Ventures Reimagined

05/30/2016Nagraj Kashyap

When I came to Microsoft earlier this year, I was driven by the opportunity to establish a corporate venture group that would create an additional channel to engage the start-up ecosystem. It would support not just company objectives, but our customers, partners and the ecosystem more broadly. The idea was that we would take an approach which would augment our own product and technology efforts, and enable us to place both strategic and financial bets with early-stage companies.

In Microsoft’s history of engaging with and supporting start-ups, we’ve done a lot of investing, but not a lot of early-stage. Because we would often invest alongside commercial deals, we were not a part of the early industry conversations on disruptive technology trends. With a formalized venture fund, Microsoft now has a seat at the table.

Going forward, this will help us identify and harness those trends as early as possible. To ensure we capitalize on these opportunities, Peggy Johnson and I have created a new team called Microsoft Ventures, a small but nimble team focused on building and extending our muscle of investing with impact. As with the rest of the Business Development team at Microsoft, our view is outward into the market — we focus on the inorganic growth of Microsoft, looking at where we can provide a step function, versus incremental progress.

On one side of the spectrum, we help early-stage companies with tools, technology and consulting through Microsoft Accelerator*. And at the other end is where you’ll typically see our larger investments and acquisitions. Microsoft Ventures now fills a gap we’ve had somewhere in the middle of that range.

There are often questions about corporate venture programs versus venture capital firms, and whether or not they are at odds or create disadvantages for entrepreneurs. In our case, we are driven by the desire to help early-stage companies take advantage of Microsoft’s financial, technical and GTM resources. While we have aspirations to have a global impact in new and different ways, we don’t believe we need a large team to do it. In fact, we feel pretty firmly that true advancement will require the efforts of many organizations within Microsoft being smart and focused on what they do best and collectively work to help startups scale.

Over the last several months, Peggy and I have worked closely with her leadership team to define what Microsoft Ventures would stand for, where we would invest in talent, what geographies we would target and where we would focus our investments. We are starting with a presence in SF/Bay area, Seattle, New York City and Tel Aviv and with the goal of expanding to other geographies in the coming years.

Given that the move to the cloud remains the single largest priority for the industry, identifying the bleeding-edge companies who complement and leverage the transition to the cloud is key to our investment thesis. Companies developing product and services that complement Azure infrastructure, building new business SaaS applications, promoting more personal computing by enriching the Windows and HoloLens ecosystems, new disruptive enterprise, consumer productivity, and communication products around Office 365 are interesting areas from an investment perspective.

In addition, and on a more horizontal axis, you should expect to see us invest in companies who are doing work in the areas of machine learning and security.

We’re not aiming to hit a specific number of investments annually, but you should expect steady activity over the course of the year in the areas I outlined.

In the coming days and weeks ahead and beyond, you will see us showing up as an investor in companies that complement these spaces and those that aim to disrupt how business is done today.

The Microsoft Ventures name was assumed from an existing team within our Developer Evangelism team. That team has now been rebranded to Microsoft Accelerator. Microsoft Ventures will focus on start-up investments while Microsoft Accelerator will focus on start-up enablement, primarily through our seven accelerators around the world.