How to Be Acquired by Microsoft

Jon Gelsey, Director of Corporate Development from Microsoft joined us in Vancouver yesterday to share some insights on the process that he goes through when considering to “buy vs. build:”

  1. Adjacency – For starters, Jon said they look for companies that are “adjacent to the core business.”  In some instances they have bought companies that are not necessarily adjacent but something they know they could benefit from moving forward. A perfect example of this is their acquisition of Aquantive in 2007, which they knew would help better monetize Microsoft’s online content.
  2. Valuation – Considering valuation and doing a model helps Jon decide how much more money they will make by buying your company today vs. developing the technology in-house and releasing it in 8-10months.  “At the end of the day, a valuation is all about what someone is willing to pay for you,” Jon said.
  3. Think like a VC – Since everything moves really quick in the tech industry, Jon needs to think like a VC and have an asymmetric risk return.  Models are imprecise.  And at the end of the day, Jon and his team have to decide that based on their model and the assumptions is this acquisition “directionally correct.”  What matters most to Microsoft is taking market share and keeping it.
  4. Market Traction & Technology –  Two girls in a garage with a few users vs. 20 people in an office with real customers makes a difference.  Microsoft is looking for traction, credibility and getting another point of “query share.”   That said, Jon stressed that the size of your company, number of employees, and price is all ultimately irrelevant.  Microsoft will happily consider buying a two person company or a larger entity.  However, they sweet spot is a company with less than 50 employees because of the low organizational impact.
  5. Team and Culture – This is something Microsoft looks closely at.  They have passed on deals for cultural reasons.  While culture is important, Jon’s team looks for good documentation, coding and hiring practices.  And after a price is negotiated, Microsoft will hire an independent third party of your choice to delve deep to find out if your code actually does what is advertised.
  6. Location – Microsoft has bought and invested in companies all over the world.  Location “matters only as much as it becomes a friction point.”  If Microsoft can manage a company remotely, then borders and location are not an issue.
  7. Patent Portfolio – As a startup, you probably don’t want to be spending your money on filing patents.  VCs like Brad Feld would like to abolish software patents all togther. Jon stressed that “any technology is replicable” and if you are concerned bout people stealing your ideas, don’t share your core IP.  Jon mentioned that Bruce Sewell, Apple’s Lawyer believes that a “patent is worth pretty much what it costs to process it.” Execution is what matters.
  8. Get Noticed – If you want to capture Microsoft or any acquirers attention, focus on building a quality company. Execute! Execute! Execute! Don’t worry about the exit.  Jon said, “Performance is the best advertisement.”

And once you do get noticed, be organized.  Eliminate as many friction points as possible to getting the deal done.  If Microsoft asks for your latest financials and historical projections, turn it around fast.  Let them be the bottleneck.

As you build your company, Jon recommends working with good attorneys, practicing good corporate hygiene and engineering practices and fully understanding all risks of the deals you sign.  If there are any weird contracts you sign or deals you do along the way, these can affect your success and possibility of a future exit.

Microsoft also invests in companies as a syndicate investor but they did lead the round for a multi-touch screen company called N-Trig in 2009.  “We will only invest, when we sign a commercial deal along side it,” Jon said.  Investing is a great opportunity for both sides to build a relationship that could lead to an acquisition down the road.

If you are interested in exploring a deal, all you have to do is send Jon an email and he will happily take a look at it.

Many thanks to Jon for taking the time to come to Vancouver to meet with us and to Fasken Martineau and BCIC for helping us bring Jon to town.

If you have any other mentors you would like to connect with – leave a comment here and we will see what we can do.

How to be Acquired by Microsoft – Sneak Peek with Jon Gelsey

Jon Gelsey, Director of Corporate Development is driving up from Seattle on Thursday to speak about Microsoft‘s investment and acquisition process. I reached Jon over Skype at his office in Seattle this morning to get some insights on his upcoming talk.

As Jon mentions in the video – “Stop procrastinating and register”.

You can purchase tickets on Eventbrite here or by filling out the form below.

See you on Thursday.

DemoIgniteCamp Wrap Up

It’s more than a week after DemoIgniteCamp that we had at the Vancouver Convention Center thanks to Microsoft Canada and Joey deVilla. You can find his wrap up post on the Microsoft Canadian Developer Connection blog. My excuse is that I was involved in 6 events in 5 days and am just surfacing again 😛

I really enjoyed the opportunity to get really really techie. As Avi said, “Surprised that the demos (including mine) are all of tools vs. products”. We purposefully kept the list very developer / programming / cool tools focused, and I’m pleased with the result.

We had 7 presentations, none of them really in Ignite style aside from Joey’s. I think it would be fun to do “real” Ignite style presentations at some point, but in Vancouver, the original Pecha Kucha does a good job of that.

The 6 presentations aside from Joye’s were as follows:

  1. Clamato — Hot Smalltalk on JavaScript action by Avi Bryant
  2. TransitDB – Carson Lam’s online guide for Vancouver Transit users that won the PHP FTW contest earlier this year
  3. RestfulX Framework – Dima Berastau’s framework for bringing Rails-esque goodness and RESTfulness to Adobe Flex and AIR development
  4. PhoneGap and Ayogo’s use of it for iPhone Game Development
  5. Joyent’s Smart – Joyent’s server-side Javascript cloud platform
  6. Walruz — Ruby framework for managing complex authorization policies

My sincere apologies to Mobify for not having time to fit their presentation in at the end. It just goes to show that I really do need a gong for timed presentations (/me looks at DaveO).

Thanks again to Joey and the rest of the Microsoft Canada / TechDays crew for making the space available AND for buying a round of truly “Free beer” at the Lion’s Pub afterwards, and to everyone for attending and presenting.

So, this wasn’t really a DemoCamp event, and it wasn’t really an Ignite event. It was a lot of fun, and I’d like to do more like this. As I said at the event, I need help in programming and organizing these events – get in touch or leave a comment if you have some ideas.

We’re also announcing another DemoCamp Vancouver event on October 22nd. If all goes as planned, we’ll be announced some startup funding related news at the event. If you want to present, please follow the link and sign up for a “Pitch Presenter” ticket.