I’ve been reflecting on the week I spent in Dublin at Web Summit 2014 (DWS). With 22,000 attendees, including 2,000 startups and 700 investors, being at the Summit tells a vibrant story regarding the amount of energy in the global startup ecosystem. The show floor was a bustle of controlled chaos, with thousands of startups from all over the world sharing their respective solutions across all segments, including enterprise, healthcare, transportation, home automation, among others – all showing up to pitch their latest innovations.
This robust turnout is evidence of the fact that startups today have more access to resources including mentors/coaches, accelerator programs, and cash flow from investors than ever before. This breadth and depth just didn’t exist a few years ago.
This fertile environment is part of a virtuous cycle, generated in conjunction with greater availability to resource, a convergence of previously disparate technologies and ecosystems, and an explosion of devices that can leverage these previously disparate technologies and ecosystems.
Innovation and the Enterprise
For my keynote, I posited that rapid change and convergence in technology is shaking up the enterprise, but as a result, the opportunity for startups to engage these companies has never been better…with a caveat: startups must know some simple tricks get a foot in the door.
Rapid change and convergence – what does it mean? Driven out of a need to use and share a greater volume of information and content – Mac, PC, Android, TV, PC, tablet, phone – all are converging at an accelerated rate around the need to consume data and content. This collision of ecosystems is happening beyond computing – it is everywhere. For example, there are no longer unique ecosystems for tele-communication providers, hardware manufacturers, retailers, finance, etc. Rather these ecosystems are being driven toward coexistence by a market that demands more and more transportability of content and data across the devices that allow people to be productive.
This forcing function ultimately offers new opportunities for innovation, as people demand more than their technology will give them. Whether innovation is driven through data, scale, or relationships, people demand that their devices support their personal notions of productivity at work and at play, regardless of device or ecosystem.
I also highlighted the effects and opportunities resulting from this convergence upon the enterprise – where the pains of personal and workplace productivity often crash together. Enterprises are hungry to innovate their ways out of the pains brought on by a BYOD world – and are often unable to address these needs, because the speed of innovation required is faster than the enterprise’s ability to innovate. This is where startups shine: by innovating at market speed.
But the same discontinuity that exists in the pace of innovation also makes collaboration between enterprises and startups challenging. Enterprises are generally risk averse to taking up with companies that have a short track record of success, much less negative cash flow! Enterprises make long term bets on technology and solutions and are looking for partners that they can be confident will be with them for the long haul.
Although there are numerous challenges facing startups working with enterprises, there are uncomplicated solutions. In my talk at DWS, I offered my experience in working with enterprises over the last 20 years, in the pursuit of increasing a startup’s chances for success when engaging a potential enterprise customer.
The good news is that there’s no black magic or secret handshake required. It comes down to three things: Infrastructure, Scale and Relationships. For the enterprise-minded startup, the following should be top of mind when engaging with established companies:
1. Meet Enterprises Halfway
Every enterprise has made sizeable investments into building their infrastructure. Given the size of these investments in both money and time, appetite and ability to reconfigure the wiring of existing systems is often very low. Asking an enterprise to move a monolithic infrastructure to the cloud overnight just isn’t going to happen. But this doesn’t mean enterprises aren’t moving; they simply have different constraints that require an incremental approach toward moving into the cloud. As enterprises think about the future, they must still be able to address current on premises needs, and they need partners that can help them make these incremental investments.
So how does a startup meet them in the middle? By finding interface points that are natural to enterprises. Fortunately, these opportunities are numerous, and span the entire continuum of technology, from infrastructure to software.
Let’s take an example that is reasonably simple, like Identity. Identity and single sign-on are the first interface point for any individual or workload to interface with another – a natural place to start. In the consumer world, you can sign onto various sites and services using your Facebook, Twitter, Google or Microsoft account. In the consumer world, this plays perfectly well, but for an enterprise, the challenges of identity and authentication are more challenging.
Most enterprises don’t want to manage the risk surface imparted by exposure to the personal data that comes with consumer SSO and OAUTH. In the enterprise, personally identifiable information (PII) is a big deal and comes with industry specific restrictions and compliance implications. From the individual’s perspective, most people don’t relish the notion of their workplace being fed with last weekend’s revelry, either.
