Gorillas Can Dance. Shameen Prashantham
Shift Toward Later-Stage Startups
In 2014, Steve Ballmer, under whose watch the BizSpark and Accelerator programs had thrived, stepped down as Microsoft CEO. Satya Nadella succeeded Ballmer. Big changes followed. Microsoft Office software was made available on Apple's iPads for the first time36 and a significant write-off was made on the Nokia smartphone acquisition.37 Given that even prior to becoming CEO Nadella had championed cloud computing – which was of great relevance to startups – Microsoft's startup managers I spoke to at the time expressed hope that startups would continue to be taken seriously.
By 2015, there was an upsurge in interest in startups among corporations as valuations rose and several so-called unicorns – startups with a valuation of $1 billion – emerged, not only in advanced markets but also in emerging markets like China and India.38 Thus Microsoft's move into accelerators looked like a prudent move. The rise of cloud computing was also having a profound impact on startups, which were no longer constrained by the need to incur upfront expenditure on software infrastructure. The emergence of startup accelerators and other enablers around the world was accompanying the growth of startups in the ecosystems where Microsoft Accelerators already had a presence. That same year, Microsoft launched BizSpark Plus alongside its in-house programs, through which it engaged with over 200 startup accelerators around the world.39
The 2016 Global Accelerator Report identified Microsoft accelerators in China, India, and Israel as the leading ones in their respective countries. Weisfeld found that Nadella's vision for Microsoft resonated with his efforts in startup engagement; he once remarked to me, “Microsoft accelerators were ‘growth mindset’ in action,” referring to Nadella's fondness for Professor Carol Dweck's concept regarding the human capacity to believe that change and improvement in one's capabilities is possible and hence strive for it.40 He observed, “Ten years ago, Microsoft was not seen as relevant or in the loop with the entrepreneurial community,” and added that he and his team found it immensely satisfying that Microsoft had come a long way in being supportive of startups: “There's just something about working with startups and entrepreneurs. It's a very emotional journey, but both experiencing and helping them through those ups and downs make it a very giving experience.”41
In 2016, talking to Ravi Narayan, who was part of Weisfeld's global team, I sensed a shift in thinking regarding the type of startups that Microsoft should be welcoming to its accelerators. Although there was no doubt in Narayan's mind that Microsoft's accelerators had added immense value to startups, including in terms of helping them raise funds42 – in fact, Microsoft was viewed as one of the best accelerators in both China and India and some global rankings43 – it seemed that it was time for a change. The focus was switching from early-stage to more mature startups.
The rationale was that one of the ways that Microsoft was especially well placed to add value to startups was by helping them sell to Microsoft's enterprise clients – but this typically meant that the startup would have to be somewhat mature to be able to provide workable solutions. Moreover, it seemed that early-stage startups now had other options, such as more conventional accelerators, to turn to. Rather than helping an early-stage startup get to a series A round of funding it seemed more prudent to attract B2B startups that already had reached, or were close to, this milestone and to then propel such startups to scale up by helping them get enterprise customers. In subsequent discussions with other members of the global team based in Israel, it became apparent that Microsoft was going to transform its accelerators into “scalerators.”
In 2017, Microsoft launched a new accelerator in Shanghai – China is the only country that has two accelerators – and, sure enough, the focus was explicitly on more mature startups. The transition from accelerator to scalerator seemed to be a natural transition as Microsoft became aware that one of its key ways to add value to startup partners was to help them connect with corporate clients, and this was more likely to be feasible when the startups were relatively mature and so were their offerings. James Chou, who led the accelerator's operations, had assembled an impressive set of startups, all of which had some traction including, in most cases, series A funding. Meanwhile, the Bangalore accelerator had a new leader, Bala Girisaballa, who also was targeting more mature startups.
In 2018, a new avatar of Microsoft's programmatic startup engagement, Microsoft for Startups, was announced.44 Shortly before that, I had visited Tel Aviv and gotten a further update from Amir Pinchas, who had worked closely with Weisfeld from the start, that a big reorganization was in the cards. Not long after, Weisfeld and his influential team in Israel moved on. When I got an update on the new program, Annie Parker, the then-global lead, was based in Sydney, Australia – the site of the newest addition to the Microsoft accelerator program. She confirmed that what I had observed in my interactions over the previous couple of years had now become official strategy: the focus was on scaling up relatively mature startups. Microsoft for Startups also included a corporate venture capital arm,45 Microsoft Ventures (later renamed M1246 ).
Perhaps most interestingly, a major feature of startup engagement was a big focus on co-selling startup solutions built on Microsoft's cloud technologies.
Aligning Incentives to Co-Sell with Startups
The Co-Sell program is a key feature of the ScaleUp program, which is what the Microsoft Accelerator program became under the Microsoft for Startups umbrella announced in 2018. What this means is that startup offerings could contribute to a co-sell repository. Microsoft incentivized its salespeople to co-sell partners' offerings just as much as to sell Microsoft's own. The sales force has became incentivized to increase consumption of Microsoft's Azure cloud service, and co-selling startup partners' Azure-based offerings was entirely consistent with this strategy.
The Microsoft journey with startup partnering thus reached an intriguing stage – from business as unusual to business as usual. That is, partnering with startups had become tightly aligned with the core of the company's cloud-first strategy. The decisive reorientation of startup engagement to co-selling in 2018 was arguably the culmination of an evolutionary process over a period of more than a decade – notably kickstarted by the BizSpark program introduced in 2008. Dave Drach, who had been part of the original BizSpark team, commented to me: “BizSpark was originally established to get startups on the platform. Now, everyone gets it. So, since that original problem has been solved, the question is: how to yield more value? The answer: through deep engagement yielding more business impact. Satya Nadella has made Azure core to Microsoft's strategy and is concerned with how to make it work for startups.”
During 2019, I came across various instances of Microsoft helping its current and alumni startup members to connect with large corporations, such as Walmart and Merck, in a way that was consistent with the new emphasis on co-selling solutions. In essence, Microsoft began connecting members of its startup community with that of more recent entrants to startup partnering in a way that was win-win for the two large corporations as well as the startups. That is, Microsoft could help its startup partners get a corporate client while the latter would be able to quickly get access to high-quality startups. As noted at the outset, in 2019, Walmart's CEO Doug McMillon was given a first-hand account of how Walmart was working with startups that were alumni of Microsoft's accelerator program.