My cofounders and I were really dejected after a VC group near us passed on us. We were hoping we could get something small (but not insignificant from them) and use their connections. Despite the rejection, we want to keep this relationship congenial; we feel that if we can attract other investors, this group could very well decide to join us. How should we respond to their rejection email?
In your initial response to them:
 Thank them for the opportunity and the clear decision. (Some VCs will string companies
 Ask them for any suggestions that they have.
 Offer to help them. Examples include introduction/deal flow.
Later on, as good things happen, send updates. Don't mention the rejection.
The vast majority of VC decisions are "no" so don't get down on yourself. However, you might still consider printing out every rejection and putting it on a wall that you see every day....
It's kind of like dating--both sides need to see a match and if there isn't one, it's not necessarily a bad thing and you could well be right about this VC group being more willing if someone else will just get their toe wet. So, first, I suggest you thank them for their time. Second, in my experience, you wind up getting advice and you can also tell them, specifically, that you appreciated their advice, too. Best of luck!
Read James Caan "business in 7days". Some VCs don't appreciate being told despite your response we will continue nevertheless.... as Caan puts it "until they run out of cash...".
Rejection is always difficult for a founder because the mission and vision is very personal. For VCs it is business. Do not take it as a personal rejection, but get used to it. As others have said, send a thank you email, acknowledge their importance, and ask if you can send periodic updates to them. It is unusual that they would actually tell you the real reason for a rejection. When I was a VC, I actually said that to founders (the whole speech) and told them it was just a business decision of the partners based on our limited time and bandwidth. Usually, that was a nice way of saying we do not spend time in leaky boats.
what response were you thinking of giving? think about what you want to achieve from a followup.
For entrepreneurs to learn and build from our experiences and be our own people, we should all work out our own next steps rather than ask other people to tell us what our next steps should be.
Once you have made your own decision, "then" ask people for feedback and i think you will get more responses and a great deal of respect for making your own path.
1) Thank them
2) Ask for straight, critical feedback ... learn as much as you can from the rejection. "What would have made this opportunity a YES for you?"
Write a polite note back thanking them for taking the time to meet/consider you and ask them for some feedback as to why they decided not to invest in you at this time.
Hope that helps - good luck!
Politely of course it's a business decision not a personal one ask if they are happy for you to send them updates on your progress and ask when investments are next reviewed. Keep the door open as you never know what the future holds. Chin up!
I don't understand why you want to continue doing business with a group of people that didn't see / share your vision. There's a lot of investors out there, the right one will provide massive, strategic value, while also supporting the business with an investment. I suggest using it as a learning experience and potentially asking their reason for not investing, use that information to improve your pitch on the next guys.