years 3-10 in a business are the real heart of entrepreneurship. Figuring out how to scale an organization, realizing that you need to bring in a set of managers above many of your initial key executives, playing with product market fit that you thought you’d already figured out 10 times, going through a downsizing of the business after you ran a bit too hot, having a co-founder leave, trying um-teen different sales and marketing ideas as you struggle to create a scalable sales model, all the while trying to make sure you don’t run out of money in the process. This is the meat of company building. And it’s hard. And messy. And rarely pretty.

So here’s to those entrepreneurs who are toiling away because they truly believe passionately in what they are doing and are going to make their idea a success whatever it takes. Building a business is crazy hard. You’d have to be half insane to even think about trying. So kudos to those who are out there toiling away at it. You are the real stars of the entrepreneurial world!

May 8th, 2013     Categories: Company Creation, Founders     Tags: , ,

Boulder is for Media

Recently Boulder based Datalogix announced that they had raised $25M to accelerate the build-out of its online ad targeting data business. The Datalogix story is one of perseverance and adaptation and it’s great to see them taking off. TechCrunch reported on the financing here. One thing caught my eye in the story and got my hackles up. In the very first paragraph about the financing Josh Constine said the following:

Since it’s based in Denver you don’t hear a lot about Datalogix, but the 250 employee startup is crucial to the future of advertising

Living in Boulder and being one of the more active adtech investors in the country (see our Adhesive investment theme) I can’t let this pass without responding. The Denver/Boulder market is actually a vibrant place for digital media companies. And you don’t have to look very hard to find them.

A few years ago Walter Knapp of Federated Media (who has a 70+ person office here after their acquisition of Lijit Networks in 2011) and I put together a conference called B.Media – a gathering of both local and national leaders working in digital media. And it was clear from that gathering that there’s no lack of energy around digital media companies here in Colorado (both on the technology side as well as the publisher side). From our early roots in ad serving with MatchLogic (acquired by Excite in ’98), and Crispin Porter + Bogusky’s 700+ person media agency headquartered here; SpotXchange which is doing pioneering work in RTB video; Yieldex (which was founded here in Boulder before moving their headquarters to New York); LinkSmart, a Foundry funded audience development network; Lijit which was mentioned above and built a very successful business here; Altitude Digital down in Denver; and Victors & Spoils which was recently bought by Havas.

I could go on, but I think you get the point. Denver/Boulder is a great place to start and build great digital media businesses.

May 6th, 2013     Categories: Uncategorized    

Measuring customer satisfaction

trada There was a great thread this week on the Foundry CEO email list about Net Promoter Score and how companies are using it to measure the satisfaction of their customers (specifically in the case of NPS, their propensity to recommend the product or service to others). NPS can be a useful tool when used properly (which was much of the discussion on the email thread – who to measure, how often, etc.). But NPS can be cumbersome to measure, hard to understand granularly and not very helpful in letting you know what any given customer is really thinking about their interactions with your company (other than the extreme outliers).

The discussion and thinking about both the benefits and limitations of NPS got me thinking about a clever way that Trada measures customer satisfaction in their app on a customer by customer basis that I thought was worth passing along.

On most pages in the Trada app (Trada has a b-to-b focused application but this advice holds for b-to-c as well), there’s a small smiley face in the nav bar. It can exist in only one of four states – Happy, Meh…, Unhappy or Confused. It can only be set by the customer themselves (the admin login that the Trada customer service team uses doesn’t allow them to change the state) and customers are regularly prompted to update its status (which does not start “happy” so there’s no bias to just leaving it alone). It’s amazing how powerful such a simple idea has been for keeping tabs on how individual customers are feeling about their interactions with Trada and its application. It’s easy enough to use that customers engage with it. It can only exist in a limited number of states so it gets ride of the gravitation away from the edge that larger measurement scales tend to product, and is a great early sign to Trada’s customer service team that something is wrong with a client. The company uses data from this metric to reach out proactively to customers who are expressing confusion or dissatisfaction with their work on the platform. For Trada this doesn’t replace measuring NPS, which gives management a higher level view of overall customer satisfaction) but has been an extremely effective tool to help them deliver a fantastic customer experience.

