Microsoft’s AI ecosystem is on fire and startups are the fuel 🔥The Six Five Media at Microsoft Ignite wraps up the week with host Patrick Moorhead, joined by guests Annie Pearl from Microsoft Azure, Ross Kennedy from Microsoft, and Adriano Koshiyama from Holistic AI for a comprehensive discussion on the transformative role of generative AI (GenAI) in the startup ecosystem and how Microsoft propels startups from their early stages to becoming unicorns and beyond.
Their discussion covers:
- The significant impact of generative AI in driving innovation among startups and Microsoft’s support through programs like Microsoft for Startups
- How their go-to-market support is a game-changer for startups AND established companies
- The differences between unicorns, public digital natives, smaller startups, and Microsoft’s tailored approach to nurturing their growth
- The importance of responsibly building AI solutions and Microsoft’s commitment to enabling ethical AI development
- HolisticAI’s mission championing governance and the synergy with Microsoft in progressing towards responsible AI utilization
- Insights and advice on adopting generative AI solutions for startups and digital natives aiming for impactful growth
Learn more at Microsoft Azure.
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Transcript:
Patrick Moorhead: The Six Five is On the Road here in Chicago at Microsoft Ignite 2024. Unsurprisingly, it has been all about AI, enterprise AI, and the unique thing about Microsoft is it literally, wherever you want to start, novice to expert, wherever you are on the technology range, whether you’re a developer, an IT professional, anybody in the mix, an executive, an end user, Microsoft sounds like it has something for you. Now, we’d like to do drill-downs here at The Six Five, and what we’re going to talk about now is born in the cloud, cloud native, and that can be large companies, large cloud companies, SaaS companies. It can also be startups, and Microsoft has a lot going in there and they have a lot of partners. So it is my pleasure to introduce Annie, Ross, Adriano. Welcome to The Six Five.
Adriano Koshiyama: Thanks for having us.
Ross Kennedy: Thanks for having us.
Patrick Moorhead: Yeah, it’s a great show. And like I said, this duality of analyst and what we like to do is capture what is going on in the industry and just get this message out here. So super exciting here. Born in the cloud. So I’m going to start with you, Annie. First of all, it’s really cool that you support startups. There’s so many big companies that Microsoft supports out there. Can you talk about the impact that startups are having on the generative AI momentum? I don’t always ask a question. I think I know the answer, but it’s like startups, baby.
Annie Pearl: Yeah, absolutely. Well, thanks for having us.
Patrick Moorhead: Yeah.
Annie Pearl: Yeah. Generative AI has really taken the startup ecosystem by storm and really ushered in a new wave of startups that I think are fueling a lot of the growth and momentum we’re feeling. You can just look at the funding, VC funding, and how much funding is going in. I think there was a CB Insights report last month that there were 22,000 new AI startups representing a third of venture funding in just Q3 of 2024. So just massive scale in terms of investment. I think one of the reasons is startups are really uniquely positioned to help enterprise customers with two challenges that they’re facing in the era of AI. I think the first is how do you move quickly? You’re a large enterprise customer, you’ve got board demands, you’ve got Wall Street demands, customers, how do you move quickly and rapidly implement AI? And I think those who are doing that well are able to leverage partners and licensed technology from startups to help them rapidly implement AI and do so at a pace that will allow them to keep up with what’s happening in the market.
So I think that’s challenge number one and the role startups are playing. And then the second is how do you then implement it responsibly and securely? So as you’re thinking about, “All right, I want to partner with startups,” how do you make sure that you’re doing it responsibly and securely? And so at Microsoft, our startups program, we offer up to $150,000 worth of Azure credits. We help nurture our startups and get them to build on Azure, which is secure and compliant and responsible. And so they’re enterprise grade from the ground up, and then we can match-make the startups in our programs with enterprise customers to really fuel this innovation. So I think that’s what we’re seeing in terms of the role that startups are playing in the market around GenAI.
Patrick Moorhead: Yeah, and it seems like investors would feel pretty good if you were behind this, particularly if they had to scale and particularly if they needed to have enterprise grade capabilities behind them.
Annie Pearl: That’s exactly right. So we offer the startups the ability to, we’re here with one today, excited to hear from, the ability to build on top of our best in class AI infrastructure, where we have the security, reliability, performance and scalability to support the needs of enterprise. So from day one, our startups are already building on a secure platform.
Patrick Moorhead: So, Ross, you deal with larger companies. Call them unicorns, but also a lot bigger than unicorns. I guess unicorn is billion dollar valuation plus. Can you talk to me how they differ, let’s see, in their needs, maybe how you approach them versus the startups?
Ross Kennedy: Yeah, I think the other thing is when we hear the word digital native, there’s so many different definitions of what a digital native is.
Patrick Moorhead: I looked it up before I came here. I looked that up in the green room. Okay?
