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Red Hat Ventures To Fund Open Source
joel_archer writes "According to this article on C|Net Red Hat Ventures division will take $500,000 to $2 million stakes in new companies specializing in open-source software and Internet infrastructure technology. Red Hat said it hopes to identify new business opportunities through the funding of start-ups. "
Bob Young annouced Redhat software's newest investment plan. Called "extend and embrace" Redhat plans to fund starting open source projects, then gobble them up and redistribute them under the Redhat label once they become profitable. Redhat is believed to be doing this to improve their stock prices, which plummeted when everyone realized that you shouldn't pay for milk when a cow is free.
Said one RH investor, "Yeah, turns out this linux thing is free and you can download it for almost nothing off the internet. Guess you don't have to pay $80 for it from Redhat after all. Oops."
In an unrelated comment Mr. Young was quoted as saying "640k should be enough for anyone" and has begun spending way too much money on a house in washington.
So far I've gotten all my Karma from telling people they are wrong... :)
>Red Hat got four billion dollars in cold, >hard cash on IPO day No they didn't! Man, people get a clue. They got something like $76 Million from their IPO and something like $300 Million from their secondary offering. Lots of cash, but certainly not billions. (I might be a little off on the figures, but the order of magnitude should be correct).
Is it just me, or does:
"Identify new business opportunities through the funding of startups"
Sound suspiciously like:
"We don't know where to go now, but we want to be the MS of the new millenium -- so we'll throw a bunch of money at a bunch of projects, and see which ones take off -- once they become profitable, we'll "acquire" them"
Sort of like them saying (now) "Here's 10k to fund your open-source project" -- then 3-4 years down the road "Hey, remember when we gave you that 10k? We own your @$$. Join us."
Admittedly, with it being open-source, it's substantially better than MS's tactics of "let someone else come up with the good stuff, then either buy them, or make something similar, proprietary, and bundled into the OS that everyone will use instead, because we give them no choice".
$$ for open-source startups is cool - but I can't help but be skeptical when large corporations are involved. Seldom do they do things because they are "right" -- most often they do things because they are "profitable"...
I guess we'll se how it turns out - I could be completely wrong.
I have to admit... I had a simialr though slightly different first reaction.
My first reactionw as "Red Hat is dumping their imaginary IPO-generated money into other things before people realize its imaginary."
But I have to be slightly fairer to Red Hat. Given the number of people I've seen usign the red Hat name I assume they are actually making SOME kind of money in license fees... which is more then can be said for most Linux companies.
Still, I read their stated interests as two-fold:
(1) Encourage open software == hope to create more products they can sell without having to do actual development work themselves.
(2) Internet Infrastructure -- A relatively safe-haven for high tech IPO money against the day investors realize comapneis need to turn real profits to be worth anything.
In re 2... I have a saying based on 20 years in bleeding edge development.
"In any gold rush, the guys gauranteed to get rich are the ones selling shovels."
(The Beatles did the same thing, with their Apple record label, and nearly went bankrupt.)
"So, be more selective!"
If you know the results beforehand, there's no point in doing the work. If Red Hat knew what people will want in 10 years time, they wouldn't be gambling on start-ups. They'd be hiring some developers themselves, producing the stuff and making a fortune.
"So, be more restrictive!"
That's not easy, with this kind of gamble. Miss out on the Next Big Thing, you risk someone else getting the kudos & cash. Miss out on several, and you risk going under. But if you don't know which those are, you HAVE to throw a lot of money out to be sure of limiting the risk.
But, if the cost of minimising the risk exceeds Red Hat's budget, then either path is a path to oblivion.
Too many skilled inventors have been turned down by companies, and too many hackneyed ideas have been funded, to be sure Red Hat has any hope, going down this road. If it works, and they somehow figure out a way to fund just the Dream Designs, more power to them! But I'm going to stay cynical until I see it happening.
It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)