Open Source Blog

“We fundamentally believe that open source is a new distribution model, but it is also a new software development model that is here to stay,” explained Bernard Dalle, general partner with Index Ventures.

Index is already a strong supporter of open source, having invested in Pentaho, Sourcelabs, Zend, MySQL and Trolltech) and Dalle explained that the company believes open source delivers better code, due to a broader level of QA testing, faster innovation, due to broader requests for new features, and a cheaper development model.

Put those together and the question is not why invest in open source vendors, but why would you invest in anything else. “We anticipate it’s going to be very hard going forward to invest in closed source, because we don’t think it’s a good development model,” he added.

For Robin Vasan, managing director at the Mayfield Fund (investments include Groundwork and Alfresco) open source is similarly pervasive. “We don’t see this as a space, we’re not calling this a category. We think this is an integral part of the industry today,” he said.

That decision is based on the experience of customer purchasing demands for software. “Customers are saying ‘I’m going to try it before I buy it, I’ll try it and if it does what you say it should do, then we’ll think about having a conversation about paying for it’,” he said.

“Yes we do expect to invest in open source, but not because it is open source but because we expect it to be part of every software company in the future,” added Frank Bohnke, general partner at Wellington Partners (investments include Astaro and Collax).

For Bohnke, the future for open source sees it being used by every company somewhere in their development process to save costs on common components. An example would be the consumer electronics industry, which currently has to rewrite the software for every device every time anew hardware version is introduced, he said.

“Just by open sourcing and reusing models, it makes the process more efficient,” Bohnke explained. He did, however, have a word of warning for anyone expecting to be able to set up an open source company and be showered in VC cash.

“Ultimately these open source companies have to prove that they can build brands, they can sell, and they can build profitable companies. I don’t think there are many companies yet who can do that and prove the theoretical benefits of open source,” he said.

Vasan also maintained that just being an open source vendor will not be enough to get funds and attract investor attention. “Your valuation is not going to be based on the size of your community and the number of downloads you have,” he said, indicating VCs had learnt the lessons of the dot com boom. “We’re back to solid business basics.”