Matt McIlwain (Photo: Erynn Rose.)
Matt McIlwain (Photo: Erynn Rose.)

Every time Microsoft scales back or restructures, the question gets asked: Could the cutbacks actually help spark more entrepreneurial activity in the Seattle area?

After all, as the theory goes, some of the laid off workers may take their severance checks to pursue that startup idea that’s been stuck in the desk drawer.

Layoffs, you see, are a bit like wildfires. While they scorch and burn the Earth and are incredibly traumatic at the time, they actually create a fresh start from which new ideas can take root.

At least that’s how the theory goes.

Given the news today that Microsoft plans to cut 18,000 workers — the largest layoff in the company’s history — I floated the scorched-earth layoff theory to Madrona Venture Group’s Matt McIlwain.

The venture capitalist agrees that there could be some short-term benefit to the Seattle startup ecosystem, but he thinks that’s looking at the issue too simply.

In McIlwain’s view, the more important thing to consider is this: Microsoft needs to be thriving and healthy if the region is to maintain its status as an important technology hub.

“We are focusing today on layoffs, but what we really should be focusing on is whether Microsoft will have the culture to be strong and vibrant over the next 10 years,” said McIlwain.

Today’s layoffs and some of the recent moves by new CEO Satya Nadella gives McIlwain confidence that the company is on the right path.

“Satya is making a lot of the right moves, setting the company up for the next decade,” he said. “This is a bold move, and more aggressive than anyone was expecting and it shows that Satya has a game plan.”

Perhaps most important is the focus on productivity and platform, stressing cloud services such as Azure and Office 365. In McIlwain’s view, that’s the future of Microsoft and where the company has the best chance to succeed.

At the same time, McIlwain said that Nadella is attempting to switch the culture of the company, making it more “outward looking” and stressing operational efficiencies. As part of that, he said that Nadella is streamlining product management and engineering, with one person in charge of each product line.

That could position Microsoft to be more successful in efforts around big data and cloud computing.

“We want to see them making moves as a company strategical to set them up to be one of the big time winners,” he said.  “That will have far more positive impact on the Seattle innovation economy than any short-term impact through layoffs.”

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  • Sanjay Puri

    Completely agree with Matt here, Microsoft is an essential ingredient to the entrepreneurial ecosystem, to Seattle’s standing as the cloud infrastructure capital of the world and this region’s economy in general. No one benefits in the long term if Microsoft sputters.

  • Troy DeFrank

    More startups? Maybe. But I’m guessing the more plausible scenario is that the other big guys (Amazon, Google, Concur, Expedia) with mountains of open positions will absorb a big chunk of these former employees. You see something similar happening in Waterloo around Blackberry over the past year.

  • Kevin

    My thoughts are with all of the employees who were laid off today. I was part of the July 2010 cuts. And while I didn’t know it at the time, the last day of my Microsoft career became the first day of my entrepreneurial journey. The support I’ve received over the past four years from the startup community has been incredible, especially from Matt and the entire Madrona team.

    If any affected Microsoft employees are thinking of dipping their toes in the startup waters, feel free to email me at I’m happy to help point you towards some resources and groups that are waiting to welcome a new crop of the region’s best and brightest into our community.

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