The deal includes $500,000 in credits to Microsoft’s cloud computing service Azure, and three years of access to its Office 365 suite of productivity tools. Half a million worth of Azure usage is nothing to Microsoft, but for young companies that are part of Y Combinator, the sum is a multiple of the cash that they receive to help build their firms as part of the program. That makes it a materially interesting offer.
Microsoft also runs a number of accelerators of its own around the world in places like Israel under its Microsoft Ventures team. That group was formed when disparate accelerator work was unified with what was formerly the Bing Fund. The latter effort appears to be either on the wane, or over. Former Microsoft Ventures don Rahul Sood told me on Twitter that Microsoft had indeed “stopped the fund.” I have a few calls into Microsoft requesting a formal explanation how, if at all, Microsoft Ventures is currently involved in actively investing cash into startups.
(Update: Chatted about this with a spokesperson, and after the Bing Fund was subsumed into Microsoft Ventures, a few more seed investments were made, but not many. The company is not currently making direct cash investments into startups.)
Here’s how Y Combinator described Azure in a memo sent out to companies in the current class:
Azure enables each startup to use the right technologies for their business – including Linux & OSS, Node.js, PHP, Python, .NET, etc. In addition, Azure provides powerful PaaS capabilities, like machine learning, stream analytics and more.
The Azure deal stands apart from the other offers that Y Combinator companies receive from different cloud providers: $100,000 in AWS credits from Amazon (Amazon told TechCrunch in an email that that offer is open to “qualified accelerators”), $10,000 from Digital Ocean, and $50,000 from Heroku. Microsoft is essentially offering double what those providers offer in aggregate.
As part of the deal, Microsoft hosted a day-long session for Y Combinator founders that included presentations from two of its executives: Steve Guggenheimer and Scott Guthrie. Guggenheimer, known as Guggs at Microsoft, is the company’s chief evangelist. Guthrie runs Azure.
I spoke to a current Y Combinator founder about the deal in the wake of its release. The founder called the offer “shockingly good,” noting that before the deal was announced, their team “wasn’t considering using Azure,” but following the terms’ release, are “exploring using it, possibly exclusively.” The founder continued, noting that the agreement gives them the “that [Microsoft] is hungry and that they are trying hard to be relevant and helpful to the startup community.”
The same founder went on to muse that they hope that Amazon ups its own commitment to startups by providing similar quantities free service.
Microsoft is making a play for the hearts, minds, and future business of startups. Give a team half a million in cloud computing, and that is a half million that the smaller company doesn’t have to raise in the near-term. That allows companies to spend more efficiently, and delay pricing their firms, likely allowing for a higher valuation mark to be set.
Amazon’s AWS cloud platform remains the de facto choice among startup founders that I speak to here in the Valley. The Azure deal may tip the scales slightly among the current Y Combinator class, and those that follow, as the program will recur. It will be interesting to see what percentage of the current Y Combinator class chooses Azure over AWS, and keeps that choice through the end of the period and into their life as a launched company.