With startups, 'new' Microsoft is trying hard to live down reputation of the 'old' one

With startups, 'new' Microsoft is trying hard to live down reputation of the 'old' one

Summary: Microsoft Ventures, a worldwide empire of startup accelerators, and a redoubled determination to innovate are all part of the Microsoft future, according to execs.

The Microsoft Ventures Marketplace event at DLD Tel Aviv (Photo: Courtesy Microsoft)
The Microsoft Ventures Marketplace event at DLD Tel Aviv. Image: Microsoft

There's probably no tech company that has had more obituaries written about it than Microsoft, but to hear Rahul Sood tell it, Microsoft is the tech world's next big startup.

As head of Microsoft Ventures, the company's new investment arm for startups and emerging tech, Sood has perhaps a different perspective on Microsoft than most — a more optimistic perspective.

However, the company has some catching up to do, he noted. "Things happened, we missed out on some changes, like the open source movement, and we certainly have challenges in mobile. But Microsoft has some great assets, and we are determined to use those assets to get ahead in the market," Sood said.

Rahul Sood (Photo: Courtesy Microsoft)
Rahul Sood (Photo: Courtesy Microsoft)

What's done is done, but Microsoft does not intend to miss out on new opportunities. "Today, more than ever before, there is an opportunity for disruption by teams of four or five people," Sood said at a special Microsoft Ventures Marketplace event at the recent DLD tech conference in Tel Aviv, where 150 Israeli startups met with dozens of investors, angels, and venture capital reps.

"The barriers to entry into the startup world are low, but the opportunity for success is great. In the past 24 months a $1bn company has been created every month, most of them originally small startups. Tech is changing, and Microsoft Ventures plans to be there for those changes."

Those changes can include everything from cloud to mobile to agricultural technology, Sood said. "For example, we have company in our Brazil accelerator that leverages big data to help farmers. They use sensors and other devices to monitor what is going on in the field, and develop information tools for farms to help their businesses grow." Other companies Microsoft Ventures is working with include companies in security, Internet of Things, advertising, cloud, and many other technology areas. Basically, if it holds promise, Microsoft is interested.

Not only interested, but willing to put its money where its mouth is. That's what happened last month, when Microsoft Ventures — in its first investment — put an undisclosed amount into SkyGiraffe, an Israeli company that provides tools for mobile application management for enterprises. 

Microsoft Ventures was established last June to take advantage of the company's string of eight (soon to be ten) Microsoft Ventures accelerators around the world.

Replicating success

But three years ago, there were no Microsoft Ventures accelerators. It was in Israel that the first accelerator was established, in 2012 — and the project was such a resounding success, the company decided to try and replicate that success around the world, said Zack Weisfeld, a senior director of Microsoft Ventures.

Zack Weisfeld (Photo: Courtesy Microsoft)
Zack Weisfeld. Image: Microsoft

"We were the first to run an accelerator of this kind for Microsoft," Weisfeld said. "It was seen as an experiment by the company, but people inside the company believed in what we were trying to do."

The companies that have been a part of the first two rounds (the latest one ended last June) at the original Israel accelerator raised over $1m each in average — not bad for early-stage startups. "Our statistics are very good, we are up there with accelerators like TechStars in terms of investments for our graduates," Weisfeld said.

Microsoft has several programs that fund and assist small companies but they are nowhere as comprehensive as the Microsoft Ventures Accelerator, which basically incorporates startups as they are into the Microsoft empire, without requiring them to adjust themselves.

There's no requirement that the company deploy, or even develop for, Windows. Neither is there an expectation that the startup will partner with Microsoft; nor does Microsoft take any equity in the startups that go through the accelerator. In addition, the program provides members with training from mentors who help with everything from coding to marketing.

Although a startup doesn't have to give up equity in order to get into the accelerator program, Microsoft Ventures is interested in investing in startups that graduate from its accelerators — hence the SkyGiraffe funding. In a sense, Sood said, SkyGiraffe is a "poster child" company for Microsoft Ventures. "They are an enterprise app, and of course all of the Fortune 500s are Microsoft customers, so we can hopefully connect them with customers and help them grow," he said. And, of course, Microsoft now has a another product to offer its customers.

'Opportunities for startups'

Satisfying that enterprise market remains a goal for Microsoft. "We have the opportunity to be a unique bridge between startups and enterprise," Sood said. "We are among the best connected in the world to enterprise companies, and we can facilitate contacts and opportunities for startups that no one else can. Our customers, meanwhile, are looking for solutions to new problems, and our accelerators are helping to develop the companies with those solutions."

Yet for its focus on startups and emerging tech, the company still seems to have the reputation of a slogging behemoth that is behind the times, an organisation that can't innovate because it's worried about losing its established customer base (which, anyway, has been eschewing Microsoft products for tools from Google and Apple) and is basically retrenching behind indefensible barriers, fighting a losing battle against the tide of history.

So why can't Microsoft get a break?

"Many people have overlooked the changes in Microsoft, but they are there and we are determined to bring even more innovation into the company," Sood said. "We are engaging with innovators on many levels — for example, beyond the accelerator program, we have Microsoft Innovation Centers in 100 universities worldwide, giving students and others access to opportunities."

