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January 29, 2016updated 30 Aug 2016 3:03pm

Why Microsoft is building its future on start-ups

Analysis: Michel van der Bel, MD, Microsoft UK spoke to CBR about why collaboration with start-ups is so important.

By James Nunns

One of Microsoft’s strengths is its ecosystem of partner companies and ability to connect to numerous different technologies.

The reason why this matters is because it gives options to Microsoft users, whether that’s to different file storage and collaborative work tools such as Dropbox and Box, which has recently been enhanced, or integrations with the likes of Hootsuite into Microsoft’s Dynamics CRM.

These types of integrations give users more freedom to move around between software, and importantly, it gives Microsoft and the companies it works with a connection to each other’s customer base. This is part of the reason why it invests in developing start-ups.

This week Microsoft Ventures held an event in London that it calls ‘The Pitch’ which gives some of the brightest start-ups in Europe from Microsoft’s London Accelerator programme a chance to pitch to some of the industry’s top investors.

While Microsoft is aiming to scale start-ups to compete on global scale, there is surely the chance that the company could be creating competitors to its own business.

Speaking to CBR, Michel van der Bel, MD, Microsoft UK praised the UK market, calling it, "a very innovative vibrant market of people having bright ideas." He went on to say that start-ups are the life blood of the UK economy, playing a key role as role models in the small and medium business space.

But are they competitors? Van der Bel, said: "’We have MS Ventures to say how can we help those companies with the right support, the right coaching, and with the right steps to not fill over their idea but just think about more things, how do we get them to the next level and with that will we maybe potentially create a future competitor."

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However, having seen 40 of these companies in the past few years he doesn’t see that they are going after Microsoft’s proposition, so instead of looking at the start-ups as potential competitors it is more about creating innovation in the UK and getting people to the next stage.

One company that Microsoft has helped support past the start-up stage is truRating, a company which enables users to rate their experience with a business when they pay.

van der Bel said: "With that I think you are suddenly having a company that we can team with as Microsoft in our joint proposition to our customers. So next time we talk to retailers or customers saying, ‘listen if you want to have a very easy but very disruptive proposition then talk to these guys,’ because that’s how these things come together.

"So I don’t see it as a competing player I think it’s more about how you complement each other."

This point of view was backed up by Zack Weisfeld, GM, Microsoft Ventures, Global Accelerators who told CBR that as a tech company it wants to invest in what will be the biggest and most successful tech companies that are coming out of the UK, and other places.

That is because: "It’s the future of our company working with these kinds of companies, so I don’t think it’s about building competitors, it’s about building business partners," said Weisfeld.

Microsoft isn’t alone in supporting start-ups, Tech City UK for example just selected 30 companies for its Upscale program, while Cisco also has its own programmes with the likes of the British Innovation Gateway.

van der Bel said: "If you think about not only Microsoft but all the tech companies in the UK are doing exactly the same, so Cisco has their way to do it and Google, everyone has their way to do it. I think there is a great sense of technology companies that say ok we want to help and just accelerate it."

Being a giant tech company that partners with these start-ups is something that can be extremely beneficial to the young companies, giving them access to a massive network and expertise that helps them to learn and grow their company.

The support of these companies appears to be helping as the number of active companies in the UK has risen in the UK from 3,139,630 in December 2014 to 3,260, 879 in June 2015.

Although the number of companies is growing there are still problems that need to be overcome, the skills gap is one of them.

Education is a key factor in bridging the skills gap and with this in mind, Microsoft has worked with the BBC to supply two million kids in the UK with micro:bit and Minecraft for Education.

The reason why it is so important to start this education early is because they are entering the world of digital, van der Bel said: "So how can you inspire those people to think about coding, not so they all end up to be a computer science engineer, but if you are in any job in 10 years from now, in any job, you need to have a sense of computational thinking and you need to know how to code."

Microsoft will be hoping that it can continue to foster good relations with start-ups and placing itself as an educational leader could help steer more young bright minds in its direction. In the end both Microsoft and the economy should benefit.

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