

8500 Startups vs Skype - nicoslepicos
http://nicolaerusan.tumblr.com/post/6184818526/8500-startups-vs-skype

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kjksf
The same argument applies to any company with large amounts of cash in the
bank: Google, Apple, Oracle. If we're not asking why Apple doesn't do that,
then we shouldn't be asking why Microsoft doesn't do that.

One obvious problem is management. Microsoft (and pretty much any other
successful company) gets majority of its profits from a very small number of
highly profitable products. It's hard to manage several businesses. Imagine
how hard it would be to manage 8500 independent business. Or integrate them
meaningfully into Microsoft (at that scale, they would have to integrate a
whole startup as quickly as they integrate a single engineer today, i.e.
several per day).

They would also need hundreds of people involved in picking the startups and
making the deals.

For Microsoft, a company/product that does 10 million/year, even if it was
acquired for 1 million, will not make a difference. They need billion dolar
products.

So the question is: if they invested in 8500 startups, would Skype be one of
them? If not, they still would have to buy Skype.

~~~
thematt
_Imagine how hard it would be to manage 8500 independent business._

Why would they need to manage 8500 businesses? That's probably the last thing
they or the startups want. Give the startup the resources and let them do the
rest.

 _So the question is: if they invested in 8500 startups, would Skype be one of
them? If not, they still would have to buy Skype._

Microsoft has spent billions on acquisitions and marketing that turned out to
be a complete failure. Betting on some startups is probably a better gamble.
Microsoft can concentrate that bet on a single business for a huge sum (like
Skype) or they can spread it out among thousands of businesses with smaller
amounts of capital. Realistically, given the money that they have, Microsoft
can probably do both.

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imack
While it might be more successful to have 8500 (fairly large) seed
investments, Microsoft is not a venture capital firm. If one were an investor
in MS, I'd would wonder why they were using my capital for other companies and
why I shouldn't just invest in them myself?

Companies that have their own VC arms tend to be very focused on a vertical
where synergy can exist (ie. Intel). For MS to make 8500 investments they'd
have to spread their money so wide that there would be no focus in the
portfolio.

Whereas with purchasing Skype, they can roll it into existing platforms and
conceivable increase the value of it.

~~~
thematt
The authors argument was that it would be in the vein of Microsoft Research.
The existing Microsoft Research works on very diversified research activities
that don't necessarily integrate vertically in their existing product
pipeline. Some of those activities get spun out into product teams, but many
don't. I'll wager that the process of doing that research (even absent a
formal product at the end) makes them better as a company.

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pessimizer
I had this same feeling about Avatar. It was a halfway decent little
distraction, but nowhere near as good as 100 * 4 million dollar movies.

8500 startups could have an internal shared service ecosystem/infrastructure
that could keep each one as lean as possible and concentrating specifically on
the problem they intend to solve. Take chaotic advantage of economies of
scale? A few runaway hits could make it all worth it.

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jimbobimbo
"Free access to Microsoft technology (There’s a reason so few startups use M$
technology...)" - BizSpark, WebsiteSpark, Microsoft partnership programs, MSDN
subscriptions - come on, there're plenty of ways to get MS' software free or
on the cheap.

~~~
nicoslepicos
I fully agree with this. I didn't do a good job articulating it. I think the
'heaviness' of the tools, and even having to go through any of those programs
(apply etc.) is enough of a deterrent to stop people who are looking to just
get something up quickly.

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Create
It seems to be a common wisdom, that whatever "startup ecosystem" is in the
Valley, MSFT is doing essentially the same thing, but _internally_ , therefore
it is not so visible for outsiders.

My guess is AAPL is the same, only even more secretive. GOOG seems to be in
the middle with the 20% working time.

The basic idea is the same. But as Joel Spolsky pointed out with Jeff Attwood,
it doesn't make much sense to be an "3ntrepreneur" for a corporation you have
little influence on. Many leave GOOG because of this, to make it for their own
benefit and control.

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rmason
How about $100K in 85,000 startups? You would think that it would be difficult
to manage. But you could leverage off universities to offer recent grads a
chance to compete for say three spots at each univesity.

I wouldn't let the universities choose them (really bad idea) but they could
provide space and help manage the program. Let them all live in a dorm room
and the universities cost would be minimal.

Let Microsoft take 10% of each company and then offer the university 20% of
their equity. I think there's a pretty good chance that a few giants would
emerge. If they did the entire program could be self sustaining.

A program like that could be a bigger legacy for Steve Ballmer than anything
else he could do.

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mattblalock
I've thought of the same thing. Thousands of "small" investments. Get 8500
tiny teams working on 8500 projects in a single building.

That'd be awesome!

~~~
nicoslepicos
Yah - definitely. That would be an out of control building. Imagine how fun it
would be to do a tour of that building, and go from room to room to see all
the interesting things people are working on. With M$ budget they could also
provide some incredible facilities.

I used to work at the MS, and it really did seem removed from the world of
startups. And, having worked in shared office space with other startups I've
really felt the difference it makes to not be working in isolation. They are
definitely making good inroads in Seattle to connect with the community, but
something more transformational may be needed.

~~~
hendzen
Is it really necessary to refer to Microsoft as 'M$' at this point?

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raldi
Does anyone understand the Yuri Mcluring reference?

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rokhayakebe
And why would they want to invest, and manage 8500 startups when they can let
others do it and pick the winners. So what if they pay a premium price? They
can afford it.

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georgieporgie
I don't think Microsoft should be a startup incubator. I can't imagine much
which is further from their current area of expertise now.

Also, _why_ would they do this when they already put enormous amounts of money
into R&D? I think you could make a much better argument for bringing more,
smaller things out of their research into the market.

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noduerme
I mean, why didn't Bill Gates just spend 8.5 billion on curing AIDS, hunger
and poverty? Oh, wait...

