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Venture Money in Open Source

Posted by samzenpus on from the money-fixes-everything dept.

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."

4 of 135 comments (clear)

  1. Re:All this money.... by zoogies · · Score: 4, Interesting
    Same lesson as TFA: throwing money at something doesn't fix it or make it work.
    Not all projects will turn out successful, but you can be sure none are getting off the ground without money. Throwing money at something doesn't make it work, but take money away, and it falls flat on its face.
  2. VC money is actually bad for business by lashi · · Score: 5, Interesting
    VC usually only care about maximize return on their investment in a short time. As a result, they take approach that's actually bad for the long term growth for business.

    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

  3. And we're talking about pre-bust by darkonc · · Score: 4, Interesting
    If they're looking at companies invested in in 1999-2000, we're talking about just before the dot-com bust. These companies would have just gotten going when the brown stuff hit the rapidly spinning blades. If 80-90% of venture capital investments are expected to crash and anywhere near half of those infant open source companies survived the dot-com bust, then I'd say that pretty much proves that open source is an incredibly good investment.

    Like the old saying says -- lies damned lies and statistics.

    --
    Sometimes boldness is in fashion. Sometimes only the brave will be bold.
  4. Depends on your definition of failure by sjbe · · Score: 4, Interesting


    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 .com boom but I know quite a few and they are invariably very smart people. They knew what was going on perfectly well. The problem they had was they had money they had to invest and there was no where sane to put it. They just had to hope that they could cash out before everything blew up.