Microsoft and IBM have groups looking for top start-ups to work with, or possibly acquire, according to a story today in the Wall Street Journal. (subscription required) The story profiles Dan'l Lewin who heads Microsoft's Emerging Business Team, and Claudia Fan Munce who runs IBM's VC group.
Why would Microsoft and IBM be interested in tiny start-ups? Lots of reasons. I can only speak from a Microsoft perspective, but our reasons are;
- Partner products that compliment existing Microsoft products by adding features, filling holes, and leveraging the Microsoft platforms.
- Innovative partner products that take advantage of the latest Microsoft technology encourage our customers to upgrade to the latest release.
- Successful start-ups draw attention to the benefits of building on the Microsoft platform, and the value of partnering with Microsoft.
- Small start-ups often grow into big companies that need lots of software.
- Working with start-ups keeps us close to the cutting edge of technology. A good barometer for what is coming in the next 5 years.
- Start-ups are the best source for new partners, and sometimes lead to acquisitions.
Microsoft acquired 22 start-ups over the past 12 months, and IBM acquired 16. Both companies have about 20 people dedicated to supporting start-ups and working with VCs. Microsoft's Emerging Business Team works with start-ups to establish partnerships and build great products for customers. The WSJ article cited AtHoc as an example;
Microsoft, led by its top Silicon Valley executive, Dan'l Lewin, has scored victories too. In 2003, it convinced a newly created Burlingame, Calif., company called AtHoc Inc. to start building its software product with Microsoft's own "dot-net" technology on top of a Microsoft computer database, instead of one from rival Oracle Corp. One inducement: Microsoft offered free consulting services to help AtHoc switch off Oracle's product. They were valued at close to half of the total $200,000 switching cost, says AtHoc's chief executive officer, Guy Miasnik. Microsoft says the services were closer to 20% of the total cost.
Last year, a Microsoft sales team also introduced AtHoc to an arm of the U.S. Air Force, which uses Microsoft's database and is now deploying AtHoc's technology. The software helps companies and the military send emergency alerts to people via computers or other electronic devices. The contract is valued at about $2 million for AtHoc.
Learn more about how to partner with Microsoft by visiting the Partner Links (right column) on Microsoft StartupZone.