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"Top of Mind" with Nathan Kurtz, Episode 44, 1/29/2014
>>> Hi. Welcome to "Top of Mind." Today our guest is Rahul Sood of Microsoft Ventures.
We will be discussing what Microsoft is doing to create an entrepreneurial ecosystem here
and around the world. I'm your guest host, Nathan Kurtz. And this is "Top of Mind."
>>
Hello and welcome to "Top of Mind." I'm joined today with our special guest, Rahul Sood.
He's General Manager and partner of Microsoft Ventures. And Rahul, why don't you start with
giving just the viewers today a little background on what Microsoft Ventures is.
>> Sure. Well you know, I guess I should probably put a little history behind it. Because Microsoft
for the longest time has always believed that, you know, startups are important to the company.
We've had, you know, a number of programs in the past that have continued to operate.
So for example, we, we've had the BizSpark program running for a little over five years
now where Microsoft would give free software and tools to startups to help them build their
business, right? And they have to be under a million dollars in revenue, under three
years old and they would qualify for that. But lately things have changed in the startup
ecosystem. You know, where there's never been a time in our history where the barriers for
entry for tech has been so low and the accelerants so high, where you can put five people in
a garage and build something really disruptive, right? And, and now a days, failure is encouraged
and entrepreneurship is also, you know, encouraged. So there is‑‑ even though failure is kind
of encouraged, it's encouraged in the sense that, you know, fail fast and move on. And
so Microsoft has‑‑ we're operating a number of accelerators around the world, startup
accelerators in Tel Aviv and Beijing and Bangalore. Then we had a pilot running in Seattle. And
we were running these for about a year and a half and, you know, all of these different
teams were, were all led by entrepreneurs inside of Microsoft.
>> Cool. >> So entrepreneurs who had built and sold
companies in the past. But they were all sort of separate and they weren't really connected.
So last year we made the decision that we needed to, you know, stop confusing our customers.
In this case it's the startup and entrepreneur community. And we needed to consolidate all
of our startup activity under one umbrella, including our seed fund. So we have our accelerators,
we have curriculums that we're developing for students, a student entrepreneurship,
and we have the BisSpark program. And we also have a seed fund where we go in and make small
investments in companies and help them build their a business. And we put it all under
Microsoft Ventures. So that's essentially what Microsoft Ventures is in a nutshell.
>> And how old is Microsoft Ventures? >> Microsoft Ventures is about a year old‑‑
>> Okay. >> ‑‑ right now, yeah. Yeah.
>> And prior to that you had the Bing Fund as well, correct?
>> That's right. >> And talk about that a little and how that
got started and your involvement with that. >> Sure. Well so I have been an entrepreneur
in tech for 18 years or so before I joined Microsoft. And when I was, you know, an entrepreneur,
I had a lot of failures and a couple of successes. And, and I was in Canada. And one thing led
to another and somehow I got recruited into Microsoft without a, without a clear role
to be honest. When, when I came into the company I had expectations of having a very specific
role, it was for the Xbox team. And then when I moved here, moved to Seattle, I started
in January of 2011. And the role that I had completely changed. The management changed
and everything changed. So I was in the company for 11 months. My first 11 months in that
time I had something like four different managers. >> Wow.
>> And I was just ready to blow my brains out and leave the company. It was hard. The
hard part is actually‑‑ you know, Microsoft is full of incredibly smart people. It's one
place you can go where you'll find the world expert in any given field that you're interested
in just around the corner. It's, it's an amazing company because you are surrounded by brilliant
people. >> Yeah.
>> But that makes it really hard because you're surrounded by people that are all smarter
than you and you need to figure out how to get them to do something that, you know, inspires
them and gets them to think, you know, differently about going to get something done. Microsoft
operates like that. It operates like, you know, where you can do whatever you want as
long as you're good at it, right? So after the 11 months I realized I had to go do something
of value that, you know, that I knew. And the one thing I knew was angel investing.
I do a lot of investments personally. And I spend a lot of time in the entrepreneur
startup community. And I'm on boards of different companies and things like that. So I've done
this for a long time. And I would always go spend time with startups. And I would find
that, you know, Microsoft we have so many strengths inside that people don't realize.
Right? >> Yeah.
>> When they think of us they think about Windows or they think about whatever. And
there's a lot more that we offer. And so what I wanted to do was really look at what are
the big strengths that Microsoft has. And we got together as a team and we realized,
you know, one of our biggest strengths is our footprint in the enterprise. And startups
care about their customers the most, right? They care about how do we get customers, how
do we do customer validation and things like that. So essentially I wanted to create an
investment fund, a small fund where we go and we make tiny seed investments in companies
and then we help them grow their business by connecting them with, you know, with customers.
It's a pretty simple model. >> Sure.
>> So, so we help them go from their ideation to prototyping. You know, obviously we help
them with their technology. But the biggest piece we help them with is getting connected
to customers. And that's what started the Bing Fund. And we pitched it to one of the
senior executives, one of the presidents at Microsoft. And he loved the idea and said
we should do this. So I got started in March to go start the Bing Fund. And in the meantime
there were other teams, as I mentioned, across Microsoft that were running these accelerators.
