Designing Disruption

How to get Microsoft to mentor your big idea

Andrew Zaleski, special to
Fred Dufour | AFP | Getty Images

Getting a leading tech company to help you jump-start your big idea isn't as far-fetched as it sounds.

Microsoft is one of many companies that have created a global accelerator program to invest and mentor seed-stage companies in the U.S. and all over the world. The company's activities span all corners of the globe, including Bangalore, Beijing, Paris, London, Seattle and Tel-Aviv.

The idea is to get back to its entrepreneurial roots and help support start-ups in a host of areas — from cloud computing to mobile gaming.

Here's a look at how some entrepreneurs have managed to get a foot in the door and get adopted in Microsoft's Ventures Accelerator program. The coveted benefits: help to fast-forward product development, garner financing and catalyze growth.

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Huan Ho's experience in the corporate world led him to found his own start-up in August 2013. Called Rallyteam, it is a matchmaking platform for managers looking to assign internal company projects to employees with skills and interests relevant to the work. Too often, Ho said, managers outsource office work instead of recruiting their own people. But to know if what he designed was a good fit for large companies, Ho needed a large company to pilot his platform — something that unexpectedly happened last March when the San Francisco-based Rallyteam headed north to Seattle to begin its four-month stint at the Microsoft Ventures Accelerator.

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"Within three weeks we got a pilot going in a team within Microsoft," Ho said. "For them to get a pilot going within three weeks was amazing."

Microsoft provided feedback on the Rallyteam platform during the pilot program, helping Ho refine the start-up's product, which in turn helped Rallyteam raise a round of Series A funding — an amount the start-up is keeping private for now — midway through their time at Microsoft's accelerator.

"Being part of the accelerator and piloting with Microsoft definitely helped with our fundraising efforts," he said.

In other cities where Microsoft has set up accelerator programs, early stage start-ups are having similar sorts of opportunities. Microsoft set up its first accelerator program in Tel Aviv in April 2012 and has since taken its accelerators to Beijing, Bangalore, London, Paris and Seattle, which accepted its first accelerator class in 2014. (Rallyteam was a member of Microsoft's second Seattle class.)

This is Microsoft's way of reclaiming its entrepreneurial roots while connecting promising seed-stage start-ups with mentors, developer resources, potential customers and a business curriculum analogous to what an MBA student might receive.

To date, Microsoft has mentored 410 seed-stage companies in its accelerator programs worldwide; 54 of those companies went through Microsoft's U.S. accelerator in Seattle.

"It's helping create the next era of great start-ups that will turn into great companies … with no strings attached," said Hanan Lavy, director of the Microsoft Ventures Accelerator in Seattle. "We're here to help start-ups on a long-term basis."

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Aside from relocating, start-ups don't exchange much in return. Microsoft takes no equity in start-ups that participate in its accelerators, and generally provides a stipend to help start-ups cover living expenses. Out-of-town start-ups that participate in Microsoft's Seattle accelerator, for instance, receive a one-time check of $25,000.

So what does Microsoft get out of it? Access to top early stage technology that it can potentially license or acquire in the future.

Three and a half years into running these accelerators, the success of the programs' 410 graduates has validated Microsoft's move. According to Lavy, 79 percent of start-ups raise an average of $3.7 million in follow-on funding the first year after graduating.

Weekly seminars on go-to-market strategies, funding and financing, product development, customer interactions and more prepare start-ups for what they do once they leave. Ho, who dropped out of the University of Houston's MBA program to pursue Rallyteam, said what he learned during his time in Seattle mirrors a semester in graduate school.

"They give you a plan for the next four months … [and] every week I knew exactly what we were going to learn," he added.

About 10 to 15 start-ups participate in each four-month class — in China the accelerator lasts six months — and Microsoft will look at start-ups that have raised up to $1.5 million, although start-ups don't need to have raised any venture capital to be eligible, Lavy said. Other parameters, like what the product is, who a start-ups' customers are and how long a founding team has worked together are also weighed.

Occasionally, accelerator classes follow themes: For its next Seattle class starting in February, Microsoft is looking for start-ups doing machine learning and other predictive analytics. Lavy said the accelerators are "open to anyone in any domain," but a Microsoft accelerator is probably more beneficial to software start-ups than hardware start-ups.

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Prior to joining Microsoft's Seattle accelerator last March, Dorin Rosenshine was skeptical about how much an accelerator could help her New York-based start-up, Outleads, which creates software that enables businesses to expand the reach of their tailored, online advertising by incorporating customers' offline activity — for example, integrating data from a phone call a car buyer makes to a car dealership into the dealership's existing customer relationship management platform.

At the time, the Outleads product was the "bare minimum version," she said. But Rosenshine applied and was accepted, and then it was Microsoft that helped her find her first beta users. Not only was Bing Ads a beta user of Outleads but Microsoft also connected Rosenshine to Outleads' largest customer to date.

"There was a huge effort to bring in all of their partners to have us network with them one on one," she said. "That was something that we needed, because we had the product and had no idea who would use this. The challenge also was, we needed a large organization to deploy this — there needed to be the volume of phone calls, the volume of leads coming in — and Microsoft helped with that."

The ultimate benefit for Microsoft, though, is being close to interesting new technologies from small companies that might become advantageous business partners in the future.

"Being part of these ecosystems all around the world is something we wanted to be in," said Lavy. "These start-ups will turn into tomorrow's partners that we want to work with."

—By Andrew, Zaleski, special to