Ross Kennedy: There’s an old proverb that says, if you ask 10 people, you’ll get 12 answers. And I think that’s probably true for digital natives. They’re different fundamentally from your traditional companies because traditional companies use software to try to build widgets better, faster, and cheaper, whereas for digital natives, the widget is the software itself. And in particular for the ones that we’re talking about here, these unicorns and these late stage digital natives, they’re typically very well funded on the VC side of the house. They’re almost always founder led or founder engaged. And so this makes them behave fundamentally different, especially in that late stage. They’re very technically intense and they make decisions incredibly, incredibly fast. So for Microsoft, we approach this in two ways to try to support them better. The first is to have the platform and tools of innovation, those things that allow them to build differentiated solutions that are secure, scalable, and responsible. And then the second is that go-to-market help. How are we helping them reach markets at scale-
Patrick Moorhead: Oh, interesting.
Ross Kennedy: … co-sell, deal mentoring, deal registration, those types of things.
Patrick Moorhead: That’s interesting. I was thinking here, mentoring in sales, it’s almost like that’s what some full service VCs do, right?
Ross Kennedy: Yeah. And in some ways you can see us that way. That’s how we differentiate ourselves, but it’s really about trying to make those unicorns successful.
Patrick Moorhead: Yeah. So Adriano, we had pretended that you weren’t here the last five minutes, but no, I have a few questions for you. First of all, can you tell us, for those who don’t know, what does Holistic AI do and how do you fit in? Are you more over here on the startup or more over here on the unicorn plus?
Adriano Koshiyama: I think I’m in the right position. I am between both. And it’s a very interesting position. So first of all, Holistic AI is an AI governance software company. We are actually spun out of university four or five years ago. One those deep tech companies that are transitioned to become a tech company, as I would say. OpenAI was a deep tech company one day. Nowadays it’s a proper tech company. So I think we all make that transition one way or another. It was co-founded by me, my co-founder, Emre. Very different background. I was a computer scientist, he was a philosopher. So it was a very interesting company to tackle this challenge of AI safety ethics and so on.
In any case, the value of this relationship with both sides is that we are really, I’ll be honest with you, we’re down the middle. We get the relationship with Pegasus and Microsoft and be able to scale and build on the Azure platform. And at the same time we leverage the go-to-market team at Microsoft, which I’ll be honest, I think is the big differential of Microsoft, is that go-to-market team that can take you to the accounts, help you break into some of the accounts and help you grow with them.
Patrick Moorhead: That’s great. I love that. It’s you’re getting kind of a twofer.
Adriano Koshiyama: Yes.
Patrick Moorhead: That’s super. So there’s a lot of people who would want to help you out there in the marketplace. Why did you choose Microsoft?
Adriano Koshiyama: Yeah, I’ll be honest, it was not something that was on our radar because I think of the academic system, like our first intuition is to go with the universities and try to find other kinds of companies around. And later on we realized that actually we are building our software into a hyperscaler and AI has been built on a hyperscaler. So it was something, I would say natural, that that relationship had to emerge. And honestly, we have to pick a hyperscaler to be a partner with. And I believe in having a focus partner, not trying to be agnostic. Pick one, marry with this partner for a long time and build this relationship. And we chose Microsoft for the two reasons. One is not only the 150 K credits. They actually give you more if you’re part of Pegasus. That’s something to remark for everyone. But the second element, which is I think, just to make the point again, the go-to market team in Microsoft is something that is impressive and is great for us as we scale the company.
Patrick Moorhead: Yeah. How has the journey been? I mean, and it’s okay, I won’t tell anybody. No, seriously. How has it been? Was it what you expected? Did you get more than you bargained for here?
Adriano Koshiyama: I met Brad Smith from Microsoft actually at Web Summit, a week and a half ago. And I told him, the first thing I said to him is that I’m pleasantly surprised with the startup ecosystem as well as the go-to-market team and the technology team. And he said to me, “That’s our big differentiator.” And what I’m experiencing is something that is just unbelievable. We have an account manager that speak to every week. Every time we need help with some potential customer, they bring us the Microsoft reps. So the engineer is working perfectly. We’re in the marketplace, we’re Mac eligible, couldn’t be better. And all of that was done really at pace. So we can get in front of the customer, everyone is happy and we can sell our software and the scale with the support of Microsoft.
Patrick Moorhead: No, that’s great. And what dawns on me that’s unique is Microsoft is such a gigantic company and they would pay attention to a small company. I mean, let’s just be blunt. It’s good.
Adriano Koshiyama: I had the same feeling in the beginning. I thought, “We are just so tiny,” and we never did any transactions or anything. But I think it’s the, as Annie was saying, is that believing on the SME approach, believe that we need to get to our customers the new technology because that new technology like OpenAI was one day. Holistic can be the future as we go along.
Patrick Moorhead: So as a research firm, we talk about accelerants and things that are slowing things down. And when it comes to enterprise AI, there’s conversations about data like, “Hey, it was one thing to do magical things on ERP data, but now it’s doing magical things across multiple data sets.” Trust and governance are huge too. And it’s not just if you’re a regulated industry. I mean, sure, it’s amplified that, but you can’t screw up generative AI if you’re any company because it impacts your customers. It could impact your employees, your stakeholders out there. So you’re in the governance business here. What kind of uptake and demand are you seeing with enterprises?