And then eventually we decided we need to pull this altogether and create a single value
proposition for startups around the world. >> So you're the GM and partner, how much
time do you get to spend actually mentoring companies? How much of your time is vision
casting and all of that? >> We've had 120 companies go through our
accelerators in the last year; 85 percent of them got funded, 35 percent have hit Series
A. >> Cool.
>> Now we're looking back at those ones and saying who are the race horses that we can
make investments in. I don't spend as much time as I would like mentoring early‑stage
companies because I just don't have the time anymore.
>> Yeah. >> But, but I do get to, I do get to go, you
know, travel to pretty much every corner of the world to go visit those different startup
ecosystems. I was in Dubai the other day, in early January. And you know, I went to
a startup accelerator in Dubai. I thought, you know, what's this going to be? It's government
funded. You're talking about a city where they, you know, there's just, there's cash
money everywhere, right? >> Yeah.
>> They've built the most beautiful skylines in the world. And there's a startup accelerator
that's government funded and it's all about entrepreneurship. So I'm like who am I going
to see in this room that's going to, you know, really be interested in building a company,
right? They already have enough money here. And I was blown away. I went there and I saw
an international presence. There was people from all over the world inside this accelerator
inside Dubai. And they're there because it's a central area, it's a central hub for doing
business. You know, there was‑‑ it wasn't what I thought it would be. Which I thought
it would be Arabs sitting in a room trying to do startups. It wasn't. The only Arabs
in the room were the people running the accelerator. And they are doing it to foster business.
And that's what they do there. They think about business thinking and, you know, how
do we, how do we evolve from being this energy capital to being the business capital in,
you know, the whole region. And so, so you see stuff like that all over the place. It's
interesting. >> What does success look like for Microsoft
Ventures in 2014? >> The success looks like‑‑ let's go back
to our accelerator companies. Let's look at the really big ones or the ones we think will
be winners. And let's connect them to customers and give them an unfair advantage in the market
and just grow the hell out of them. That's one thing. The second thing is we need people
to see that, you know, we have a lot more to offer than what meets the eye, right? Microsoft
as a company is very open source friendly. We're extremely entrepreneur friendly. We're
the original startup. Like never mind every other startup company out there. But if you
think about, you know, having been at Microsoft for three years, I can now see the implications
that this company has had in the world, right? I mean, this company has created, helped to
create, you know, every major tech startup that there is. Helped to, you know, if you
look at all the ex‑Microsoftees who leave the company and go do startups, it's pretty
interesting where they end up. >> Sure.
>> Or go work at other tech companies. And then they've helped governments and just helped
build generations and generations of wealth that‑‑ and then we have a founder, we've
a living founder who's dedicated his life to making the world better, right? And so
we really need to do a big perception change about Microsoft, right, in the startup community.
And this is what I aim to do. So it's all about perception and then creating the next
big wins. >> That's great. Talk about some of your‑‑
well, your biggest failure at Microsoft Ventures so far, if I can ask that. What lessons have
you learned? >> Well, you know, I don't know if we've been
around long enough to say that we've had a big failure yet. The only thing I would say
that I've learned is, you know, we are a group of entrepreneurs inside of Microsoft Ventures.
We don't have all the answers. There's enough people inside of Microsoft that, you know,
that have answers that we don't have. And so the lessons I've learned is, you know,
you can't go in with arrogance thinking that I'm an entrepreneur and you've been here for
20 years you don't know what you're talking about, right?
>> Yeah. >> It's just not true. There are so many people
in the company that have value to bring. And I've learned that, you know, when you're empathetic
to that you learn a lot more. And also, there's so much more than Silicon Valley out there.
There is way more happening elsewhere in the world. The nice thing about it is if you really
look at the data and what's happening yeah, all roads or maybe a lot of roads eventually
lead to Silicon Valley for money. But it doesn't mean you have to be in the valley to build
a business. We want to help forward and advance ecosystems everywhere so that it doesn't have
to be that way, right? And I think as we do that, as we mature this, then you're going
to see a major change in the world, a major shift in the world because of work like this
that we're doing. >> That's great. So, Rahul, what are you looking
for in 2014 at Microsoft Ventures, what types of startup are you looking for? To say tech
might be too vague, but are there certain industries you're looking at?
>> Sure. Since, you know, every ecosystem is different, Microsoft Ventures in 2014 will,
will open up a couple more pilot accelerators, we're running one in Brazil. We have one in
Paris and London. We just opened one in Berlin. We have Tel Aviv and Beijing and Bangalore.
And we're doing something in the U.S. soon. Our focus right now is going to be get these
things off the ground, get these ecosystems moving and continue to drive really great
quality companies. Our goal is to help create great companies and create successful companies.
And you know, when we talk about the early days of our accelerators where we had, you
know, people who were super skeptical of coming to Microsoft in the first place, and we barely
had any applications for the first class, we now have over, between 800 and 1,000 applications
for people who want to join our accelerator and we only accept 15 companies at a time.
So the quality of companies that are coming in are very high. So the goal is to, you know,
to go and continue to forward some ecosystems and build some new ones.
And then at the same time, you know, in terms of like themes and areas we look at, like
Microsoft is a very diverse company. We have everything from consumer entertainment and
gaming, music, all the way to cloud enterprise and, you know, so, it doesn't matter, right?
As long as they are solving a big problem and technology can help them solve it we want
to be there to partner with them. >> Rahul, thank you for your time today. Thank
you for watching "Top of Mind" with Rahul Sood, General Manager and Partner with Microsoft
Ventures.