I wrote a thread recently on why we will see a bunch of big US software companies becoming LPs of VC funds soon. Turning it into a blogpost (with some minor edits)
One trend we sill see going forward: Big companies becoming LPs of VC funds
Microsoft is already a part of Vision fund 2
Why they are doing it?
The only people who get rich in a gold rush are the ones who sell the shovels
Chamath has already spoken/written about it: Start-up economy is a ponzi scheme
If you are Microsoft or a Google (and are behind AWS in the cloud war), the best way to gain marketshare is by getting fast growing startups as customers
Just think about the amount of money a series D/E startup spends on Infra
Let’s talk about Flipkart
Flipkart moved to Azure after funding by Microsoft. Moving to another cloud infra when you are at their scale is tough.
But what if one way of getting convinced is by a 100–200m investment
“Starting with computing infrastructure, Microsoft Azure will ultimately add a layer of advanced cloud technologies and analytics to Flipkart’s existing datacenters. Microsoft’s strong presence in India, along with its global scale, allows for continued growth and expansion, setting the stage for the long-term partnership.
Flipkart plans to use the artificial intelligence, machine learning and analytics capabilities in Azure, such as Cortana Intelligence Suite and Power BI, to optimize its data for innovative merchandising, advertising, marketing and customer service. With powerful insights about its business and new, intelligent services, Flipkart can deliver increasingly relevant and personalized experiences to its customers”
Every big companies know that you can recoup that investment in a few years
These kind of strategic fundings are only going to go up as the cloud war heats up
Currently these investments are happening in the later rounds and FAANG companies are paying a big premium to be part of these rounds.
If you are a series B startup founder pondering whether to use
Google for business or Microsoft 365? Microsoft Teams vs Slack? Google’s text to speech API or Microsoft’s?
The answer becomes easier if Softbank leads your series C round with their Vision Fund 2 for which Microsoft is a LP
As long as your are getting a discount on the API usage and priority support you don’t probably care whether you are using Azure or GCP
More people using Azure -> More popular the Azure ecosystem becomes
If you are an early employee working in a big company as a TL and tomorrow start doing your startup it is easier to choose Azure if you were using Azure before
My bet is that most of corp dev at big companies will involve finding the best VC firms, investing in them as LPs and offering their portfolio companies cheap plans for infra/any API
Imagine being Uber building your own mapping solution
You would soon want other on demand companies to use your maps than google maps
But why would a series B company in say Brazil use Uber’s SDK than Google’s?
Because soon Uber would probably start being LPs in VC funds
Microsoft being a LP in Vision Fund 2 is just the start