8500 Startups vs Skype
nicolaerusan.tumblr.com
nicolaerusan.tumblr.com
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.
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.
Well, Google IS doing that.
It is not only the google summer of code when they could know about young and fresh people they can hire for cheap if they are good(with a proven real case).
It is about companies like now "google earth" that later become "google maps", "google docs","gmail", "blogger", "google voice", the company then "panoramio" and know the photos is gearth and so and so. Those companies were in the millions(in son cases tens of) for acquisition cost.
Nope. Contrary to its PR image, MSFT is not a software company, not in a full sense. They are more into management (yes, this is an euphemism). If you look at their core products, they are almost all essentially acquired or "copied". (DOS-, NT-VMS, IE-Spyglass, DirectX was essentially NV1 etc.) They are successful at "selling" and doing DM with influential people.
Very few people actually go out and buy their products, which would be true sign of best fulfilling a need in the demand-offer market sense. But most of their cash cows are shipped OEM or are centrally purchased and shoved down the corporate/gvt-al echelons. Others are tied into vendor lockin and the network effect.
Should MSFT be a real software company, it should have no problem competing with Linux/Android/Java/LO etc. offering superior products without any dirty legalese tricks.
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.
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.
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.
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.
That'd be awesome!
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.
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.