Microsoft Ventures GM: 'There will not be a WhatsApp-style acquisition again'

Microsoft Ventures general manager Rahul Sood said that we won’t see another WhatsApp-style, multi-multibillion dollar acquisition for a virtually prerevenue company again.

Ever.

“You know you’re in a bubble when you see people throwing money at dog-shit companies,” Sood said at the Cloud Factory conference, referring to copycat companies who are building strong buzzword compatibility but not much else. “We’ve hit the peak of the bubble.”

Sood was careful to not say that the sky is falling or that there won’t be any more significant acquisitions.

Rather, he said, Facebook’s $16 billion decision to buy WhatsApp is essentially the high-tide mark, and future acquisitions will have to make sense on business fundamentals as well as intangibles. (Of course, Facebook bought Oculus for one-eighth as much, $2 billion, just a short time after buying WhatsApp.)

Sood did note to me after the talk that he “loves” WhatsApp, and that he thinks Facebook made “a great decision on that deal,” but that what followed the deal was a “bubble of investor craziness.”

Sood joined Microsoft Ventures after starting a series of companies, including Voodoo, which built high-performance gaming PCs. He now focuses on helping startups around the world in accelerators that Microsoft has set up in cities such as Bangalore, Tel Aviv, Paris, and Berlin … as well as various locations in the U.S.

Microsoft doesn’t take any equity in the companies, instead focusing on the long-term value of helping startups who rely on Microsoft technologies.

“In the last 90 months, there’s been a billion-dollar company created every month … the startups of today are the enterprises of tomorrow,” he said. “If we help them build, help them scale, they’ll be long-term customers of Microsoft.”

But he’s not expecting WhatsApp level of exits from any of the 200 companies that have graduated from Microsoft Ventures. Over 80 percent of them have exited with external funding, and 30 percent have raised their first institutional round of funding, Sood said. Nine of them have been acquired for “significant” amounts of money, but he didn’t disclose any details.

Even though Sood doesn’t think we’ll see more WhatsApp-level acquistions, he did acknowledge that by utilizing cloud technologies, companies can scale faster than ever before.

“Cloud is an accelerant,” he said. “You can start a business in no time and exit really quickly … 85 percent of new software being built today is being built for the cloud.”