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Venture Money in Open Source
prostoalex writes "Interesting statistics from VentureOne and New York Times on open source venture capital investments: "In 1999 and 2000, according to VentureOne, venture capitalists invested $714 million in 71 open-source companies." Even more interesting stats: "Most of those projects collapsed." The article talks about both successes and failures: Red Hat, TurboLinux, JBoss."
of ventures are EXPECTED to fail by venture capitalists, it's par for the course. Sounds like open source is as good a venture as any!
While the money invested in open source is a lot, I'd venture to say it's but a fraction of total venture capitalist investment? correct me if I'm wrong.
Also, what's the point of this article? It's good, right, that open source is being given this attention? Why the complaints about the power of venture capitalists? They are keeping these open source projects alive.
There wouldn't be much "venture" if those investments were a sure thing. VCs throw a lot of money around and hope that once in a while it sticks, and more than make up for the ones that don't. They're a little more conservative now than they were a few years ago, but that's cyclical. But $10m each (more or less) for 71 different companies is enough to count. I'd be curious, though, where $95M went with Turbolinux.
Interesting, too, that the Red Hat board member specifically talks about the comfort he feels in having big bucks backing that shop. It will be interesting to see if the few million that SugarCRM raised can possibly keep them going up against MS's CRM group, and hosted apps like SalesForce.com.
Don't disappoint your bird dog. Go to the range.
According to the former chairman of ArsDigita, VC basically pushed him out and run the business with their own man as CEO and killed ArsDigita. At first I was surprised by this but it seems that's the way VC operates.
http://waxy.org/random/arsdigita/
Paul Graham has an interested 'unified theroy of VC suckage' on his page
http://store.yahoo.com/paulgraham/venturecapital.h tml
very interesting read. Also I agree $750 mil is peanuts for VC. Greylock and Partners (mentiion in the ArsDigita story) alone manages over $2.2 billion in investments. That's just one investment company.
http://www.greylock.com/strategy/funding.cfm
Like the old saying says -- lies damned lies and statistics.
Sometimes boldness is in fashion. Sometimes only the brave will be bold.
Yes, and that just goes to show that most of the time open source is better in a business than as a business. Cooperative investments in open source by multiple businesses are what made open source what it is today.
Occam's razor is the blind faith in the natural selection of least resistance and in universal oversimplification. -- EF
You're talking about Be Inc.
IMHO, they really got a lot of the engineering right with BeOS that other operating systems (Windows, MacOS) are getting to only now. The doom of Be wasn't just that the internet appliance thing was a distraction, but also that BeOS was either too early, because its features weren't needed yet, or too late, because the OS wars had already concluded.
For those of you that would like a history lesson, Palm ended up buying Be for around $11M and then, on behalf of Be, suing Microsoft and getting around a $22M settlement a few years later.
Where's BeOS today? Here: http://yellowtab.com/
R.I.P.
Most of these projects, like most VC projects of any kind, were not only expected to fail, they were required to fail.
Consider LinuxCare: the VCs installed crooked executives who raided the cash box, handing much of it to the VC's other ventures, and pocketing the rest.
How many startups got a few million and then handed half over to Oracle, Sun, and EMC, and handed the rest to the execs, and then folded? How many went on a buying spree, handing over boatloads of inflated shares to the VCs (to sell immediately) in exchange for other failing companies, right before they tanked themselves? How many went public and the bankers got enormous kickbacks, buying captive shares at a fraction of their value the next day, and then selling out immediately? The losers were not the VCs -- they made out like bandits on those "failures".
Enormous amounts of money changed hands under very little official scrutiny. That was the point. Business successes, where they happened despite all, were just icing on the cake.
Don't a large portion of ventures fail? Perhaps not directly related to them being open source.
I deal with VCs pretty regularly. The basic rule of thumb is that out of 10 investments most VCs make, 1-3 will be total busts, 7-8 will be close to breakeven or make a small profit and 1-2 will be home runs. The key is that the home runs are big enough that they make up for the rest of the investments that go no where. In some ways it's high risk but they also have a lot more control over the investments than a mutual fund.
Things get tough for VCs when there is too much money chasing too few good opportunties. Venture funds are very much like the mutual funds we all own except the companies the fund owns aren't usually traded on a stock exchange. Rich individuals and companies/organizations contribute money to a pool which the VC then invests in companies. (could be start ups but not necessarily) They then either take these companies public or sell them to a larger company and return the profits to the investors. I've seen lots of people who think VCs were stupid during the