As a counterpoint, consider the case of Active Directory (AD), an SSO technology used by almost 80% of enterprises, behind and beyond the firewall. As the de facto SSO solution for enterprises for over a decade, AD was designed, from the ground up, for enterprise management scenarios. Over time, AD has evolved and extended into the cloud, as a service that can be integrated into any application load requiring SSO.
By doing something as simple as offering integration with a solution enterprises already use, a startup immediately sends a signal to enterprises that its respective systems are going to integrate seamlessly at the prescribed intersection point.
But this applies more deeply than just at the network’s edge – understanding how enterprises manage their data and workloads is critical to servicing enterprises in a manner they are comfortable. All enterprises run numerous, pre-existing solutions for productivity including CRM, collaboration, compliance, document management, analytics, email, etc. Any startup that can offer capability in interfacing with these incumbent systems can tell a very compelling story regarding diminished effort, cost and risk associated with partnership.
A startup that shows capability integrating into enterprise Line of Business applications reinforces its credibility with the enterprise. For example, many enterprises have been using various Office products – from Excel to SharePoint to O365 – as the backbone of their day-to-day operational systems. If a startup’s solution is built to integrate with these systems through existing APIs and extensions, it not only shows a capacity to “play nice”, but also builds on the credibility of a fully supported interop layer from a name brand company.
Find something, anything, which an enterprise depends upon, ensure that your capability integrates with it seamlessly, and your story for working with that company can become just as seamless.
The opportunity to meet enterprises in the middle even extends into an enterprise’s private data center. Any enterprise that has been in place for more than 5 years will almost assuredly be running portions of their infrastructure on proprietary systems, data and/or workloads, secure behind their own firewalls. Many of these systems, especially for long going concerns, were built long before the technologies born-in-cloud startups take for granted. I’ve seen workloads at enterprises, running on mainframe computers that have been in continuous service since the Reagan administration!
Not all cases are this extreme – the majority of enterprise systems are built on one of the common server variants of UNIX, Linux or Windows Server. In these instances, there are solutions and best practices that already exist for bringing these workloads into the cloud. For Windows Servers, above and beyond the basic practice of lifting and placing Virtual Machines, there are numerous hooks inbuilt that allow incremental hybridization of on-prem and off-prem Windows Server workloads into the Microsoft Azure cloud.
Whatever the platform, if a startup can stand on the bridge between the public and private cloud, there are numerous opportunities to be seized with enterprises looking to modernize infrastructure.
By showing an aptitude for working with existing on premises systems and infrastructure, then by understanding the technologies that bridge the public cloud to the private datacenter, startups can tell an enterprise the most powerful story of all: Not only do I get you, but I can play within your comfort zone, and still get you to your vision of the future.
2. Scale Matters
For a startup, scale is often described in the context of application/platform/service ability to scale up to meet demand, usually in terms of compute and IO. For enterprises, this is just a tiny portion of the scale puzzle. All successful enterprises have faced and addressed the challenge of scaling their business to meet their customers, often at global scale. As a result, enterprises need their prospective partners to be able to operate at equivalent scale, out of the box. This is one of the major reasons why enterprises work together, even in competitive environments, far more often than with smaller concerns.
Enterprises, being global by nature, have to be where their customers are – as do their employees, their service offerings and numerous other considerations. By engaging locally, enterprises need to be in compliance with local laws, regulations and other restrictions (e.g. data sovereignty), as well as offering more mundane things like low latency access to LOB systems, web services and websites. If an enterprise is going to engage, a prospective partner must be able to scale geographically across all of these axes, in the same manner and at the same scale that the enterprise does. A startup must be able to scale out geographically, legally and contextually to be relevant to an enterprise. There are a couple of approaches to this end.
The first requires building legal competencies in every relevant market, building datacenters in these markets and engineering these systems to bind technology and compliance in a manner that is locally relevant…and then be able to respond and report in the manner prescribed by each local market. Pockets must be deep and resolve strong to build these kinds of assets, making this approach for startups almost universally infeasible. Which is why, in this regard, there are just three companies in the world that can offer true worldwide scale-up and scale-out, when it comes to datacenters and compliance: Microsoft, Google and Amazon.
So this transitions us to the second option: partnering with a company that already has these assets in place, in all major markets, has already solved local compliance challenges, and has baked these considerations into their respective platforms.
