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October 22, 2015

Microsoft CEO Nadella urges investor caution over ‘over-funded’ tech sector

News: But doesn’t include Uber or other Microsoft investments in that category.

By CBR Staff Writer

Microsoft CEO Satya Nadella has recommended that investors be cautious about current valuations in the technology sector, but argues that over-funding is good for the industry.

Speaking at a Dell World keynote alongside Michael Dell, Nadella was asked to comment on tech companies with billion dollar valuations, known as ‘unicorns.’He said: "It’s been true from the industrial revolution until today that you have these booms and busts. During the booms, because nobody wants to be left out, there is over-funding."

However, Nadella said that this was no bad thing in itself.

"But the beauty of over-funding is that lots of ideas get to flourish and out of that, there will eventually have to be a correction or a bust."

"That is what I think is great about the American entrepreneurial system and what ensures the competitiveness of this country."

"Out of these 150 [unicorns] there will be 10 or 15 very successful companies."

Under Nadella, Microsoft in July took part in a close to $1 billion venture capital funding round for controversial transport app Uber, which is now valued at around $50 billion.

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In August Microsoft invested in UnifySquare, which supports its Skype products.

Nadella also said that investors needed to be careful and have an awareness of the cycle.

"Now, investors have to have caution because you need to know that there are these booms and busts."

Asked where we are now in the cycle, Nadella said: "Well, if I could time that, I wouldn’t be sitting here."

Michael Dell had a similarly un-bullish outlook on the valuations, saying: "Clearly when IT moves just from the realm of making companies more efficient doing the old things into this digital transformation, it is a game-changer for new industries and so you see these new companies being created."

"Are all the valuations making sense, are they all going to work out? Probably not. But there are some fabulous new companies that are being created."

Dell recently made an investment in DocuSign, bringing the funding round to $278 million.

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