Open source after the venture capital fire

Even though total dollars being invested may rise for a time, the old business model of paid support in lieu of licensing only draws yawns on Sand Hill Road.
Written by Dana Blankenhorn, Inactive

After the fire the fire still burns

Quoting Pete Townshend dates me, but I have seen this movie many times before. (Kitchen fire image from CNetTV.)

Venture capital enters a new space. Everyone laps it up. Then with a turn of the market the VCs are gone, or looking to cash out, and the new industry is left wondering where its future is coming from.

Even though total dollars being invested may rise for a time, the old business model of paid support in lieu of licensing only draws yawns on Sand Hill Road.

They want to hear about open source in products that sell, open source in services people buy. Open source becomes one ingredient in the stew. The good old days are gone.

I have seen this happen with PCs, with software, with multimedia, and with Internet technologies of all sorts. I have seen it happen with content, with advertising, even with blogging.  Open source was hot five years ago, but now it's all social media or renewable energy.

This is natural. Venture capitalists are looking to get back 10 times what they put in, or many times more. If you can't show them that they are not interested. That's because most investments are lost. They must have hits or their business collapses.

The reaction among open source advocates is the same mix of wonder, denial, and worry I found in all those other industries. But they survived. Open source will too.

Once the shock wears off, you ask, what'll I do? Ning decided to focus solely on paying customers, and many companies will choose to abandon their community, in whole or in part. Other companies have climbed back up the open source incline. The word for 2010 is monetization.

The irony is that the open source business model was designed for hard times. Marketing, distribution and even development costs are flattened to near-zero. Companies can become virtual. Development teams become global. No one really has to take a Silicon Valley salary.

Consolidation is another watchword in this period of evolution. The cream rises. Within each niche, the distance between the lead dog and those trailing grows. Didn't you used to be Matt Mullenweg?

This is also where the big boys come in and get bargains. The embrace can't be resisted, especially if you have outside investors to satisfy. Seeing the "crown jewels of the movement" swept off the board by big companies that may not understand the business model is just evolution in action.

The good news is that open source is an established force. Communities do have power, and that is not going to change. Entrepreneurs come and go, corporate strategies adjust with the times, but open source is now a permanent feature of the landscape.

This means open source values are a permanent feature of the Internet and software landscape. Companies may still choose to defy those values, but they remain as ascendant as they were when the fire burned brightest.

The power, in this case, doesn't lie with the entrepreneurs or the business managers of open source companies, as was true with every other niche I have ever followed. It lies with users, with developers, with communities.

It lies with you. Open source has given you power, and it is up to you to use it well.

Editorial standards