3. Relationships are Powerful
Life is a theater of relationships. As people, everything we do requires us to interface with others along the way. Companies, as extensions of the people collected within them, are no different. People often congregate amongst people like themselves, because there is security and comfort in a shared common context. Common language, common culture, common expectations and numerous other implications generate significant efficiencies, when these things don’t have to be actively managed.
Consider driving down the road: we all know which side of the road we need to drive on, what a stop sign looks like and what to do when we see one – and we take for granted that everyone else on the road shares that common context. Without that common context, you’d spend so much time looking for wayward drivers, the trouble of driving might not be worth the effort or risk. Similarly, enterprise companies depend upon the efficiencies of common context. Those like you are just easier to work with.
Meeting enterprises in the middle and addressing scale can be looked at as a metaphorical equivalent to phrases in a phrasebook for speaking enterprise – but they don’t make a startup ‘fluent in enterprise’. Tactics don’t impart you with the cultural nuance of being an enterprise. So what is a startup to do?
Building a relationship with a partner that is fluent in enterprise is a good start.
There are many enterprise companies actively seeking out startups to partner with. These enterprises have many motivations for doing this: some are looking to make financial investments, others to broaden ecosystem influence – the reasons are numerous. The most important consideration for a startup is to fully understand what motivates a potential partner to engage, and whether those motivations are compatible with your business goals. Assuming those concerns are addressed, a startup must then ultimately consider the preexisting relationships of a prospective partner.
What other companies do they do business with? How is that company perceived? Do those partners offer opportunities for my startup to engage them, as well? Determining if a prospective partner’s relationships accelerate or impede access to desirable future partners and customers is of critical importance. If you can sign off on all these considerations, then you’ve got the makings of a great partnership!
With a well aligned partnership in place, you pave the way for a productive relationship that can ultimately impart a halo of “enterprise common context” upon your startup. Being in a position where an enterprise will vouch for your startup, is a very powerful relationship to have.
How We Partner
Up to this point, I’ve attempted to separate concept from specific solutions, except where examples help set context. Now I want to drill a little deeper on Microsoft’s approach to partnering. As a company, Microsoft has always been built on partnerships. This goes back to the earliest days, when partnering with OEMs and Resellers to sell Windows, and still applies today through a robust network of various partners across every industry. This culture of partnership has translated into a broad set of relationships, with partners that spans from enterprises to startups.
Satya Nadella recently reiterated this point when he was quoted as saying “Microsoft will always be partner led.” Having been at the company over 20 years, he’s witnessed the power of partnerships and the positive impact it imparts. Partnerships are key to this company’s future success.
The power of genuine partnership that focuses upon shared value for all parties results in some amazing – and skeptics might say unlikely – partnerships. Nonetheless, even enterprises with perceived competitive overlap, continue to partner deeply and substantively with Microsoft, because of this steadfast commitment to shared value in partnerships. Take for example the following collection of very different, recent partnerships.
Adobe recently partnered with Microsoft to collaborate on building some very unique and differentiating capabilities for creative professionals that enhance both Windows and the Adobe Suite of creative products. This partnership ensured that Adobe products leveraged the best in class around pen and inking capabilities on Windows tablets, while Microsoft used feedback from Adobe to ensure that this experience was unequalled. This partnership ultimately provided Adobe’s bread-and-butter customers – creative professionals – the most comprehensive and natural creative platform available and made Windows even better through real customer feedback. Microsoft and Adobe’s complementary competencies have resulted in a great partnership that has enhanced both companies.
Some partnerships may appear unnatural on the surface, but when there’s a sharp focus upon shared value, even these seemingly unlikely partnerships flourish. Take for example Microsoft’s recently announced partnerships with IBM and Oracle. A collision of ecosystems, coupled with a broad set of common partners/customers has meant that Microsoft, IBM and Oracle needed to be able to operate seamlessly across highly heterogeneous environments. This partnership, which brings Oracle’s servers and databases to Azure, and IBM’s middleware and databases to Azure, means that Microsoft, IBM and Oracle are now able to fully address their customers’ needs, regardless of stack or cloud.
Even in the world of startups and SaaS incumbents, Microsoft has worked hard to partner. Microsoft and Salesforce recently announced a deep partnership for cross-pollinating Salesforce and Office 365 environments. The reality is that most enterprises have productivity systems in place from both Microsoft and Salesforce, but up until this partnership, getting those systems to work together was challenging. No longer.
