In the first keynote session of the day, Nagraj Kashyap, global head of Microsoft’s M12 corporate venturing subsidiary, spoke to John Riggs, partner at professional services firm PwC, about how corporate venture capital (CVC) has helped the software producer become the world’s most valuable publicly-listed company 16 years after the dotcom crash.
Kashyap began by mentioning some existential questions for the CVC community, stating: “If there is no value, then there is no reason for us to exist,” and stressing the importance of adding value to portfolio companies beyond mere equity when establishing relationships.
US-based M12 has a financial rather than strategic focus, and concentrates chiefly on enterprise-oriented startups, covering North America, Europe, India and Israel. It conducts early-stage deals at series A and B stage, providing between $2m to $10m, and prefers to lead or co-lead rounds.
Kashyap then explained some unique CVC models that M12 adheres to which he hoped would be common practice for peers by 2021. The unit aims to help companies grow within the Microsoft ecosystem, offering programmatic support that includes free access to technology benefits, customer innovation days and inclusion in Microsoft Tier 1 events.
“We curate engagements; we do not do introductions,” added Kashyap, emphasising the role M12 plays as a value-add investor. It puts forward friendly terms and does not sign rights of first refusal or rights of notification, which he considers negative practices that show CVCs in a bad light.
Kashyap said M12 communicates with portfolio companies every three months to get an idea of how much capital they may require and how often it might need to invest.
Asked about the unit’s inaugural M12 Summit, which took place in Seattle in March this year, Kashyap answered: “60 to 70 Microsoft executives and two other classes of people attended, in addition to 70 people that are potential customers, such as companies and buyers, and VCs that will do the follow-on rounds, because M12 is an early-stage investor.”
When M12 was being set up, Microsoft’s chief financial officer, Amy Hood, wanted it to bring innovation signals back to Microsoft, and Kashyap said: “We are making bets on innovation trends on behalf of Microsoft, [foreseeing] what might happen in three to five years’ time.”
Riggs recalled Kashyap said at the time of M12’s formation that it was intended to be “financially minded and (had to) earn the right to be strategic,” and enquired whether this goal had been achieved.
Kashyap replied: “We are there today, it is very clear.” He then went on to explain that during the first meeting with a potential startup, M12 judges the investment based on merit. Then, at the post-investment stage, the deals become strategic because “there is more in it than equity”.
“If you do not cover an area you think is strategic, then you have not done your job,” he said.