Adriano Koshiyama: Yeah, I think we are finally crossing the chasm, using that verbiage from marketing. This year we’ve seen so many RFPs in our space. It never has really happened before. And we do believe that it was because of the interest from large companies of adopting it at scale. And it’s really, as you say, it is not necessarily only healthcare, financial services, regulated industries. Actually everyone is trying to make that adoption at scale and they’re feeling the pain of trying to make that in reality. And the reality is we have to deal with processes, frameworks, regulatory hurdles, internal governance and so on. How do we make that process seamless as possible? That’s why we built holistic for it.
Patrick Moorhead: Just a follow-up question on that. Have you found the collaboration? My assumption is you would tell your prospects and customers that you’re affiliated with Microsoft. Did you think that helps give you credibility in the enterprise?
Adriano Koshiyama: One million percent. I would even say there are situations where the customer will only purchase if they’re able to purchase through Microsoft Marketplace. And because we tick that box, we really jump the queue with so many competitors.
Patrick Moorhead: So net-net they can get the benefits of the innovation from a startup with the benefits of this gigantic company. This is great. This is great. I think I get it. I’m coming to you for money.
Annie Pearl: There we go. Yeah.
Patrick Moorhead: Here we go. I’m going to start a startup.
Annie Pearl: It’s a better together story.
Patrick Moorhead: We’re going to be talking here. No, this is super. Hey, as part of these videos, the last question that I’ve been asking people for Ignite is advice you would give, and in this case, to a startup or digital native, building a generative AI solution. Annie, let’s start with you.
Annie Pearl: Sure. My number one piece of advice is to focus on the problem you’re trying to solve and not the AI technology itself. AI is a great technology to help you build a solution that will solve a problem, but if you don’t deeply understand the problem that your customers are facing and you’re just building AI for AI’s sake, you’re likely not going to be able to build something that’s going to be better than any alternative out there on the market.
Patrick Moorhead: I love that. I’m a recovering product person.
Annie Pearl: I’m a recovering product person as well.
Patrick Moorhead: And it’s like I am all in on core value proposition. So, Ross, let’s get to you. What’s your advice for startups here?
Ross Kennedy: It’s going to sound self-serving, but truly pick the right partner. You probably very good at one thing, maybe two things. Make sure that you are partnering with those agencies that can help you fill out the rest of your portfolio.
Patrick Moorhead: That makes sense. You would think that would be easy because when you’re a smaller company, you know you have to partner, but sometimes you get these delusions that you can do everything. But then picking the right partner, based on… What kind of criteria would you recommend that they look at?
Ross Kennedy: Yeah. Well I think if you’re really strong in the tech side of the house, make sure that you have a partner that’s really strong in the GTM side of the house. If you’re really good on the marketing side of the house, make sure you get a partner that’s good on the sales side of the house. It’s figuring out where you’re weak. It’s almost like a marriage. You want to make sure that your better half is filling you in some way.
Patrick Moorhead: Yeah. So, Adriano, don’t give too good advice to your competitors, but no, we’re trying to educate everybody out here. What advice would you give to people like you?
Adriano Koshiyama: Yeah, I think I’m going to say use Holistic because we can help you with all the risk problems. But beyond that, I would say think about the potential impact that this generative AI application will regenerate for your customers, for your internal employees, whoever’s using it. So try to think about it. Is this going to be something that you’re going to be using externally, internally? What kind of data it’s going to be accessing. Is this something that’s going to be autonomous, there’ll be human in the loop? What’s the worst case scenario if things go wrong? So try to think about all these questions and then answer them. And when you think about like, “Oh, it’s going to be external. If something goes wrong, it’s going to be big damage. We use sensitive personal data,” it feels very problematic. And that’s something you need to think about. What’s the guardrails you need to put in place before you go live?
Patrick Moorhead: No, I appreciate that. So, Annie, Adriano, Ross, thank you so much for taking this time. I know I’ve enjoyed myself and I know everybody out there is going to pick up on these different conversations here and hopefully be better because of it.
Ross Kennedy: Appreciate it.
Annie Pearl: Thanks so much.
Ross Kennedy: Yeah, thank you.
Adriano Koshiyama: Thank you.
Patrick Moorhead: So this is Pat Moorhead in The Six Five here signing out for Microsoft Ignite 2024 in Chicago. Make sure to check out all of the interviews and analysis that we’ve done here at the show. Take care. Hit that subscribe button. Bye-bye.
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Six Five Media is a joint venture of two top-ranked analyst firms, The Futurum Group and Moor Insights & Strategy. Six Five provides high-quality, insightful, and credible analyses of the tech landscape in video format. Our team of analysts sit with the world’s most respected leaders and professionals to discuss all things technology with a focus on digital transformation and innovation.
