Microsoft Establishes Venture Fund for Early-Stage Startups

By Pedro Hernandez  |  Posted 2016-05-31 Print this article Print
Microsoft Ventures

Microsoft Ventures will invest in potentially disruptive startups that specialize in the cloud, machine learning and security technologies.

Microsoft is on the lookout for early-stage startups whose technologies complement its own cloud-first ambitions. The Redmond, Wash., technology giant on May 30 announced the formation of Microsoft Ventures, a formalized venture fund that will enable the company to finally address a gap in its corporate investment strategy.

"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," admitted Nagraj Kashyap, corporate vice president of Microsoft Ventures, in a May 30 announcement. The new group will provide Microsoft with "a seat at the table," he added.

Prior to Microsoft Ventures, Kashyap headed Qualcomm's venture capital arm for 12 years. Kashyap left the mobile chip maker in January, according to a report in Fortune. During his time there, Kashyap oversaw investments in Magic Leap, Sotera Wireless and Bitfone, the latter of which was acquired by HP.

If Microsoft Ventures sounds familiar, that's because it was the name assumed by a team in the Developer Evangelism group, according to Microsoft. That unit has been rebranded Microsoft Accelerator, a startup enablement program that provides early-stage firms with business consulting and access to the company's technology. Microsoft Ventures will slot between the software and cloud services provider's startup accelerator initiatives and its larger investments and acquisitions, said Kashyap.

Mirroring Microsoft's cloud-first product strategy, the venture capital arm will primarily focus on companies developing technologies that complement its parent company's Azure cloud computing platform in addition to new business software-as-a-service (SaaS) applications. But there is still room for startups pursuing other technology areas.

Kashyap said Microsoft Ventures is also interested in companies working on data security and machine learning. Startups with innovations that somehow enhance Office 365, Windows and HoloLens, the company's highly anticipated augmented reality headset, also have a chance of snagging funding from Microsoft.

In quantifiable terms, Microsoft Ventures is "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," said Kashyap, before hinting that his group is already in the midst of preparing some funding announcements. "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."

Naturally, Microsoft Ventures is just one of several organizations eyeing tech startups.

Earlier this year, a report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), using data from Thomson Reuters, revealed that the software industry is a magnet for venture capitalists, scoring more financing than all other industries. In the fourth quarter of 2015, VCs poured $4.5 billion into the software industry across 369 deals.


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