A blog for the enterprise open source community
Open source funding plunged in Q4, FY07Matthew Aslett, January 2, 2008 @ 11:32 am ET
NB The figures originally reported here were preliminary and have been revised for a formal CAOS report to be published in the first half of 2009. The figures for Q4 have been removed or updated, while those for the full year have been updated:
“I believe last year was actually the peak year of open source fundraising… This year is down slightly, but not down in such a dramatic way to indicate anything else but a good appetite for funding of open source,” Matrix Partners general manager David Skok told LinuxInsider in late 2007.
The raw data indicates open source funding fell more than slightly in 2007. Disclosed funding deals as funding for open source software declined 34.0% to $403.9m.
In response to the LinuxInsider article noted above, Matt Asay argued that it would be wrong to conclude that VC funding for open source is drying up. Once again we return to Larry Augustin’s prediction that the value and number of deals would decrease this year and would be unlikely to increase until we see more evidence of successful exits.
On the subject of exit strategies, we previously noted that the big money for established open source vendors went on M&A activity rather than venture funding in the third quarter. While there were fewer M&A deals in the fourth quarter, and none of the big money deals (Citrix/XenSource, Yahoo/Zimbra) we saw in Q3, there has been a noticeable shift towards open source M&A activity as open source funding has fallen.
Meanwhile Gianugo Rabellino, CEO of Sourcesense previously questioned whether the VC industry might have “filled the checkerboard and… moved to something else”. While it is certainly true that many of the investment opportunities in the obvious application categories have been filled, there are still emerging opportunities in new markets.
Examples from the fourth quarter include Acquia raising $7m in Series A funding to support the commercialization of Drupal, while open source-based home appliance vendor Axentra raised $6m in October. Meanwhile, as Asay states “as for investments into the ‘easy’ enterprise categories, there’s still money there, too”. We are aware of one significant funding round for an established open source vendor that is set to be announced soon, and there are rumors of others to follow in the first quarter.
Clearly, open source funding hit a peak in 2006, and while funding levels are unlikely to increase substantially in 2008 there is no reason to believe that the rate of decline seen in 2007 will be repeated this year.
Incidentally, for those that like to follow the running total, open source funding to date now stands at $2.38bn.
Comments (13) Categories: Funding,Linux,M&A,Software