Microsoft has modified its approach and support for startups. It has replaced the earlier startup accelerator programme with Microsoft ScaleUp, through which it will also look to grow its cloud platform, Microsoft Azure.
The company will now only work with B2B Series A funded companies generating around $600,000 to $1 million in revenues annually but would also consider the technology a startup has developed. This is different from the earlier approach where Microsoft worked with startups who were still in a ‘pre-seeding’ stage in both B2B and B2C categories.
“We do a deep dive into their business strategy, the business models that they are using and give primacy to the business over the technology that they’re using. We are also interested in when they plan to raise their Series B,” Lathika S Pai, country head at Microsoft for start-ups, MENA and SAARC region told FE.
She added that the cash burn the startup is incurring is also considered.
Pai said the company will be focusing on segments like fintech, blockchain, machine learning, among others.
Four startups in India have been added to the programme thus far and the company hopes to add 30 this year and 300 across Seattle, Berlin, London, Beijing, Shanghai, Tel Aviv and Sydney.
Industry analysts say that Microsoft’s tweaked approach towards startups mirrors strategic investors and VCs behaviour in India. Strategic VCs and investors are investing in companies with a measurable track record and “maturity” in business strategy. Such a phenomenon was witnessed by the food tech industry which saw a major drop in investment in 2015-2016 with several startups shutting down and thereafter investors mostly increasing equity in the existing ventures, who were part of the consolidated market.
Another critical aspect and differentiating factor in the Microsoft ScaleUP programme is that startups who will be brought on board the programme will have to migrate to Microsoft’s cloud platform, Azure. Pai said that Microsoft will help startups in co-selling by letting them leverage Microsoft’s sales network to expand to other markets. “For our salespeople to sell, it will be difficult for them to sell it on another cloud platform,” Pai said.
“When the startups come up on Azure and sell into enterprises, the cloud platform’s growth will be magnified with the startup’s growth and their clients using the platform,” she added.
To this end, Microsoft is also giving the startups $250,000 worth of Azure credits to use. In fact, the SacleUP team will report to Scott Guthrie who looks after the company’s cloud business from the Redmond headquarters. This move also underscores the competitive environment of the cloud computing market where Microsoft is primarily competing with Amazon, Alibaba and Google. A report by Synergy Research Group showed that Amazon Web Services leads the market share with around 33% but has remained stable despite the market tripling in size. Microsoft’s Azure stands at around 12% but has grown over last few quarters.