Open Source funding: good and not-so-good news

For those of you who consider sizable chunks of VC money invested as a sign of a growing industry sector, Matthew Aslett has good news: Q2 2007 has been on the rise, with $98.45m thrown into the Open Source hat by a number of investors and VCs.

You know there’s nothing like numbers to prove whatever you want, which is why I’m taking this datum with a grain of salt: the vast (by far) majority of that money, since a few quarters already, is going towards the so-called “round B” or later, that is existing companies who have been already financed and are milking more cash from their investors. There has been none or marginal investment in startups. We can look at this in at least two ways:

  • Open Source is healthy enough to stand the trial of the market: companies are getting second-series financing, which means the business model seems to be working. Very few investors are running away, the bubble is not going to burst anytime soon (which means there was no bubble to begin with) and the Open Source marketplace is becoming an established industry rather than a playground for the adventurous soul.
  • On the other hand, the flip side of the coin is that the VC industry has filled the checkerboard and has moved to something else as far as startups are concerned (green tech seems to be the new kid in town), leaving Open Source in “maintenance” mode with Darwinian selection doing the rest. As one of the key roles of Venture Capitalism is fostering innovation, a possible conclusion is that the a good deal of fun is over: it’s now time to roll up our sleeves.

Being all this based on numbers, I have no doubt that we can read that in another thousand ways, of course. But consider myself enrolled in the skeptical camp for the time being.



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