Microsoft VC Summit 2007

Microsoft held its 8th annual VC Summit last week. Over 250 VCs from around the world were invited to attend. Steve Ballmer's keynote speech was the highlight of the day as usual. Steve talked about the 21 acquisitions made last year, and the desire to do another 20 to 30 acquisitions this year. Dan'l Lewin, Corporate VP of Strategic and Emerging Business wrote an excellent blog about the VC Summit for AlwaysOn.

Microsoft is a very big company, revenues of $44 Billion and over 70,000 employees, but there are basically seven multi-billion dollar divisions.

• Windows desktop client $13 Billion
• Windows Server and development tools $11.5 Billion
• Office - Information Worker - $11.8 Billion
• Home Entertainment Xbox, Zune - $4.3 Billion
• MSN Live Search - $2.3 Billion
• Business Solutions (CRM, ERP) - $900M
• Mobile Embedded Devices (phones) - $400M

Steve then explained 13 important growth areas for Microsoft. The top 5 growth areas are all in Microsoft's traditional Windows, Servers, and Tools businesses. The 6 through 9 spots are interesting; 6) Advertising, 7)Xbox, 8)Small Business, 9) Windows Mobile.

Someone from the audience asked why Microsoft doesn't acquire bigger companies, most of the acquisitions are in the $50M range. Steve responded that our 9th priority growth opportunity is far larger than most companies can ever hope to be. It is hard to find an acquisition candidate that can significantly impact the growth rate.

But, it also part of Microsoft's culture to find and acquire promising start-ups before they get big. Steve has said he would rather acquire 25 companies for $40M each, than acquire one company for $1 Billion. Take the recent example of Cisco acquiring Web-Ex for $3.2B, while Microsoft acquired Placeware four years earlier for $200M. Microsoft moved faster and spent $3 Billion less.

Steve did another session at the Stanford Business School this year. Watch this video to get a real sense of how Steve works, and his sense of humor. He is a lot of fun to work with and what you see in this interview is exactly the way he is in meetings. Very bright, very intense, and always jovial.

The Microsoft VC Summit is an opportunity for VCs to learn about Microsoft product directions and to make personal connections to Microsoft executives. About 100 top execs and technical people from all the product groups attend, as well as corporate strategy and business people.

Steve Ballmer met privately with several VCs after the meeting. Pictured here (from left to right) Dan'l Lewin (Microsoft), Brad Feld (Foundry Group), Vlad Jacimovic (New Enterprise Associates), Ann Winblad (Hummer Winblad), Steve Ballmer (Microsoft), Dave Barrett (Polaris Ventures), Dave Fachetti (Globespan Capital), and  Scott Sandell (NEA).

Ed Sim from Dawntreader Ventures in New York was at the VC Summit again this year.

Peter Moore's presentation centered around the full featured entertainment capabilities of the device which included the ability to synch with other PCs in the home and buy movies, television shows, and music in a simple way.  Once again, it is amazing how much progress is being made throughout the many divisions at Microsoft and how the Internet and on-demand services are getting weaved into the very fabric of the applications and infrastructure.  For a large company, one year has made a huge difference.  Finally, one of the other recurring themes I heard throughout the day was the importance of advertising in many of its product lines ranging from mobile to MSN to the digital home and video gaming.

Microsoft has made some huge strides and will certainly be worth watching over the next year.  In addition, as with each year, I did find the Microsoft executives more willing than ever to network with startups to fill gaps in their product line and to be a more open, gentler Microsoft versus years ago.

Pictured here are Boston based VCs; Ajay Agarwal (Bain Capital), Dave Fachetti (Globespan Capital), and, Eric Hjerpe (Atlas Ventures). Other Boston area VCs in attendance included; Murray Berkowitz (Kodiak Venture Partners), Justin Perreault (Commonwealth Ventures), Mike Werner (Flagship Ventures), William Kung (General Catalyst), and, Charlie Lax (Grandbanks Capital).

Venture Capitalists from around the world attended the Microsoft VC Summit including over 30 from Europe, India, Asia, and Latin America. I hosted a special half day Pre-Summit session with the international VCs along with my colleagues Sanjiv Parikh, Anne-Marie Roussel, and Don Canning.

Paul Jozefak, a VC based in Germany has some pictures of Steve Ballmers keynote presentation. Shantanu Bhagwat shared some Summit thoughts on his blog. Mike Cannon-Brookes, CEO of Atlassian stopped by for a meeting with me, and bumped into Steve Ballmer at Starbucks in Palo Alto. Small world.

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Comments

[Bob]

Don,

Is Steve's speech available somewhere? I just checked the investor site and don't see it. Would be interested in the detail on that list of 13 and which one #9 was.

[Abraham Sultan]

Don,

Is there a way to get the list of Latin American VCs that attended the event?

[DonDodge]

Sorry, Steve's speech/slides at the VC Summit are not available. That is why I included the video links in this post.

I can't release the list of VC attendees either, although I did mention 10 or 15 VCs in my post.

The VC Summit is a very exclusive, invitation only, event where senior Microsoft executives share confidential information, product plans, and high level strategies with VCs from around the world. This blog goes as far as I can go.

Thanks for understanding.

[rob]

>>The VC Summit is a very exclusive, invitation only, event where senior Microsoft executives share confidential information, product plans, and high level strategies with VCs from around the world.<<

isn't that pretty much the definition of a securities-law violation waiting to happen, setting up both MS and the VCs for potential insider-trading charges? especially if the transcripts are not simultaneously made public?

regards,
rob

[DonDodge]

Rob, no problems since no future revenue projections were discussed, and no "forward looking statements" were made.

Product directions are generally known through various sources, public statements, press releases, and blogs, and of course they are subject to change.