In spite of a recent slowdown in venture investment, open source remains high on the list of Hummer Winblad Venture Partners.
Ann Winblad, a partner in the prominent San Francisco VC that funded MuleSource, said at MIT's Emerging Technologies Conference Thursday that the money will keep flowing as open source software penetrates deeper into the IT infrastructure, beyond the operating system, application, and database layers.
Winblad pointed to the success of open source firms Red Hat, mySQL and Alfresco and recent acquisitions of XenSource and Zimbra as evidence that open source is paying off in bigger dividends.
she also cited recent Gartner Group report that claims that open source accounted for 13 percent of the $92 billion in software revenues in 2006.
"The opportunity distilled here is that core pieces of the infrastructure are becoming open source, " Winblad said. "The opportunities are almost everywhere where software is not matching the current architecture. If it isn't open, isn't supported by an open community of innovators, there's an opportunity for an open source company."
During her chat on stage with MIT Technology Review Editor Jason Pontin, Winblad said service-oriented architecture, software-as-a-service, open source and open standards are key trends driving VC investment in software.
The vast majority of clients listed in Hummer Winblad's portfolio are proprietary software firms.
But MuleSource, which the VC began funding a year ago, is doubling its revenues every quarter, and exemplifies a prime candidate for investment in this climate, she said.
"The integration platform is a core fundamental software in the enterprise that we're funding with these new business models and development models, but also pricing models," she said.
"It's an open source integration platform and enterprise services bus, on premise and across the cloud, that touches all pieces of software in the stack, she added.
"SOA is a really big driver of redefining the IT architecture in the enterprise," she said. "The [enterprise] buses used today are quite old and quite expensive. MuleSource is the innovation platform at the integration layer for these companies, so open standards are key here. "
"If I am building a new trading platform, I don't want off-the-shelf trading platform, I want as much value up the stack and innovation up there as I can have."
MuleSource raised an initial $4 million round of funding in October of 2006 from Hummer Winblad Venture Partners and Morgenthaler Ventures. In May, the San Francisco firm raised another $12.5 million from Lightspeed Venture Partners.
After her presentation, Winblad said she expects consolidation to continue as the valuation of open source companies increase, with deep pocketed industry giants such as Cisco, Citrix and EMC leading the way.
She dismissed the notion that investment in open source companies has peaked or dried up. "The mash up going on in the enterprise is clear," she said. "This is a disruptive force."