And to come back to Dublin Web Summit, we announced one more partnership there, with Dropbox. While Microsoft offers a similar service in OneDrive, we realized that amongst the one billion Office users, there were a lot of users that depended upon Dropbox, the most popular cloud file storage service. It just made sense to bring these two ecosystems for the betterment of both Microsoft’s and Dropbox’s customers.
And these are just a few examples of the many partnerships already in place – and indicative of the types of partnerships we will be pursuing in the future. Simply:
Microsoft has perhaps the broadest collection of deep partnerships, from startups to enterprises, of any company on the planet.
What We Do for Startups
Microsoft is uniquely positioned to help startups grow their business beyond the borders of cities, countries and continents. As a platform and productivity company, we help startups scale their business with a variety of technologies, services and programs.
In 2008, we started Microsoft BizSpark to provide entrepreneurs with free software, support, and visibility to help startups succeed. More than 100,000 startups and 1,500 partner organizations in over 100 countries have benefited from the program. Startups can sign up for the service and receive access to all of our top developer technologies, including Visual Studio and Microsoft Azure.
When we announced Microsoft Ventures in 2013, our goal was to align all of our global initiatives and investments targeting startups, under one organization, to be as efficient and effective as possible at engaging with startups. Through this program, we are creating more opportunities for startups to get hands on support, mentorship and resources from Microsoft and our partners.
Microsoft Ventures runs a number of Accelerators in top startup ecosystems, including Bangalore, Beijing, Berlin, London, Paris, Seattle and Tel-Aviv. In tandem, we have also created a few unique, vertical accelerators through partnerships with leading enterprises. These are focused upon helping startups in creating innovative services in home automation, health and cybersecurity. At our accelerators, we combine deep mentorship and technical expertise with access to our customer, partner and investor communities to help founders accelerate their businesses and access global routes to market.
Our commitment to a startup’s success is sincere. For startups in our accelerators, we don’t take equity, because we realize that the dilutive effect upon equity is a greater drag on the startup than a benefit to Microsoft. We also don’t require any of these startups to build on Microsoft technologies. It makes no sense to compel anyone or anything to do something not in its self-interest. But the pursuit of shared value has seemed to take care of itself, in that most startups tend to find their own value in Microsoft’s services, while going through the program.
And the experience seems to pay off for startups: of the more than 240 startups that have graduated from our Microsoft Ventures Accelerators, 80% of the startups have achieved follow-on funding within a year of graduation, averaging $1.9M. 16 startups have even had exits.
For startups and developers that aren’t in our accelerators, not only do we partner with almost all of the leading industry incubators and accelerators in the world, but we also run more than 100 Microsoft Innovation Centers, in more than 33 countries and regions. We have created a vast network of world class technology centers that partner with local government, academic and industry leaders to create environments that facilities collaboration on research and software solutions. These are amazing places to develop ideas and work on technology solutions that solve local issues.
Our goal is to discover, build and grow high potential startups into world class companies. We serve as a strategic partner for startups and provide unparalleled routes to market, by connecting high potential startups with our global network of customers, partners, business mentors and technical experts.
So what’s our motivation? By being a great partner to a startup today, there’s a great chance that we will also continue that partnership with a startup turned enterprise.
Takeaways and Go Dos
My experiences at Dublin Web Summit reinforced my initial observations regarding convergence and its implications. This impending collision of ecosystems creates a massive opportunity for startups, especially in vertical industries and with enterprises, whose ability to pivot and react at market speed isn’t always an option.
My time meeting with startups also highlighted the fact that startups continue to do what they do best – solve hard problems – first, when engaging these segments. And while solving hard problems is the key to innovation, a little homework done to diminish headwinds, is an opportunity many startups miss out on. Especially when it comes to making themselves attractive to enterprise customers.
For startups with an enterprise focus, there are some simple things that every startup can do decrease friction with enterprise customers. Additionally, Microsoft offers some unique opportunities that can help accelerate a startup’s success, when engaging big companies. And even if Microsoft isn’t the right partner for every startup, the following advice still stands:
Meet enterprises in the middle. Understand and address the concerns of scale from an enterprise’s perspective. Build the right relationships and leverage them fully. Solve hard problems on top of these pillars, or get buried underneath them. The choice is yours.
See you in Dublin in 2015!