What company sold 71m software licenses for a single product in fiscal year 2007 while delivering over 27 per cent growth in two separate billion dollar product lines and also expanded revenues by over 25% in 46 countries? Naturally, it's software behemoth Microsoft. These are just a few of the staggering statistics pulled from the 2007 Microsoft Annual Report. While most of the stats quickly grow mind numbing, it's an interesting set of data for putting venture capital investments in perspective.

Consider that Microsoft spent $7.12bn on research and development in fiscal 2007. Over that same period, the total value of disclosed investments in all European venture backed companies was about $8.79bn. It's a bit hard to fathom that the total investment in all the 412 information technology companies (~$2.5bn) during that same time was only a third of the R&D budget of a single software company. The graph below highlights total European Venture Backed investment compared to the Microsoft R&D budget over the last three Microsoft fiscal years (July through June).

 

Thankfully though, money isn't everything. Innovation at a small start-up is much more productive and rapid than at a large company. Microsoft sometimes decides that its legions of researchers and developers can't build what their billions in cash can buy. In 2007 alone it shelled out $1.34bn to purchase 13 companies: TellMe Networks Inc, Softricity, Winternals, Azzyxi, Gteko, DesktopStandard Corporation, Colloquis Inc, Secured Dimensions, Medstory, devBiz Business Solutions, ScreenTonic SA, Engyro, and Stratature (plus $6bn for aQuantive). The TellMe acquisition was estimated at $800m indicating the average acquisition price for the other twelve companies was around $45m.  While the stats on Microsoft's research budgets may be a bit depressing, investors on this side of the pond should be happy to know that Microsoft plucked 30 per cent of this year's acquisitions from Israel, France, and Turkey.