open source software development by tlv partners

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June 2015

Open Source

“open source as a development model promotes a universal access via a free license to a product's design or blueprint, and universal redistribution of that design or blueprint, including subsequent improvements to it by anyone.”

Source: Wikipedia

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Open Source SW in Numbers

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Source: Black Duck, ComputerCorldUk, IDC

Number of Open Source Projects

>1.8M 485 of the top 500 Supercomputers run an open source OS.

80% of Smartphones run an open source OS (Android)

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Source: protecode

Open Source SW is widely used

Black Duck Software and North Bridge's survey found that

78% of companies run open

source software

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Source: ZDNet

The Power of Community

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The Community as a Double Edged Sword

“Having some components of your solution

stack provided by the open source

community is a fact of life and a benefit for

all. So are roads, but nobody accuses Fedex

or your pizza delivery guy of being evil for

using them without contributing some

asphalt. Commercial entities provide needed

products and services, employ people and

pay taxes. We might want them to make

more open source contributions , and some

do, but they are not morally obligated to do

so.”

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Merv Adrian VP Research, Gartner 2011-Present

Customer Decision Factors

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Customers’ Decision Factors - Open Source or Not

• Better SW quality

• Lower costs

• Freedom from vendor lock-in

• Security

• Flexibility

• Internal technical capabilities

• Support

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Source: Black Duck - The 2015 Future of Open Source Survey

Order of costumers’ decision factors Over the years

2011

Freedom from vendor lock in

Lower costs

Flexibility

Better SW quality

2012


Flexibility

Better SW quality

2013

Better SW quality


2014

Better SW quality


Ease of deployment

Ability to access source code, add

features and fix code

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1 1 1 1

2 2 2 2

3 3 3

4 4

Decision Factors For Open Source Software Procurement

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Source OSS-Watch

The Market

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Expected High Growth

“In the coming years, we will see open source unlock the potential of a new generation of technologies—the Internet of Things, big data and cloud computing creating many billions in

value.”

Source: http://www.northbridge.com/

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Paul Santinelli General Partner at North Bridge

Open Source Resource Volume

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Source: Black Duck

The number of open source projects grows significantly

Top Open Source SW Deals Company Date IPO/M&A Post Deal

Valuation/Price

Red Hat Aug 1999 IPO $9.2B

Cloudera Inc. Mar 2014 $900M funding round led by Intel $4B

Sourcefire Jul 2013 Acquired by Cisco $2.7B

Novell Nov 2010 Attachmate Corporation $2.2B

Hortonworks Dec 2014 IPO $1.1B

MySQL Jan 2008 Acquired by Sun Microsystems $1B

Sourcefire 2007 IPO $700M

Cygnus Solutions 1999 Red Hat $675M

XenSource Oct 2007 Citrix Systems $500M

Jboss Jun 2006 Acquired by Red Hat $420M

Springsource Aug 2009 Acquired by Vmware $362M

Zimbra Sep 2007 Acquired by Yahoo! (and later by Vmware on 2010)

$305M

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Top 10 OSS Venture Dollars Raised

121

121

124

129

131

135

194

200

330

1041

0 200 400 600 800 1000 1200

SugarCRM

Mirantis

Joyent

Kaltura

MuleSoft

MapR

DataStax

Hortonworks

MongoDB

Cloudera

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Source: Tomasz Tunguz @ http://tomtunguz.com/open-source-software-environment/

Most Promising Open Source Software Companies

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Source: Black Duck – Open Source Rookies of The Year

Company Description

Appium Test Automation Framework For Mobile Applications

Docker Enables developers to pack, ship, and run any application as a lightweight container

Exercism Crowd-sourced code reviews on daily practice problems

Ghost Publishing platform that is beautifully designed, easy to use, and free for everyone

InfluxDB Distributed, Time Series, Events, and Metrics database with no external dependencies

OpenDaylight Collaborative open source project that accelerates adoption of software-defined networking (sdn) and creates a solid foundation for network functions virtualization (nfv)

OpenIoT Enables a new range of open, large-scale intelligent internet of things (iot) applications using a utility cloud computing delivery model

Serverspec ServerSpec tests for your servers configured by puppet, chef, or anything else

Tox Secure instant messaging, video conferencing, and more

XPrivacy Prevents android-based applications from leaking privacy sensitive data and can restrict the categories of data applications can access

Pros and Cons for Software Producers

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• Marketing greater penetration

• More likely to establish an industry standard and gain competitive advantage (especially in “infrastructure” domains – for example MySQL and Hortonworks)

• Creates community and get free testing, free bug fixing, free users’ opinions

• Promote the company’s image, reliability including its commercial products if exist

• Helps build developer loyalty as developers feel empowered and have a sense of ownership of the end product

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Source: Wikipedia Open Source Software


• Complex business models

• It’s a “less paved” road

• Community as a double-edged sword

• Can we go back?

• Is it good for revenues?

