Microsoft faced the threat of being disrupted by the open source software movement. The last-mentioned was particularly crucial given the emergent platform strategy that culminated in the 2002 release of .NET, as Microsoft sought to transform itself into an enterprise software company in the post-dot-com era. The platform “evangelists” were seeking to get B2B independent software vendors (ISVs) to work on Microsoft platform technology and create enterprise solutions. Startups constituted a potentially important set of platform adopters, but there was a sense of disconnectedness between Microsoft and startups, notably in Silicon Valley, before Lewin arrived on the scene.
Operating out of Microsoft's Silicon Valley campus in Mountain View, California, Lewin went about establishing Microsoft's worldwide venture capital and startup community engagement efforts.9 Lewin and his team began the groundwork for a partner program that would become BizSpark (discussed later) and related Microsoft Innovation Centers10 across six continents in over 150 locations. This was going to be a marathon, not a sprint. Lewin had a formidable network in Silicon Valley, and in the early days of my research, Silicon Valley entrepreneurs took Lewin seriously but were still reserving judgment about Microsoft. Microsoft's power, because of its user base, was undeniably considerable; it couldn't be ignored. But the company was not perceived as being “cool.” At a Microsoft event in California, one Silicon Valley entrepreneur quipped to me during the lunch break: “That was like watching my dad dance …” Microsoft may have been grudgingly respected, but it certainly wasn't loved in Silicon Valley.
But further afield, Microsoft managers were getting the message that attracting great startups onto their platform was important. Essentially, this was a period of learning for Microsoft as it figured out how to partner with startups. In the mid-2000s this was happening within the generic framework infrastructure of partnering with ISVs, since a partner program customized for startups – which would appear as BizSpark – was still in the future.
Beginning to Partner with Startups (within a Generic Partner Framework)
Microsoft's partnership with a startup called Skelta was one of the early striking examples that I came across of a mutually beneficial partnership that took place even before there was a startup-friendly partnering program – with the emphasis on being more of a partner than a vendor.
In 2004, an early decision made by the founders' of Bangalore-based Skelta was to build its business process management (BPM) software products on Microsoft's .NET platform technology. They were thus betting on Microsoft's user base among enterprise customers that also constituted Skelta's target market. Having attracted a returnee with extensive experience in software product companies, Sanjay Shah, to be the CEO of the new venture, Skelta aggressively pursued a close working relationship with Microsoft's subsidiary in Bangalore.
During 2005, Microsoft India was highly supportive because it felt that Skelta had proved to be a valuable and loyal partner. Skelta was given significant exposure to thought leaders within Microsoft and enhanced Skelta's visibility in Microsoft beyond its India operations. Shah knew that Microsoft managers in India were pleased to have, in Skelta, a good example for internal and external audiences of its efforts to partner with Indian companies. As noted by Rajiv Sodhi, COO of Microsoft India, who was then the Microsoft manager who had been instrumental in fostering the relationship with Skelta under the auspices of the ISV program,
Skelta fostered a very strong link with Microsoft India on multiple levels. They quickly recognized that Microsoft is a big company and will have its own agenda. And so smart people like them very quickly align themselves to this [agenda] because then, they have the whole subsidiary standing behind them. What happens as a result is that it's not a very distant point in time when they start getting elevated to global levels.11
In 2006, Skelta received an award from Microsoft recognizing it as an ISV “making waves.”12 This reflected Skelta's progress, with support from Sodhi and other Microsoft managers, including one who had moved from the India subsidiary to global headquarters, in building bridges with actors in other parts of the Microsoft ecosystem, including at the corporation's global headquarters. This enabled Skelta to gain go-to-market support from Microsoft in the United States and also led to Skelta's building a partner network comprising other fellow Microsoft partners to act as their resellers in international markets around the world, including in Europe. In all, 80% of Skelta's revenues accrued through international business, with the bulk of this resulting from Skelta's engagement with the Microsoft global ecosystem.
In 2007, a Microsoft conference in Beijing showcased an example of good practice in reaching out to young firms by tailoring the existing ISV apparatus to local conditions. The person behind this, Vaqar Khamisani, was an entrepreneurial Microsoft manager in Pakistan, who had found that promising small enterprises needed rather more structured guidance than the ISV partnering program allowed for. He therefore proactively modified that program into a “journey” of sequenced activities through which small firms could develop technical and market capabilities that would ultimately make them far more effective in leveraging the Microsoft partnership.13
What is perhaps most impressive about the Skelta-Microsoft partnership, and the work of managers like Khamisani, is that these occurred prior to the commencement of more systematic partnering efforts that were specifically targeted at startups. When a more structured partner program for startups did emerge, many more Microsoft managers were galvanized into partnering with startups. That initiative was BizSpark, launched in 2008.
Establishing a Customized Startup-Friendly Partner Program
The 2008 launch of the BizSpark program was a major milestone in Microsoft's journey of partnering with startups. The program's stated goals were to “develop and support a global ecosystem of startups, learn how best to provide value to these partners in the rapidly changing technology industry, and foster innovation, opportunity and economic growth around the world.”14 It was the crystallization of a programmatic way to partner with startups on a large scale, and entice them onto Microsoft's technology platform by providing software, along with support and visibility, virtually for free to privately held startups that were less than three years in existence and made less than $1 million annual revenue.15
Pulling off the BizSpark launch called for two key sets of actions. First, Lewin made robust efforts to persuade Ballmer of the importance of BizSpark, got his boss to underwrite the program, and navigated the challenges of introducing a complex program like this in the middle of the company's financial year. Second, to understand their perspective, Lewin created a team to engage with the entrepreneurial community and promote platform technologies such as the .NET platform to startups.
Dave Drach, who was part of that early Microsoft team, described to me the interactions they had with Techstars, a startup accelerator in Boulder, Colorado. Through his relationship with Brad Feld, Lewin and a small team met with the very first Techstars cohort, and talked to startups for feedback as to why they were using open source rather than Microsoft technology. They were told that startups couldn't deploy Windows server software because it was not available with the appropriate license rights to run web-based software. Feedback from startups at other accelerators was consistent. The bottom line was that even if they wanted to, startups could not license Microsoft software without a special service provider's license agreement (SPLA), which was only available to