Sometimes simple solutions can be very effective.

 

April 17th, 2013     Categories: Foundry Companies, General Business     Tags: , ,

#3010: The Video

I blogged last year about the amazing 40th birthday trip my wife Greeley sent me and 9 friends on – cycling through Slovenia and Italy (original blog post along with a bunch of pictures here). We had a video put together of the whole experience that I thought I’d share.

Thanks to Mike Shum for the video production!

February 27th, 2013     Categories: Life    

The Democratization of Entrepreneurship

One of the great trends we’ve been witnessing over the past decade, and in particular the past 5 years, has been what you might call the “democratization” of entrepreneurship”. It’s a powerful trend and one that I think will have a huge impact not just on the US economy and workforce, but perhaps even more intensely on other areas of the world – particularly developing economies.

There are several underlying factors that I think underpin this sift that are worth noting:

- The breaking down of geographic boundaries that confined entrepreneurial communities. Fundamentally entrepreneurial communities are networks (not hierarchies). And as such they thrive best in open environments that lack artificial restrictions. They also thrive best when information sharing is free and when entrepreneurs have access to other entrepreneurs (in this way entrepreneurial communities follow Metcalfe’s law of networks which states that the power of a network increases exponentially with the number of nodes on that network; entrepreneurial communities are exponentially stronger as they add more entrepreneurs to their “network”). The globalization of economies combined with the free flow of information fostered by the internet and other media has enabled entrepreneurs to establish connections that extend beyond traditional geographic boundaries and create virtual communities of peers where they once couldn’t exist.

- Entrepreneurship is becoming more highly valued. While many societies have thought of themselves as “entrepreneurial” it’s really only been in the past 10 years or so that entrepreneurs, as members of the creative class, have been truly celebrated. Where once striking out on one’s own was considered overly risky and either big companies (or in some countries state enterprise) was the path to job security and economic independence, now in many parts of the world entrepreneurship is embraced (think of the emphasis both candidates in the recent US election put on entrepreneurs as the growth engine of the US economy, for example). This acceptance (even celebration) of entrepreneurship is opening doors for many people around the world that were until recently closed due to cultural and economic pressures.

- Entrepreneurs don’t care about pedigree. I referenced above a belief that entrepreneurial communities are networks, not hierarchies. Openness, the free flow of information, the lack of community gatekeepers and entrepreneurs as leaders are hallmarks of these networks (vs. hierarchies which are closed, tend to have a small number of people who control access to the system and where information flow is controlled and limited). As a result the fundamental tenants that underpin these networks there is a decreased emphasis on pedigree, background and connections. While this hasn’t completely taken hold in all countries, in many places entrepreneurs are rightly judged by the strength of their ideas, the value they bring to the community and the success of their past efforts and not on their family name or where they attended school. This has opened the door for many entrepreneurs who 10 or 20 years ago would have found themselves cut off from the opportunities they have today.

- A focus on mentorship and giving first. One of the most powerful trends in support of the democratization of entrepreneurship has been the establishment of broad mentor networks that support entrepreneurial communities. These networks are aided by the trends noted above and stem from the fundamental belief that a larger and larger number of experienced entrepreneurs are embracing of giving first, getting later. Ultimately the best mentor relationships become two way but the going in expectation of the mentor needs to be that they’re participating first to give with no expectation of anything they’ll personally take away other than the satisfaction of helping out. The development of these mentor ecosystems – bolstered by the rise around the world of accelerator programs (the Unreasonable Institute being a great example) – has allowed entrepreneurs greater access to advice and counsel and I think helps create better entrepreneurs and more vibrant entrepreneurial ecosystems.

Fundamentally the world benefits from the democratization of entrepreneurship as more people look to themselves as the engine to grow beyond their circumstances. And importantly this phrase works in reverse as well – entrepreneurship promotes democratization. Entrepreneurs value the stable systems that democracy tends to bring, they see themselves and not government as the answer to their societies challenges, they provide jobs and economic stability that promote stable society and they work in networks that by their nature are fundamentally more democratic than hierarchical regimes. I don’t have a crystal ball and I don’t know exactly what the next 20 or 50 years will bring. But I do believe that the global trend towards entrepreneurship will continue and that the world will be much better for it.

