Microsoft is a company that you will occasionally hear referred to as one that makes very long bets. It’s always hard to gauge a long-term pronouncement in the short run, but at the moment the company appears to be both thinking and acting out that supposed role.
Microsoft is investing dollars, and human capital into funding incubators and accelerators that focus on building companies whose products depend on one or another of its core technologies. It’s actually quite smart, when you break down the costs and potential benefits: Microsoft’s investment, for a company with tens of billions in cash, is essentially zero, but for those pennies it’s buying a spot at the table with the next crop of startups, any one of which could become a giant.
As ways to buy mindshare now and potentially pick up market share go, this is a good one.
How much, and for whom?
As I noted moments ago, the investments that Microsoft is making are small, and often in-kind. Take for example this, from TNW’s coverage of Microsoft’s second full incubator, in India:
The incubator, like its sibling, is focused on bringing in startups that are focused on working with cloud computing, and linking them up with office space, mentorship, and $60,000 in credits to use Microsoft’s Azure platform. Azure, of course, is the company’s cloud computing play.
That incubator could be called the sister to the firm’s first complete installation, that one in Israel. Microsoft has also worked with TechStars to build an incubator for companies that use its Kinect technology, while spreading the Azure love to any company that graduates from the incubators main programs:
Microsoft announced today that its BizSpark Plus program will offer TechStars accelerator startups up to $60,000 in credits for use of its Azure cloud computing platform. Azure competes with Amazon’s Amazon Web Services (AWS) product, and other similar offerings.
And now, today, Mary Jo Foley of ZDNet has written a post indicating that Microsoft is working on something called the Bing Fund. That’s not too hard to parse, I don’t think, but let me assist you, in case you don’t track the search market. From a past report:
On the heels of its massive redesign, which caused a sizable stir in the tech vertical, Bing has today announced that its paid search API is now live on the Windows Azure Marketplace. This was an expected move, as Bing announced that it would be shifting the Bing API to the Marketplace, and charging for it, in April.
The Bing API went unlimited back in 2009, TNW reported, which caused some to raise their eyes; Bing’s terms were quite reasonable, and the lack of volume control made it an interesting potential tool for developers. However, the Bing of 2009 is hardly the Bing of today. Microsoft’s search engine has greatly improved, and the company is now ready to begin to monetize it in new ways.
Yes, Bing is now a paid service; its days of being free are over. And how might Microsoft ensure a steady stream of new customers, with ready cash or credits? Well, it could always put together a program that would do so. I wonder what they would call it?
Microsoft as venture capitalist
Now, Microsoft, so far at least, the Bing Fund aside, isn’t apparently too interested in equity of companies that it’s helping, instead looking to give them ample access to its products. This implies that Microsoft hopes that it will become entrenched in the startups’ offerings, and thus become indispensible to them. Over time, that sends dollars and market share points to Microsoft.
However, Microsoft is also stating that if a company will just use its products, be it Azure, Kinect, or Bing, then it will find them to be at a minimum commensurate to what else is out there (Google Search, Amazon AWS, etc). Of course, Microsoft too profits from all of this, in a way – by bringing in such new clients, they have a supply of fresh clients that can help them mold their products.
Microsoft, unlike most, is investing without taking a piece, betting that startups that know them whilst in the cradle won’t want to switch teams when they can walk. That’s not taking a slice of the pie in the usual sense, but it could be a painless way to buy access at a low price.
Each of the products that Microsoft has picked has a specific domain, of a sort. Each technology can be used in myriad ways, but is more focused than, say, the code behind Metro Style Apps. Thus, I wouldn’t expect to see an incubator or fund pop up for that specific area of the Microsoft puzzle.
However, there remain niches where Microsoft could apply its strategy, such as Windows Phone apps, that might have promise.
All told, Microsoft is adeptly, in my view, applying capital, both monetary and of-the-flesh (man hours), in a way that is unobtrusive (who doesn’t love free stuff?) and potentially lucrative. If it works, we could see other companies follow suit.