“Aside from the general unwillingness of VCs to invest in startups, Linux is a no go. Many factors come into play with the primary lack of an exit strategy topping the list. When will Linux companies see the light at the end of the tunnel? Or will they?”
I think this is about linux distributors. the VC’s have no faith in Yellow Dog, Mephis, Xandros, etc.
the VC’s have no faith in Yellow Dog, Mephis, Xandros, etc.
If it’s not about the distros then what does “investing in linux” mean? Linux is just a kernel. The article was horrible, and obviously written by someone who doesn’t care about practical matters.
There are plenty of companies churning money and developping..stuff. But what profit is there to be made?
We saw it earlier this year when someone made a free version of Lindows/Linspire. When your software is tied to a rule that says ‘you MUST allow people to aquire gratis versions of your software and spread it’, there’s only service to be gained on. And the services industry isn’t all-encompassing for distro makers for example.
There’s no rule that says you MUST allow people to get your software free of charge. The only requirement is that you make the source code available. If I remember correctly, the only stipulation regarding price is that you had to make the source code available for free, or for a nominal fee to cover CD production, shipping, etc.
You can charge $10,000.00 for the product if you want to, you just can’t gouge people who want the source code on top of that.
I’ve heard a lot of people whine about having to give the source code away too, but be honest, what percentage of the people in the world are REALLY going to do anything with your source?
In my mind, it is about the same number of people who would not buy your word processor because they could write their own.
I agree. You cannot make money selling GNU/Linux per se. You have to come up with services that somehow encompass GNU/Linux in their use.
Are there any Linux based companies that are making a profit from selling services?
Google.
I was going to mention Google and say something like aside from that. But I was thinking more along the lines of direct Linux distributors or support companies. Say… Red Hat, Novell, WindRiver, VA Linux.
Red Hat certainly makes money: http://www.redhat.com/en_us/USA/home/company/news/prarchive/2005/pr…
Not too shabby for an open source company with almost 1000 employees.
Mandriva is also making a profit: http://frontal2.mandriva.com/en/company/investors/newsletter/sn0505…
It’s not big money, but still good for a company that almost went bankrupt a while back and now has about 130 employees.
As for Novell, I don’t know which parts of the company are losing money and which parts are making money. It’s not (yet) a pure Linux shop.
But yes, there will NEVER be big money in Linux services, simply because the barrier of entry is so low. And that’s a good thing.
Are there any Linux based companies that are making a profit from selling services?
Red Hat.
Stats (from Yahoo!):
Market Cap (intraday): 4.25B
Profit Margin (ttm): 22.08%
Revenue (ttm): 234.88M
Qtrly Revenue Growth (yoy): 41.90%
Gross Profit (ttm): 158.59M
Source : http://www.google.ca/search?q=stocks%3ARHAT&start=0&ie=utf-8&oe…
There is also companies like IBM that are profiting because of Linux.
The article was about VC’s and Linux. I think Redhat and IBM are a bit past that stage. The question is “What’s there to invest in?” Not “What has already been invested in?”
So I’ll pose the question to the OSNews crowd at large.
What FOSS based companies are out there, let’s keep them small and no further along than seed investment rounds, that you think would be worth investing in?
I’m truly interested to hear what is out there.
Thanks!
There are a number of reasons that VC’s aren’t willing to invest in Linux companies.
1. IP. Even though IP (intellectual property) becomes less and less important in the standard IT or software business model these days (thanks to FOSS), investors continue to place great importance behind it. So it’s difficult for them to invest in a company who’s great invention had GPL behind it.
2. Truthfully, probably the strongest business model in the Linux world is services based. Done right, it might be worth a lot in a few years . . . and VC’s hate service companies. Why? Because there is no IP. No great technology that they can say “we own it and nobody else does or can”.
3. A business model that actually has been working. A number of high profile projects have been able to secure pretty good financing; JBoss, Apache, Bottorrent and a few others. The common thread to almost all of them? Volume. It doesn’t seem to matter whether you are actually making money from it or not, the fact that you are a household name and can demonstrate tons of downloads and good market share . . . is enough to prove that somebody can build a decent business model from it.
So they key? Build it small, build it slow, build it cheap, and grow it smart. Put your energy into one thing instead of many . . . and plan on boot strapping the whole thing yourself. That way when and if the big money comes it’s a pleasant suprise, not something you had to have to stay in business.
Here is a perfect example of a company with emphasis on Linux.
— MontaVista Linux for Embedded Devices
— MontaVista Linux for Communications Infrastructure
— MontaVista Linux for Mobile Devices
http://www.mvista.com/products/
related articles:
http://linuxdevices.com/news/NS8113334316.html
http://www.informationweek.com/story/showArticle.jhtml?articleID=17…
Why do people think starting any kind of business and making money off it is easy? Do you know the number of startups that fail each year that have nothing to do with Linux?
Because your business model is developed around OSS doesn’t give you any advantage or disadvantage when compared to other businesses. You need to be creative. You need to design compelling products. You need to establish a reputation. You need to create an appealing image. You need to listen to your customers and you need to market your product well, to have a chance of succeeding in any business, regardless of whether or not it is centered around OSS. And even all these in place does not guarantee success.
Starting a business is a like starting an OSS project. Your chances of success and survival are extremely low. In the end leadership, determination, a will to succeed, perseverance and plain old stubbornness is the cornerstone of what has made the most successful businesses and businessmen, not marketing analysis, micro/macro economics or business strategies instrumented by MBA Harvard graduates. The reality is that too many people punk out even before the tides starts going against them.
I completely agree with you.
I agree with you, but I do think their are inherent issues that go along with trying your hand at a FOSS based business that don’t exist in many older and more established models and markets.
I completly agree and have used the whole “source code doesn’t mean you can do anything with it” argument myself. The real problem here isn’t the end customer but reather another who can create a competing business from your hard work. What’s happend with the nessus project is a perfect example. While they continue to develop products, competitors continue to reap from their hard work.
Another great example is SugarCRM and VTiger that was build from it. Vtiger while it has become a great project on it’s own, certainly had a great leg up based on all of Sugar’s work.
Now I’m not saying that this is either bad or should keep peolpe from going into a FOSS based business, but it is reality.