January 27, 2020

Microsoft’s M12 is on the hunt again for European startups

Two investments in two weeks — into SuperAwesome and Comtravo — signal that Microsoft's venture capital arm is back in the game in Europe.

Maija Palmer

2 min read

M12, the venture capital arm of Microsoft, has signalled a renewed interest in backing European startups, as it unveiled an investment in SuperAwesome, the London-based kidtech platform, less than two weeks after funding Comtravo, the German business travel startup.

M12 previously had six investments in Europe (out of a portfolio of 87), including stakes in Kahoot and Unbabel, but had done little since 2018, when the venture capital firm lost its London-based investment director, Itxaso Del Palacio, to Notion Capital. Now it has appointed partner Matt Goldstein to the London role with the intention of picking up the pace of investments.

SuperAwesome is a child-safe advertising platform which provides tools for making online content for children compliant with digital privacy laws such as COPPA (Children's Online Privacy Protection Rule) in the US and GDPR-K in Europe. It works with companies including LEGO, NBC Universal, Hasbro, WPP, Omnicom, Dentsu, Mattel and Niantic.

Children are exposed to the internet far earlier than before. Yet there is no good mechanism to ensure the responsible use of data.

“We were really impressed with what Dylan Collins, the CEO, has built. It is a very mission-driven company, building a safer internet for children,” says Nagraj Kashyap, Microsoft corporate vice president and global head of M12.

“Children are exposed to the internet far earlier than before, and there are some 170,000 new kids going online every day. Yet there is no good mechanism to ensure the responsible use of data. A lot of companies have simply put age gates on their sites and we know these don’t work. I have a 14-year-old son and he knows exactly how to get around these.”

SuperAwesome said it hit profitability in 2017 and was at the time estimated to be worth $100m. It raised a $13m Series C round from Hoxton Ventures and Mayfair Equity Partners last February.

Although M12 says it invests primarily on a financial basis, rather than for corporate strategy, companies are likely to do partnership deals with different parts of Microsoft. Given that Microsoft has a big interest in online identity management, the is scope for joint projects with SuperAwesome.

Any VC has to sell themselves to startups these days.

It is part of the unique selling point of M12 that it can broker deals with Microsoft for its portfolio businesses. Sometimes it is this promise that helps M12 clinch the deal, says Kashyap.

“Any VC has to sell themselves to startups these days. There is no shortage of capital, startups take our money because they believe we can add value to them,” says Kashyap. Founders are increasingly savvy about doing their due diligence these days, he adds, so venture capital funds really have to live up to what they promise.

Hence the post-investment team at M12 is much bigger than the investments side. The first meetings between SuperAwesome and Microsoft are already in the diary, says Kashyap.