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

Microsoft Ventures, a worldwide empire of startup accelerators, and a redoubled determination to innovate are all part of the Microsoft future, according to execs.
Written by David Shamah, Contributor
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."

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