Gorillas Can Dance. Shameen Prashantham
to work with Walmart in China through this program demonstrated their solutions. Apart from the apparent prowess of those startups, the win-win outcomes for them and Walmart, and the high-level executive attention the program had attracted, there was something else that was striking: most of those Chinese startups were alumni of the Microsoft Accelerator program.
I was fortunate to be present at both those meetings as an academic researcher. For well over a decade, as part of my ongoing research program I have studied how Microsoft (and many other corporations discussed in this book) partnered with startups. For me, Microsoft's journey of partnering with startups across time and locations is an excellent case study for three reasons.
First, Microsoft took startup partnering seriously, yet had to work hard to figure things out – therefore there was plenty for me to study, over time and across space. Partnering has been in Microsoft's DNA, as acknowledged by Steve Jobs. Yet, even Microsoft has had to work hard at startup partnering. A key point of the story is that Microsoft's current status as a partner of choice for many digital startups didn't happen overnight; it has been effortful, not effortless.
Second, I was fortunate to gain access to relevant Microsoft managers across several regions, over a considerable period of time – therefore I could observe an unfolding journey. My exposure to Microsoft began in June 2003 during a fortuitous visit to its headquarters in Redmond, Washington. Since then, many Microsoft managers, startup partners, and other ecosystem members have been generous with their time and stories with me over the years, as I embarked on a study of corporate-startup partnering. Spanning over a decade and a half, my research on Microsoft covers multiple geographies including China, India, Israel, Kenya, South Africa, the UK, and the United States, among others. On occasion, I have even found myself telling Microsoft managers stories about the past that they weren't aware of!
Third, it is a story about a learning journey – and thus offers lessons for all companies that are committed to partnering with startups, even traditional ones. Today, startup partnering is relevant to corporations in all industries. As seen, traditional companies like Walmart could partner with startups alongside a technology company like Microsoft. Moreover, in this era of digitalization, all companies are becoming software companies, as Microsoft CEO Satya Nadella often says. Everyone can learn from the Microsoft story.
Before getting into my narrative, I wish to make it clear that I am a neutral observer; despite the warm professional relationship I have had with many current and former Microsoft managers, I deliberately declined taking on any commercial or consulting role while my research was ongoing, a stance that has been graciously accepted by all my informants. (This holds for all the other companies I've studied for this book, as well.)
In presenting my account of Microsoft's startup journey, I describe three broad phases (see Figure P.1). The first culminates with the launch in 2008 of BizSpark, Microsoft's large-scale programmatic initiative to engage with young startups; that was also the year Bill Gates exited day-to-day operations at Microsoft, leaving Steve Ballmer fully in charge. The second phase covers subsequent startup partnering initiatives that had a global footprint, including an accelerator program originating in Israel, and were brought under a single umbrella, Microsoft Ventures, in 2013. The third begins around 2014, when Satya Nadella became CEO, when startup partnering had become increasingly “mainstreamed” into Microsoft's corporate strategy.2
Figure P.1 Three Phases of Microsoft's Startup Partnering Journey
PHASE 1 GETTING STARTUP PARTNERING OFF THE GROUND
Recognizing the Imperative to Partner with Startups
Following my first contact with Microsoft in 2003, the year it became the most valuable company in the world,3 I had the opportunity to talk to Microsoft managers who were reaching out to the software developer community. Their goal was to co-opt independent software vendors (ISVs) as Microsoft partners. If these companies built their software products on top of Microsoft tools, then there was a win-win situation every time that company sold its offerings, since Microsoft technology would, in effect, be bundled with it. A prominent name that kept coming up in my interactions with these managers was that of Dan'l Lewin.
Back then, Lewin was a relative newcomer to Microsoft – a Silicon Valley insider who'd been around for a couple of years in a company that many viewed as a Silicon Valley outsider. Lewin's professional background made him better suited than most to connect Microsoft with the Valley. Lewin had worked at Apple as a member of the original team that designed, built, and marketed the Macintosh, an initiative that Steve Jobs described as intrapreneurship, and was hand-picked by Jobs when he left Apple to set up NeXT Inc.4 In the years that followed, Lewin got involved in entrepreneurial ventures of his own, and had credibility in the Silicon Valley startup community. Later, in late December of 2000, he contacted Steve Ballmer and offered to help Microsoft build bridges with Silicon Valley, based on Ballmer's speech committing Microsoft to web standards, which he believed were going to be critical to realize the company's goal of becoming a software enterprise powerhouse; he says: “I sent Steve Ballmer an email, and I said, ‘If you're serious about … want[ing] to engage the start-up and venture capital community, I'd be interested in talking.’”5
Ballmer acted swiftly. In January 2001, Lewin was hired as an officer of the company and, as a corporate vice president, had executive and site responsibility for the company's operations in Silicon Valley and the mandate to change how the company engaged the venture capital community and entrepreneurs and to resolve technical and business conflicts with the industry. In the aftermath of the dot-com boom and the lingering US Department of Justice (DOJ) anti-trust settlement, this was an important hire for Microsoft.
To better understand why Lewin's arrival at Microsoft in 2001 was significant, it is useful to take a step back and look at what Microsoft had been dealing with in the runup to Lewin joining the company. I am not a business historian, but looking back, developments at Microsoft in the late 1990s suggest that certain seeds were sown then that had a long-term impact.
The second half of the 1990s had been a complex period for Microsoft in at least three ways. First, the Internet had produced a “tidal wave”6 that Microsoft was late to catch, but eventually did. Second, there was turbulence as the company had to deal with an anti-trust lawsuit brought by the US DOJ.7 Third, as noted in a memo known as the “Halloween papers,”8 Microsoft faced the threat of being disrupted by the open source software movement. The last-mentioned was particularly crucial given the emergent platform strategy that culminated in the 2002 release of .NET, as Microsoft sought to transform itself into an enterprise software company in the post-dot-com era. The platform “evangelists” were seeking to get B2B independent software vendors (ISVs) to work on Microsoft platform technology and create enterprise solutions. Startups constituted a potentially important set of platform adopters, but there was a sense of disconnectedness between Microsoft and startups, notably in Silicon Valley, before Lewin arrived on the scene.
Operating out of Microsoft's Silicon Valley campus in Mountain View, California, Lewin went about establishing Microsoft's worldwide venture capital and startup community engagement efforts.9