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At DEMO, Microsoft Keeps A Watchful Eye

At the Demo conference this week, dozens of entrepreneurs will vie for the attention of investors, customers, and the media. Microsoft is none of those things, yet it's a platinum sponsor of the event. Why? Microsoft is looking to bring more up-and-coming companies into its fold.

Microsoft's Emerging Business Team has been working with startups since 1999. Four months ago, Microsoft launched a new initiative called the Microsoft Startup Accelerator Program, which has grown to 50 participating companies. Microsoft uses the program to give special attention to young companies in the hopes that its beneficence will someday be rewarded.

Not everyone gets in. Microsoft "looks at" more than 100 companies a month and provides some level of assistance to approximately 200 a year, according to Dan'l Lewin, Microsoft VP of strategic and emerging business development. In other words, only a fraction of the startups on Microsoft's radar are bestowed with the privileges of its new program, which include preferential support, discounted software, early access to new technologies, a key to Microsoft tech centers for product testing, marketing help, and sales leads. "Everything you can imagine, short of cash," says Lewin.

Microsoft generally doesn't invest in startups because there's plenty of venture capital available without its help, he says. Microsoft has put cash into a few companies -- Groove and Facebook, for example -- but those are the exceptions.

The benefits to startups of riding in Microsoft's tailwind include increased market visibility and access to Microsoft's worldwide customer base. But there are risks, too. Microsoft is viewed by some with distrust if not distain, and its business practices have long drawn the scrutiny of regulators near and far.

Such concerns will cause some startups to keep Microsoft at arm's length, but others will find the lure of Microsoft's ecosystem too strong to resist. Here's a list of participating companies.

(Microsoft.com also has a Startup Center to help entrepreneurs get their companies off the ground using its software.)

Microsoft is constantly vetting startups for potential acquisition. It buys nearly a dozen startups a year, spending in the range of $50 million to $200 million on each (sometimes less). "For the most part, when we buy, they're companies that we already have a rapport with," Lewin says. So, if you see Microsoft talking to a Demo presenter, take note.

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