Software giant Microsoft has made its first European foray into the venture capital market.

The Microsoft Intellectual Property (IP) Ventures division was established in May to invest in new businesses. It will furnish the firm with technology that can be integrated into its own products and provide a boost to its innovation cycle.

Earlier this month Microsoft announced that a UK startup called Skinkers , which develops push communication technology, will receive  intellectual property investment, and have the opportunity to work on joint development projects at the Microsoft Research Lab in Cambridge.

This model of investment is new to Europe, but is becoming increasingly commonplace in the US, says Gerard Hallaran, a Gartner venture capital analyst.

‘This will allow the startup company to gain access to resources that would otherwise not be available to them,’ he said.

Martin McNair, a general partner at venture capital specialist Advent Venture Partners, says the deal could have advantages for both sides, but warns that close attention must be paid to the management of the business.

‘If it was just a pure research team, the question we would ask is: how are you going to build a business out of it?’ he said.

‘However, we would also want to know how Skinkers is going to build routes to market and how it is going to develop a business that can have a global presence. How is that going to be done?’ said McNair.

UK technology startups often face major challenges in attracting commercial talent to their ideas at an early enough stage to set the business off on a stable footing. But even then, winning funding can be difficult.

Getting the initial technology funding for a startup business is difficult because they have no track record, says Tom Hockaday, executive director of Isis Innovation, an Oxford University company that helps researchers commercialise their ideas.

‘There is a business plan, but there hasn’t yet been a business to implement it. Also, investors dislike new and unproven technologies, they prefer something that has been there a while and has been seen to work,’ he said.

‘Awareness is growing all the time in the UK of the opportunities that are there to be had in technology startups, but it will only work if ideas are managed and executed sensibly,’ he said.

‘Universities can help by investing in IT transfer activities at a high-level, but ultimately it is about people working out how to commercialise their ideas.’

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Further Reading:

Model investment

Microsoft Research Cambridge is investing money and research time in a UK technology startup called Skinkers.

The deal will provide a new avenue for investment into technology startup companies.

But funding for new ideas is still difficult to find, according to innovation experts.