{"id":90897,"date":"2019-03-26T15:19:58","date_gmt":"2019-03-26T15:19:58","guid":{"rendered":"https:\/\/news.microsoft.com\/?p=431967"},"modified":"2019-03-26T15:19:58","modified_gmt":"2019-03-26T15:19:58","slug":"meeting-entrepreneurs-on-their-terms-why-microsoft-doesnt-require-any-special-rights","status":"publish","type":"post","link":"https:\/\/sickgaming.net\/blog\/2019\/03\/26\/meeting-entrepreneurs-on-their-terms-why-microsoft-doesnt-require-any-special-rights\/","title":{"rendered":"Meeting entrepreneurs on their terms: Why Microsoft doesn\u2019t require any \u2018special rights\u2019"},"content":{"rendered":"
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Last week in Seattle, leading innovators, entrepreneurs and business minds came together to discuss best practices for startup funding and operations at M12\u2019s inaugural summit. It was humbling to see almost 80 companies<\/a> in our portfolio gathered from around the world, and to reflect on the progress we\u2019ve made since we started the fund nearly three years ago. Our team has grown to more than 20 people<\/a> supporting portfolio companies across 11 countries and 38 cities, seen four exits, and created new channels to ensure capital is reaching startups, such as our competitions to find female founded and led<\/a> businesses and entrepreneurs innovating with AI<\/a>.<\/p>\n

In the days and weeks leading up to the summit, one thing I am particularly proud of is our pulse on the startup community, the relationships we\u2019ve built there and our unwavering focus on doing what\u2019s right for the entrepreneur. We\u2019ve learned some important lessons, including one of the most egregious contributors to the poor reputation of corporate venture capitalists (CVCs) \u2013 terms and conditions like \u201cRights-of-first\u201d (ROF), which we believe favor the corporation and restrict the startup.<\/p>\n

Microsoft\u2019s mission is to empower every person and every organization on the planet to achieve more. ROF terms restrict that for entrepreneurs. Simply put, ROF terms limit an entrepreneur\u2019s ability to maximize their exit valuation. Stifling those options can be detrimental to a startup\u2019s growth and consequential to the return profile of founders and all the investors. That\u2019s why at M12, we believe ROF and similar terms are neither necessary nor valuable.<\/p>\n

While we\u2019ve always believed this, we weren\u2019t following through in practice when other CVCs utilized these rights in companies we invested in, leading us to ask for the same during the first year our fund operated. And while we\u2019ve never asked for these terms if the other investors didn\u2019t have the same, in retrospect, we should have never asked at all. Since then, we\u2019ve stopped asking for any special rights regardless of what other strategic investors held in the company and we\u2019ve started actively educating entrepreneurs to resist these terms and try to remove them if they already exist.<\/p>\n

We firmly believe that being fully aligned with founders is the only way to drive value to all stakeholders, including M12 and Microsoft. So, we want to go one step further. Instead of simply thinking, \u201cWhat\u2019s best for us,\u201d we want to encourage the CVC community to start thinking \u201cWhat\u2019s best for all,\u201d starting with adopting similar rules of engagement M12 currently employs to benefit the entire startup ecosystem:<\/p>\n