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Microsoft wants to give $4 million to two female-led startups

The software giant says it’s focusing on an underrepresented group.

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Microsoft's two-year-old venture fund, M12, is running a competition for business-focused tech and giving two winners $2 million each in funding. The catch: They must be women-led companies.

"These are companies who might not have been on our radar," Peggy Johnson, Microsoft's head of business development, said in an interview.

Microsoft said there's good reason for its focus. Companies founded solely by women represented just 2.2 percent of all venture capital funding in the US last year, according to data from industry tracker Pitchbook. Yet, research consistently shows that women-led companies tend to generate better returns

Johnson, a former Qualcomm executive who joined Microsoft in 2014, began M12 ("M" for Microsoft, 12 for the number of letters in "entrepreneur") as an effort to identify promising startups Microsoft can both invest in and support with access to its technology. Last year, the company held an artificial intelligence competition called innovate.ai, awarding $3.5 million to startups working on medical technology, privacy and speech recognition.

This time, Johnson said she wanted to tackle diversity more directly. Despite Microsoft's diversity efforts, for example, just 7.5 percent of M12's portfolio companies are founded by women. And while Johnson said that's above the industry average of about 5 percent, it's not enough.

"We need more" women in tech, she said. 

Microsoft will accept submissions for its competition from Thursday to September 30 from applicants in North America, Europe and Israel. 

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