VCs and Open-Source Software

The New York Times writes:

Venture capitalists are again embracing open-source technology companies. JBoss, which offers a layer of software for controlling Web applications, was one of 20 such businesses that raised $149 million in venture money in 2004, according to estimates by the research firm VentureOne. At least three open-source start-ups raised $20 million last month alone.

A big difference between then and now is the increased adoption of open-source software by corporate users. Another is the relative success of Red Hat, an open-source start-up that went public in 1999 and makes money by selling enhancements and maintenance services to corporations using Linux.

Red Hat has become something of an inspiration to open-source businesses and their investors because it shows that it is possible to base a lucrative services business on giveaway software. Red Hat also gives its customers a guarantee that a long list of popular applications will work on its edition of Linux.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.