Investing in Tablets

Something Scoble mentioned awhile back has been nudging at my neurons: “Some of our [Microsoft] executives are regularly meeting with Silicon Valley venture capitalists and business owners to let them know about what we’re doing and where there are business opportunities to create value.”

How would you explain the business opportunities of Tablet PCs to VCs? Do they create whole new industries? Are they the right scale for VCs?

I can see where hardware companies need the leverage a VC can provide. However, what about Tablet PC software companies? Purely from a financial standpoint, is there enough opportunity here for VCs to be interested? VCs need significant market potential. Are we going to be seeing a handful of $100M opportunities or rather hundreds of $10M ventures? I’d bet the latter. In VC land, though, these numbers are too small.

I imagine that over the next couple of years it’s going to be a combination of in-house corporate/educational investments as well as angel investors that are going to help finance Tablet PC software development. (Although most projects probably will never be funded, but rather born out of passion and perseverance.)

Microsoft already has extensive ties into educational investments. And there’s an excellent surge of Tablet PC marketing in the corporate world. I’m not so sure the angel community has gotten the message though. Much of the responsibility of talking with angel investors lies with the individual startups themselves, but I think Scoble is on to something. Angels are an important part of the investment spectrum and they need a targeted message just as end-users, developers, corporate purchasers, and VCs need of the value of Tablet PCs.

I imagine blogs such as this one, TabletPCBuzz, and Scoble’s blog are part of a powerful distribution network of Tablet PC information and opportunities. However, there’s nothing like face-to-face marketing. Comdex and CES are probably generically important here for this. And the Tablet PC Get Together at Comdex was one example of networking in action. Next time we need to expand the invites and make sure that a broader network of industry and investor influentials join in so they can talk directly with and see for themselves the tremendous energy behind several of the latest Tablet PC ventures. Startups need access to networks such as these. And potential investors and people that can influence them need direct access to these opportunities.

Should Microsoft organize Tablet PC events such as these? Hmm. They probably have to be involved. They have to participate in order to illustrate their commitment. However, I wonder if a third-party wouldn’t do better? I wonder if events such as these wouldn’t be most efficient if managed as part of a bigger investment strategy.

Imagine if Microsoft directed $5-10M to a special Guy Kawasaki Garage.com fund specifically targeted to angel-level investments in Tablet PC ventures. Could Guy make the money stretch further than Microsoft could directly? Could Guy inspire other angels to lead the way? Could Garage.com more effectively bring together potential investors and Tablet PC ventures? Could a Garage fund inspire new Tablet PC businesses?

On Microsoft’s side, I’m sure they’d like others to do the financing work (–Intel, anyone?). Heck, I don’t blame them. And it’s clearly not something a division would initiate. It would have to be something a senior executive would want. The Tablet PC needs an angel within Microsoft’s management team.