Microsoft joins hunt for next big thing

Steve Ballmer, chief executive officer of Microsoft, has joined a growing list of technology and media company bosses who have taken to trawling Silicon Valley in person in search of the next hot start-ups.

The readiness of corporate chieftains to scout personally for talent echoes the boom days of the late 1990s, when many thought nothing ofthrowing off their suits and ties, donning khakis and venturing out to hunt for potentially world-changing technologies.

Among others, Peter Chernin, president of News Corp, has taken to meeting entrepreneurs personally and to pursuing local venture capitalists to try to tap into their networks of contacts, according to several people in the Valley.

Setting aside the sort of corporate ego normally associated with powerful media bosses, Mr Chernin thinks nothing of turning up to early breakfast meetings with largely unknown companies in his pursuit of the next big thing, according to one prominent financier.

News Corp’s purchase last year of MySpace, a social networking site, has galvanised other traditional media companies into joining the hunt.

Meanwhile, the shift of advertising to the web has prompted a group of big media and technology companies to start trawling through a common pool of young internet technology and “content” companies.

Speaking at an event last week in Silicon Valley, Mr Ballmer said that he recently devoted a full day to meeting chief executives of small start-ups to find companies that Microsoft could buy or form partnerships with. He added that he plans to spend another two days this year hunting for talent.

Mr Ballmer’s personal involvement reflects a broader change of heart at Microsoft, which has set out to buy more technology through small acquisitions rather than relying exclusively on its massive internal research and development effort. The change has resulted in the software company picking up more than 20 small tech companies during the past year.

Outsiders to Silicon Valley, such as Mr Ballmer and Mr Chernin, are trying to narrow the gap with rivals such as Google and Yahoo, whose presence in the Valley has given them a headstart when it comes to finding ground-breaking start-ups.

Both companies have used small acquisitions to develop new products. Google’s purchase of a start-up called Keyhole, for example, led to the Google Earth service, while Yahoo bought Oddpost to lay the ground for an overhaul of its e-mail service.

“As the competition between Google, Microsoft, Yahoo, AOL, News Corp gets more intense, these companies are looking to the outside for innovation and quick growth,” said Tom McInerney, chief executive of Guba, an online video service. “All of these companies are sitting on piles of cash, and the preferred exit for many tech companies is acquisition instead of IPO.”

Networking events and conferences in Silicon Valley are now swamped with scouts. “From the media companies, News Corp is the one that is everywhere,” said a Valley executive. “At even the smallest gathering, Fox Interactive people are there checking companies out.”