Microsoft used to scare start-ups but is now an 'outstandingly good partner,' says Silicon Valley investor Ben Horowitz

Key Points
  • Microsoft's Azure Databricks service was announced in 2017.
  • Microsoft has previously done deals with open-source companies like Hortonworks, and it recently acquired an open-source database company, Citus Data.
Microsoft CEO Satya Nadella at a company event in San Francisco in 2014.
Source: Microsoft

Once upon a time, Silicon Valley start-ups were afraid of Microsoft, or scorned it as irrelevant.

That's changed under Satya Nadella, according to investor Ben Horowitz, whose firm Andreessen Horowitz just co-invested alongside Microsoft in Databricks, a start-up with software for processing large-scale data inpublic clouds.

Microsoft is "truly an outstandingly good partner, which is really an amazing thing, just because if you go back to the '90s, Microsoft didn't have that reputation," Horowitz said.

In the old days, two things made Microsoft difficult to partner with, Horowitz said. Anything the company did had to promote Windows. Also, he said, "it was always scary to introduce a company to them [Microsoft] because it always felt like they were going to use information against you."

In addition to changing the company's track record, Nadella has also rebuilt the company's bench of product leaders after it emptied out under former CEO Steve Ballmer, Horowitz said.

The relationship between Databricks and Microsoft dates to 2016, when Horowitz sent an email about the company to Nadella.

Nadella grasped the importance of having data in the same place as the software that will process it, and his team understood how well it could handle lots of different kinds of data, Horowitz said.

"You have to just give him credit for seeing it," Horowitz said.

Microsoft employees then did the work to make sure that the Databricks software, which draws on the Apache Spark open-source project, works well with Azure, and got its salespeople prepared to sell the technology.

The resulting collaboration was one-of-a-kind — Microsoft offers a cloud service with "Databricks" in the name, but Databricks is the one that's running it, said Databricks CEO Ali Ghodsi.

Sometime in the second half of 2018 — Ghodsi wouldn't say exactly when — he had dinner with Nadella in the private room of Seattle restaurant. He came away as impressed as Horowitz.

"He said, 'As a leader, you need to create clarity.' I think he's created a lot of clarity at Microsoft," Ghodsi said of Nadella. "He's really, really customer-obsessed, and he really believes in the cloud, and he's a great leader."

Ghodsi and the Databricks board recognized what Microsoft had already contributed and decided to give Microsoft a chance to invest in the latest round, Horowitz said.

The new investment, which is an unspecified portion of a $250 million round, exemplifies Microsoft's increased focus on commercializing open-source software. In addition to making some of its technology compatible with the Linux operating system, which competes with Windows, Microsoft has also tapped other companies and made acquisitions in recent years to bolster its collection of developer tools that are compatible with open-source code.

Microsoft has previously partnered with open-source companies like Docker and Hortonworks in its efforts to compete with cloud market leader Amazon Web Services.

In January, Microsoft announced the acquisition of Citus Data, a company focusing on the PostgreSQL open-source database software, and in 2017 it bought the Deis team and technology, partly with an eye toward improving Azure's capabilities with software containers.

San Francisco-based Databricks claims more than 2,000 customers, including HP and Shell. The new round values the company at $2.7 billion. Coatue Management, Battery Ventures, Green Bay Ventures, Geodesic and New Enterprise Associates also participated in the new round alongside Microsoft and Andreessen Horowitz.

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