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November 29, 2005

Advice for start-ups partnering with Microsoft

Posted by David Hunter at 7:12 PM ET.

Ina Fried at CNET:

MOUNTAIN VIEW, Calif.–Microsoft’s first tip for start-ups wanting to work with the software maker: Don’t expect it to give you money.

Microsoft–particularly its MSN group–has been on an acquisition spree, but said it typically doesn’t buy companies that it finds through its emerging business team. Rarer still is a minority investment from Microsoft, said Dan’l Lewin, the corporate vice president heading up business development for Microsoft’s .Net group.

“I would never say never,” Lewin told the 90 or so entrepreneurs who gathered at Microsoft’s campus for a daylong seminar titled “Partnering with Microsoft: The insider’s guide for start-ups.”

“But we’ve done three or four over the last five years,” Lewin said.

More by following the link and also see Cliff Reeves’ post, Behind the veil: how the Microsoft Emerging Business team works.

Paul Krill also has his take on this event at InfoWorld:

Software startups at an industry event Tuesday received a clear message from the venture capital community and Microsoft (Profile, Products, Articles): Do not automatically look to Microsoft as a rainmaker.

Fledgling companies were instructed not to set out to be acquired by Microsoft. Moreover, Microsoft usually relies on venture capitalists to seed startups rather than funding companies on its own.

Software executives in attendance were told not to expect Microsoft to be their sales channel, either.

“Microsoft is not a channel, and expecting that Microsoft is going to drive revenues [for you] is probably a going-out-of-business strategy,” said James Phillips, CEO and co-founder of Akimbi Systems, a virtualization software company that partners with Microsoft. Startups should not expect Microsoft to sell their product for them, he said.

Microsoft also is not likely to buy your company, according to Sam Jadallah, a general partner at venture capitalist Mohr Davidow Ventures and a former executive in Microsoft’s partnering program.

While at Microsoft, Jadallah said he witnessed 100 companies a week coming in seeking to be acquired by Microsoft. He left Microsoft in 1999 after being there for 12 years. But Microsoft does not buy as many companies as it used to and the price may not be what a startup expects to receive, he said.

More by following that link as well.

Update (11/30): There’s a less favorable view at The Register.

Filed under Acquisitions, Alliances, Partner Program

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One Response to “Advice for start-ups partnering with Microsoft”

  1. Microsoft News Tracker » Blog Archive » Google and Startups Says:

    [...] Yesterday’s item about Microsoft and startups (”Do not automatically look to Microsoft as a rainmaker”) comes to mind when reading the Business Week Dec. 5 cover story, Googling for Gold: The Google effect is already changing the delicate balance in Silicon Valley between venture capitalists and startup companies. Instead of nurturing the most promising startups with an eye toward taking the fledgling businesses public, a growing number of VCs now scour the landscape for anyone with a technology or service that might fill a gap in Google’s portfolio. Google itself and not the larger market has become the exit strategy as VCs plan for the day they can take their money out of their startups. Business founders have felt the tug as well. “You’re hearing about a lot of entrepreneurs pitching VCs with their end goal to be acquired by Google,” says Daniel Primack, editor of PE Week Wire, a dealmaking digest popular in VC circles. “It’s a complete 180 [degree turn] from the IPO craze of five years ago; now Google is looked at like NASDAQ was then.” Other entrepreneurs, meanwhile, are skipping the VC stage altogether, hoping to sell directly to Google. [...]

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