• Is it good for M&A/IPO

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Source: Wikipedia Open Source Software

Business Models

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“Free” Software

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“According to the Open Source Initiative, ‘free software’ and ‘open source software’ are interchangeable phrases. It’s just that the word ‘free,’ in this case, doesn’t mean ‘without cost.’ Instead, it has to do with being liberated from the traditional walls of proprietary solutions…”

James White, Hongkiat

Developers vs. Adopters

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Business Model/Strategy

1. Services Model The Company sells services – maintenance, support, training. The support can be priced per “buckets” (e.g., ElasticSearch) or as a subscription (e.g., Red Hat) 2. SaaS The open source project serves as a foundation for a SaaS offering. Customers pay per hosting, streaming, and delivery of the software. 3. Freemium Model / Commercial Plugins The company sells separately premium commercial add-ons, applications and modules (e.g., Jaspersoft, Joomla). Often, The company releases software under an open source license and sells premium features on top of it.

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Business Model/Strategy – Cont.

4. Dual License

The company releases the code under a standard commercial license and under an open source license. The open source serve as an up-sell to a commercial enterprise edition (e.g., MySQL)

5. Non-Profit Business Models

Non-profit organizations which are not interested in making profits. Funding might come through donations, investments or crowdfunding. (e.g., MIT, Stanford, Technion) source: HONGKIAT

6. Mix-and-match

The usage of any combination of the above. (e.g., Katura, 10gen)

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Investments

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Investment In Open Source Compamies

398

669

920

1300

0

500

1000

1500

2011 2012 2013 2014

$M

Venture Investment in Open Source

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Source: Black Duck (DowJones/VentureSource)

8 14 18 33.9

0

50

2011 2012 2013 2014

$M

Average Deal Size

Andreessen Horowitz

$100M, Jul 2012. GitHub is a social network for programmers which allows collaboration by forking projects, sending and pulling requests, and monitoring development.

$11.2 (total round), Jul 2012. Meteor is an open source platform for building web apps.

Undisclosed Angel Round, Apr 2013. Open Coin develops the Ripple open source payment protocol.

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Source: crunchbase, plivo, techcrunch

Andreessen Horowitz - Cont. $7.5M, Mar 2015. Tachyon is a memory-centric distributed storage system enabling reliable data sharing at memory-speed. It achieves high performance by leveraging lineage information and using memory aggressively. $1.7M, Aug 2013. Swiftype is building search software for the next generation of websites and applications. Founded by Quin Hoxie and Matt Riley in January of 2012, Swiftype is funded by YCombinator and other angels and VCs. $1.75 (total round), Dec 2012. offers Global SMS & Voice calls for businesses of all sizes. $5.8M, Mar 2012. Offers fast & simple mobile payments technology that aims to allow consumers to checkout from a mobile site or app in under five seconds with one-tap.

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Source: CrunchBase, plivo, TechCrunch

Peter Fenton

• A Successful open source investor

• Currently a Partner at Benchmark Capital

• Made successful Investments in many OSS Companies (for example): o Docker, Estimated value of $1B following 2014

investment round.

o Hortonworks, Valued over $1B in NASDAQ

o Software AG, Valued $2B in NASDAQ

o Zimbra, Acquired by Yahoo! $350M

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Source: Forbes, Bloomberg

Peter Fenton – Cont.

Lately he also invested in:

Cockroach Labs - Deveolps cockroachdb which enables developers to build scalable applications that can survive datacenter-scale outages effectively.

Elasticsearch - Open source search and analytics engine makes real time data exploration

Pentaho - Open source search and analytics engine makes real-time data exploration.

Engine yard - leading cloud application management platform empowering developers and devops to provision, manage and monitor applications in the cloud.

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Greylock

Docker – open platform that enables developers and system administrators to create distributed applications. $95M (total round)

Famo.us – Open source JavaScript framework that enables developers to build beautiful apps with 3D physics-driven animation. $1.1M (total round)

Cloudera – Enterprise software company that provides Apache Hadoop-based software and training to data-driven enterprises. $40M (total round)

Typesafe is dedicated to helping developers build Reactive applications on the JVM. $14M (total round)

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Source: CrunchBase

Accel Partners

Weaveworks - Weave is an open source software project for containers and Docker especially. Total funding: $5M

ForgeRock – ForgeRock provides solutions based on top quality open source software for companies and government organizations. $30M (total round)

Couchbase - The developer of Couchbase Server, an open-source, NoSQL, document-oriented database optimized for interactive applications. $60M

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Index Ventures

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Minio – Minimal object storage server written in Golang and

licensed under Apache license v2. Minio is compatible with Amazon

S3 APIs. $3.3M

Elastic – The company behind Elasticsearch, Logstash, and Kibana,

three open source projects focused on scalability and ease-of-use

that help you make sense of your data. $70M (total round)

Pentaho – Open source search and analytics engine makes real-time

data exploration. $40M

OpenX – Open Source ad server, trusted by more than 30,000 web

publishers in over 100 countries. $25M

New Enterprise Associates

Mongo DB - The next-generation database that helps businesses transform their industries by harnessing the power of data. $80M, Jan 2015 MapR Technologies - Provides an enterprise-grade, big data platform that supports mission-critical and real-time production uses. $80M, Jun 2014 IIX Inc. - The company's SDI platform enables programmable interconnection between networks that allow customers to improve security, reduce costs associated with IP transit delivery and optimize network performance. $10.4M Jul 2014

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New Enterprise Associates is a global venture capital firm that invested in over 9 Open Source companies over the past few years.

Do’s and Don’ts

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