The company runs numerous other programs as well, such as Microsoft Virtual Academy, where users can study Microsoft technologies and products in-depth, for free.

And it's not true that Microsoft hasn't been innovating, Sood said.

"We had Kinect, we have a thriving cloud business, and we have come up with many new solutions for enterprise. All of the Fortune 500 companies have been facing challenges," he said. "We, too, have faced our challenges, but I believe that many of the changes that have been implemented in recent years are starting to have a positive effect.

"It's an exciting time to be working at Microsoft, and we want people to hear our story. I've been here for two and a half years, and every day I come to work, I am inspired by the people here."

Further reading

Topics: Microsoft, Emerging Tech, Start-Ups

David Shamah

About David Shamah

David Shamah has been writing about Israeli technology news for over a decade, both in print and on the web, and knows the Israeli tech scene and its start-ups inside out.

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  • Thoughts

    "There's probably no tech company that has had more obituaries written about it than Microsoft"

    Unfairly so, I'd say. Once or twice would have been fine, but the tech press loves a good death story, and beat a dead horse to pulp on claims that never turned out to be accurate. In the end, places like ZDNet lost all credibility.

    "So why can't Microsoft get a break?"


    -Some people remain sour for life. They will never accept any changes Microsoft makes.

    -The press is horrible at admitting their mistakes. Declaring Microsoft dead back in the early 2000s was a mistake (Microsoft is still here and you're still talking about them 10+ years later), yet I've never seen a story admitting it and promising change.

    -Microsoft is still as slow as molasses in many respects. The Internet Explorer team is nowhere near as fast moving as those who make Firefox or Chrome. They still have an old-corporate attitude towards new Internet technologies.

    "We had Kinect"

    Yeah, that didn't turn out to be so great when Microsoft declared it to be mandatory on the Xbox One.
    • Why can't MS get a break?

      Because it's still trying to maintain the old monopolistic ways as much as it can without Steve Ballmer being being jailed for contempt of court. Things might change once there is a new CEO in place, that will be hard to determine until it actually happens.
      John L. Ries
      • Right, Sure, Yup!

        "Because it's still trying to maintain the old monopolistic ways as much as it can without Steve Ballmer being being jailed for contempt of court."

        Riiiiiiiight..... ;)
        • It's called "hostile compliance"

          And if you believe that MS never did anything wrong to begin with, it's perfectly understandable.
          John L. Ries
    • Poor Microsoft

      "There's probably no tech company that has had more obituaries written about it than Microsoft"

      That's a false lead anyway. How about "beleaguered" Apple? It's still dying everyday in the tech blogs.
  • Total dishonesty

    "Things happened, we missed out on some changes, like the open source movement" said the Microsoft spokesman.

    Microsoft did everything they could in every way to STOP the open source movement. They made countless comments about the evils of open source.

    Another dose of pure self serving propaganda from Microsoft
  • So what is the benefit for MS?

    Pure venture capitalism isn't what MS has ever been about.
    John L. Ries
  • MS struggles with its own backwards mentality and legacy entrenchment

    There's no question in my mind that Microsoft has talent, and compelling products. They also have a lot of potential moving forward. However, their biggest challenge is their own backwards mentality and monopolistic attitude. They cling to an old business model, because they do not know how to move forward with one that works in the cloud/mobile age.

    Their efforts to break in to the mobile market have been particularly stymied by their attitude that they can treat the consumer like an after thought by releasing broken, half-complete products and patching them later. That worked for 10-15 years because Microsoft was the only option. But today's consumer electronics market innovates on a 3 month cycle and there are plenty of better, cheaper options to choose from, as far as most end users are concerned.

    This leads to the next point: Microsoft fails to respond to their consumers. You cannot boot strap a touch OS onto a desktop system, have it flop miserably as predicted well in advance of its release, and then double-down on that strategy to the obvious ire of their customers. Again, Microsoft simply does not know what to do with itself here, and part of the problem is it designs software for itself, rather than the every-day consumers it is now attempting to capture. Old think.

    On top of this fact, Windows is dying in the consumer segment due to its own obsolete ways, and Windows 8 fails to address the fundamental problem. PC sales are declining because Android, Chrome OS, OS X, and iOS are better options than clunky, buggy, and insecure Windows. If Microsoft had released an OS with a forked UI--one purely for touch, and one purely for desktop--and worked more closely with the developers to have more app content at launch, then maybe. But no.

    Microsoft's most profitable cash cows are Windows, Server, and Office. They dominate Enterprise. They are good at these things. But for how much longer? They are already facing increasing competition in the Enterprise sector from Apple and Google, as well as other cloud-based upstarts. And as for the consumer market post-Windows 8? Forget about it (at least for the foreseeable). At a minimum, we are going to see their profits take a hit, even if they do survive this storm called competitive innovation (which I suspect they will).

    Microsoft has compelling products and talented engineers. However, they need to get over their old corporate mentality and embrace new ideas, and devise a more innovative business model. They also need to double-down on pleasing fickle consumers, rather than designing products based on the aforesaid outmoded business model. They are now trying to do just that, but even Steve Ballmer himself admits his old ways of thinking were the biggest thing standing in Microsoft's way. Hence, he has stepped down. Is it too little, too late for Microsoft? Time will tell.