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No alarms and no surprises – VC funding for open source down in Q1Matthew Aslett, April 1, 2009 @ 6:04 am ET
It should not surprise anyone that the decline in funding for open source vendors seen in the second half of the year continued into the first quarter.
According to our preliminary figures, there were just eight announced funding deals in the first quarter of 2009, compared to 22 in the first quarter of 2008.
Seven of the deals announced in the first quarter of 2009 had a disclosed size, resulting in a combined total of $45.1m, and an average deal size of $6.4m. In the same quarter of 2008 there were 20 deals with a disclosed size resulting in a combined total of $209.8m, and an average deal size of $10.5m.
Blatant plug: This data is extracted from The 451 Group’s forthcoming CAOS report on the history and future of venture capital investment in open source vendors. The report will be published in early April and will also include a survey of investors from private investment firms, assessing their sentiment towards open source and the likely impact of economic conditions on investment in open source software-related vendors. It also identifies a list of the vendors that are most likely to be considering further funding in the next two years as well as a list of open source vendors that are best positioned for a run at an IPO in the 12-24 months after the downturn ends. More details coming soon.
However, it is somewhat unfair to compare the first quarters of 2009 and 2008. Q1 of 2008 was a record quarter and with hindsight it appears a number of vendors rushed to raise funds in anticipation of hard times ahead. We won’t really be able to put the first quarter into some kind of perspective until we see the figures for the rest of 2009.
Early stage deals announced in the first quarter included a $5m Series A round for Hadoop support provider Cloudera from Accel Partners and 13 individual investors; $4m Series A for systems management vendor RiverMuse from Trinity Ventures and Sierra Ventures; and $1.6m Series A for marketing software vendor LoopFuse from True Ventures.
Later stage deals included $12m Series C funding for Talend from Balderton Capital and AGF Private Equity; $9.5m equity and debt funding for code management vendor Black Duck from General Catalyst Partners, Fidelity Ventures, Flagship Ventures, Focus Ventures, Intel Capital, SAP Ventures, Red Hat, and Gold Hill Capital.
Meanwhile embedded systems vendor Open Kernel Labs announced $7.5m Series B funding from Chrysalis Ventures, Neo Technology Ventures, and Citrix. SEC filings also indicate that Aptana raised $5.5m in Series B funding in March.
Based on these deals it is clear that venture funding is available for both early and later stage deals if the business opportunities are right but that overall funding for open source vendors in 2009 is likely to decline considerably compared to the funding levels seen in recent years.
At the Microsoft SD Forum open source event in San Francisco last week, Larry Augustin predicted (PDF) $250m in 2009 from 30 deals. I would guess there might be a few more deals and a lower average deal size but not enough to argue about.
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