Above the Crowd

Do VCs Help in Building a Technology Platform?

July 19, 2005:

Here is an interesting article on whether or not Microsoft’s “.Net” technology is attracting the interest of the venture capital community.

As a platform company, Microsoft has reaped huge benefits from the formation of vibrant application opportunities on top of its OSes.  In the 80’s, the Microsoft desktop OS was the breeding ground for such successful application companies as Lotus, Borland, Adobe, and many more.  Many of these companies were very successful stand-alone public companies.  In the 90’s, many enterprise software startups were successful by betting early on Microsoft NT.  IPO’s resulted here as well.

Venture Capitalists look to the public markets for clues on where to go next.  There is no point in investing in technologies that don’t lead to liquidity events.  What the article stresses is that the majority of VC money these days is being spent on top of the Open Source platform rather than the Microsoft’s .Net platform. 

It’s not clear to me if this is because (1) VCs are making a conscious bet on the future success of the Open Source platform, or if (2) VCs have recognized that Microsoft tends to move up the stack quickly eating up these application opportunities, and have therefore turned to a platform that is seemingly more benign.  It is also unclear what impact this will have on the overall staying power of the Microsoft platform.  Rapid and fervent application availability certainly reinforces, fortifies, and protects any platform play.

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