US-based technology company Microsoft is looking to help smaller companies scale up, and intends to enhance startup ecosystems outside of Silicon Valley, Rahul Sood, the general manager of its corporate venturing arm Microsoft Ventures, told Global Corporate Venturing.
Microsoft Ventures was formally established in June 2013 through the merger of several of Microsoft’s existing seed funding initiatives, and includes both a seed fund that can make strategic investments and six accelerators across the world. The accelerators last three to four months and the curriculum features workshops on customer development, branding and strategy, as well as the chance to meet venture capital investors, angels and entrepreneurs.
“After the three-to-four month period, we put them in front of a group of angels and VCs, including ourselves, for investment,” Sood said. “[Usually] in Microsoft’s history, when we make an investment it is because we feel that we would like to acquire the company one day.
“In this case, we make a number of seed investments, and that has nothing to do with wanting to acquire the company, it is just a way for us to help them bootstrap so they can get to the next level.”
Microsoft Ventures’ key advantage is its customers, which include some of the largest companies in the world, Sood explained. The barriers to developing a technology into a company have never been lower, and by working with Microsoft, those large corporates can get access to innovation at the startup level, while the startups meet partners who can help them expand their businesses.
The six accelerators span London, Paris, Berlin, Tel Aviv, Beijing and Bangalore, and Microsoft is using its prominent position in each country’s startup sector, particularly outside of Europe, to not only build individual companies but to help regional startup ecosystems mature.
This generally involves the financial and technological side, but the company is also spendin time on diversity issues, ensuring that female entrepreneurs are connected to startups in order to create balanced teams.
“Every market is different and every ecosystem is wildly different from the next, and so we are basically building a global programme in areas that are hot, and we are tailoring them based on the ecosystem they are in,” Sood said.
“Let’s say you are an internet of things company based in Germany and you want to build hardware – there is no better place in the world to build hardware than China. So, we are helping companies go from one location to another to get access to that kind of expertise.
“If a company wants to break into the US market, we’ll be able to help them do that, or if a company in Israel, where there are only eight million people, wants to go into China or India, we can help them do that. That is why we have this global platform.”
Sood added that its international focus also means that Microsoft Ventures is not confined to the Silicon Valley bubble. Investors are increasingly looking beyond the Valley, where social issues are beginning to spring up, and China and India in particular are showing extremely strong growth.
“In India we are seeing the ecosystem accelerate much faster in the last year, although they need more sophisticated investors because the investors there tend to be a little bit aggressive in the beginning,” Sood said.
“China is really aggressive. There are 1,300 accelerators and incubators around the country, and you’re starting to see VCs there get aggressive and start investing in other countries without having to have these crazy term sheets. They give really simple, entrepreneur-friendly term sheets, they will invest in any country, and they are not asking you to move. It is pretty interesting to see that dynamic.”
Ultimately, Microsoft Ventures is only one part of Microsoft’s efforts to foster innovation. It also has over 100 Innovation Centres across the world, many on university campuses, and its Customer Access Programme helps small companies get access to corporate executives, designers and engineers, but the enveloping of its seed activity under the Microsoft Ventures umbrella last year was essential to tying the company’s seed funding to its overall strategy.
“If you look at Microsoft as a company that does everything from consumer entertainment to quad enterprise, we’re a pretty broad company,” Sood said. “It is hard to connect directly to the business units and try to be strategic. If you do that, you are never going to get anywhere because their focus is so heads-down on what they do.
“What is amazing is that we started these accelerators as pilots a couple of years ago, and when we first started people were very sceptical – ‘Why on earth would I ever want to go to Microsoft to start a business?’ – because the perception of Microsoft is that we are a big company. We want people to see that we are the original startup.”
Rahul Sood will give one of the opening keynote speeches at the Global Coporate Symposium on Tuesday May 20. Attendees can register here.