February 20th, 2013     Categories: Uncategorized    

Marc Barros on the shift from Product to Marketing/Sales

Marc Barros, the founder of Contour cameras wrote a great follow-up to my post on your company’s shift from a product focus to building out a sales and marketing organization that’s definitely worth reading. A few excerpts here:

1. Make A Clear Definition of Success

Early on, often before you raise venture capital, you want to create a clear picture of what the future looks like. That picture can include a range of things such as how you define your culture, values, employee morale, size, revenue growth, market domination, etc. Equally how you define success could range from world domination (e.g., Square) to building a small company focused on great products (e.g., 37 Signals).

Whatever the definition for success is, the best companies know this early on. They are already thinking about how they transition from their initial customers to growing the business. So when they do raise venture money they are clear about what the money is for and how they are going to use it to complete their ultimate vision.

At Contour we weren’t clear early on about what we wanted to be. At the core we were always focused on building great product, but along the way we didn’t shift our priorities from the best products to reaching more customers. We weren’t sure if we wanted to lead the market, follow the market, just make the best products, be a niche brand, etc. Instead we invested a little bit everywhere, never recognizing when we should shift from satisfying our early customers to a focus on how to reach a lot more of them.

2. Every Company is Building a Brand

Just because you are a product-focused or technology-focused company doesn’t mean that you aren’t building a brand. You are.

No different than Apple, your brand matters. The name, what it stands for, what it feels like, even what it smells like. Some of the best technology companies have built the stickiest brands. Look no further than Google, who through Marissa, was obsessed with its brand. I’m sure there was a lot of tension within Google about what was considered on brand, regardless she was consistent in protecting its image. Another great example is Intel. Technology at its core, they spend serious dollars to brand “powered by Intel” at a consumer level to make no doubt consumers wanted their technology.

If you recognize early on you are building a brand, it helps to lift your head up above the product/technology and begin thinking about how you are going to scale your platform.

3. Don’t Divide Your Organization

A traditional way to see the world is to divide the company between the functions: sales, marketing, product, finance, operations, etc. This is consistent with how we are taught to run a company and with how people view their roles within the organization. This is even consistent with how Seth phrased it, shifting from product to sales/marketing. I have come to believe it’s the wrong way to lead a company, especially early on.

It’s true your company will have specialists that can handle customer relationships, design things, write code, etc. But it doesn’t mean all of these people have to be working on different objectives.

If we remove the functional titles for a minute and talk about what the company is trying to accomplish it becomes much clearer. Early on you are finding your customer and building a product to satisfy them. As Seth says you are constantly cycling between customer feedback, improving the product, and getting more feedback. This process can sometimes take years until you have built a great product that your customer can’t stop using with a business model you think is sustainable. To do this well you often hire designers, engineers, and product managers. Before you know it your team is great at understanding the customer need and building a product.

Skipping forward you decide you want to really “grow” the business. If we forget the traditional functions of “sales/marketing,” and rephrase the objective, we’d say the goal is to get more customers. The more customers, the more revenue, and hopefully the greater the profits. There are a variety of ways you can grow your customer base. Getting new customers could be through adding new features (product), hiring people, traditional marketing efforts (social, advertising, SEM, etc), or even traditional sales efforts (sales teams, distributors, affiliates, new channels, etc). The important shift here isn’t the shift in hiring more sales people or more marketing people, it’s the shift to recognizing the most important thing is to get more customers. If the whole organization is thinking about this, including engineers, I bet you would come up with a variety of ideas and priorities to meet this. And instead of just the sales guys thinking about sales, you involve the whole team.

I believe the best companies focus the whole organization on a few priorities and therefore get the mind share of every employee towards the same goal.

Lastly, don’t rule out the need to shift the mix of your team mix, especially if your business isn’t generating enough cash flow to support the people you hired and your new growth objectives. At least by making these changes it would be clear to the whole organization that you are focused on growing your customer base.

February 5th, 2013     Categories: Marketing, Startups