How Microsoft is aiming to get in on Berlin's startup action - and why

Summary:The software behemoth is set to join a growing fray of tech accelerators in the city.

To some observers, the startup accelerator scene in Berlin is getting quite crowded, fueled by increasing interest from large firms looking to invest in the city's entrepreneurial spirit. Earlier this year, Mercedes Benz partnered with Bosch and HDI to launch Startupbootcamp Berlin, while last year, Deutsche Telekom introduced its hub:raum. Not to mention real estate portal's Immobilienscout's You Is Now incubator, as well as more obviously-named ones such as Make a Startup and Berlin Startup Academy.

But last month, Microsoft announced that it was jumping is as well .

With its Microsoft Ventures program, Redmond is essentially combining its existing start-up outreach initiatives — accelerators, seed funding (through the Bing Fund) and software support (BizSpark) — into one package, while launching a series of new accelerators around the world. The company has already operated accelerators out of Bangalore, Beijing, and Tel Aviv, but with the new program, it will expand to include Moscow, Rio de Janeiro, Paris, Seattle, and Berlin.

Microsoft Venture's Berlin Accelerator
Microsoft's Berlin accelerator to open this September Image: Michael Filtz/ZDNet

So why Berlin? In short, Microsoft sees opportunities in what has been called the Silicon Valley of Europe.

"It's a vivid startup city, said Stephan Jacquemot, Microsoft's emerging business lead in Germany. "But it has to grow, and the city knows it, and the start-up scene knows it — it's still not there where it could be."

According to Jacquemot, a main goal of the undertaking is to introduce up-and-coming businesses to the company's offerings, which have traditionally been more readily embraced by larger enterprises. "We have to be very honest and clear here: a lot of the startups are not using Microsoft technology," he said.

"Microsoft is very strong when it comes to companies like BMW and Siemens, [but] if you go through Berlin, you see a fair amount of MacBooks, Android devices and iPhones, and many startups are not using Microsoft technologies for their back-ends."

In the accelerator programmes, startups won't be obliged to use any particular software or develop for Microsoft's platforms specifically. "We're not forcing startups to build on Windows Phone or on Windows 8," Jacquemot said.

"If a startup would rely on our platform solely, we can ask the honest question 'would it be truly successful?' And to be successful you have to have a market platform strategy."

However, through Microsoft Ventures, the company is introducing its cloud computing platform, Windows Azure, to startups, with the hope that they will move away from competitors such as Amazon Web Services (AWS) for their back-ends. But even so, the adoption of Azure will not be a requirement for participation.

Aimed at early-stage startups

Like at the other Microsoft Ventures accelerators, each Berlin 'class' will host 10 to 12 startups over the course of three to four months. During that time, startups will have access to a mix of technical resources and business guidance, including a team of mentors, as well as networking events. For example, "we'll have workshops on legal questions, on how to raise money from VCs, and things like that", Jacquemot said.

ms-ventures

For the programme, Microsoft will be looking for early-stage startups, generally working on apps or web technologies. Jacequemot said that for the Berlin accelerator, Microsoft is considering focusing on companies with a music and entertainment remit, but is pretty flexible. Eligible companies include those with a full-time founding team and less than $1m raised.

At the end of each phase, there will be a demo day, where the participating startups can showcase their ideas and products to angel investors and VCs. In past programs at Microsoft's other accelerators, around 80 percent of the startups have been funded, either at a demo day or within a few weeks of it, according to Jacquemot.

And a recent Microsoft blogpost notes that startups that participated in an accelerator program in Tel Aviv last year received about $900,000 in funding, on average.

No equity (at least, at first)

What the Microsoft programme is doing differently to some of the other accelerators in Berlin is the fact that the company will not take equity in the participating startups right off the bat.

"There are some incubators that take 50 percent or even more from a company," said Jacquemot, which can make a startup undesirable to future investors, as well as make it more complicated for a founding team to guide the company. "If they're giving out too many shares at the beginning, they lose interest in their own company, they lose interest in building up their own company."

Instead, Microsoft will give startups convertible notes, which will convert into equity after a specified amount of time after the company has made "a certain amount of money", according to Jacquemot. In Microsoft's Bing Fund, which was launched in 2012 and has been consolidated into the new Ventures program, the convertible notes generally ranged from $50,000 to $100,000.

Microsoft Ventures plans to open its Berlin accelerator in September. Applications are now being accepted.

Topics: Start-Ups, EU, Microsoft

About

From the day he brought home a modem and dialed in to a local BBS in 1991, Michael has been obsessed with technology and how it enables collaboration. He has a master's degree in journalism from UC Berkeley, and has worked in and around the technology start-up scenes in San Francisco and Berlin.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.