A rollercoaster - as trite as that image may be - is the right analogy for
venture capital investing in open source companies. And what a long, strange
trip it's been.
Starting in the mid '90s, a few brave pioneers like Benchmark invested in an
open alternative to proprietary software and made a fortune. By the end of
the decade, everyone wanted a piece of the action. A second wave of VCs
rushed in at ridiculous valuations and got their clocks cleaned. In 1999 and
2000, over-capitalized, over-valued open source companies burnt through
hundreds of millions of dollars. Shame on the dumb money that gives efficient
markets a bad name. Then, the bubble burst, and we entered nuclear winter
followed by the trauma of 9/11. Valuations plummeted to the ground. Investors
panicked and ran for the exits. Things hit bottom when the vulture
capitalists waited until the CEO of SuS... (more)
The open source movement is something completely new. It doesn't fit neatly
into any accepted economic or business theory. For that reason a lot of
traditional thinkers, e.g., economists, business people, and investors, are
struggling to figure out what it means. Is it the beginning of a new economic
order or is it a flash in the pan?
The idea that 400,000 software programmers around the world contribute their
knowledge and energy for free doesn't make sense to people schooled in Milton
Friedman and Karl Marx. Traditional thinkers keep coming back to the same
question: "How do t... (more)
The other day my 16-year-old daughter came down the stairs in tears. She was
holding the new version of the Scholastic Attitude Test and complaining that
it was unfair.
Look at this question, Dad. Who could answer a question like this?"
I looked at the question and had to agree that it was a tough one:
27. Lamb: wolf;
Open Source Project: ________________?
a. Microsoft
b. Enterprise software vendor
c. 419 scammer*
d. Jack Messman
(For additional information on 419 scammers, refer to
www.419eater.com/html/trophy_room.htm.)
"Honey, it has to be A. Everyone knows that Microsoft ... (more)
I've always wondered where the word "oxymoron" came from. What does "oxy"
have to do with "moron"? What about the words "commercial" and "open source";
do these words form an oxymoron when combined in one phrase?
The open source-based CRM software maker, SugarCRM, has successfully combined
these polar opposites and implemented such a "commercial open source"
business model. SugarCRM has taken its business model to a new level in that
they have combined an enterprise server software sales model with that of a
software-as-a-service model. Of course, SugarCRM offers its software for ... (more)
At LinuxWorld Expo in San Francisco, it occurred to me that I had overlooked
a very important Open Source business model, the Membership Model. Confronted
by a keynote speech by Stuart Cohen, the leader of the Open Source
Development Lab (OSDL) (www.osdl.org), it became clear that I had jumped into
the Advertising and Conversion Models too quickly and had to back up and deal
with the membership phenomenon.
As a businessman, the Advertising and Conversion Models are more interesting,
but from a raw power standpoint the Membership Model may be more important.
So in the spirit of j... (more)
Paul L. Sterne is general manager, Americas, Open-Xchange Inc. (www.open-xchange.com), and managing partner, Sterne & Co. LLC, an M&A boutique specializing in technology deals. His most recent transaction: the acquisition of Protocom Development Ltd. by ActivCard Inc. He is a sponsor of openResource, a wiki about the Open Source industry (http://sterneco.editme.com/home).
David Lucas
Shaul Efraim
Terence Martin Breslin
Cory Marchand
David Hughes
James Carlini
John Iffert
Dan Stolts
Joe Zeto
