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Reuters: Linux success spawns more open source companies

Aug 27, 1999, 21:12 (0 Talkback[s])

"Venture capitalists intrigued by the red hot stock market debut of Linux distributor Red Hat Inc. are placing bets on new start-up open source companies built around software that is given away. ... So far, the best known open source software is the upstart Linux operating system that competes with Microsoft Corp.'s Windows NT."

"The growing interest in open source software was evident earlier this week at the O'Reilly Open Source Software Convention in Monterey, Calif., when some attendees sat on the floor in a packed meeting room for a session called 'How to Finance an Open Source Company.'

The founders and chief executives of some older open source companies talked about how different the market was a few years ago. At that time, the concept of open source was not well understood outside of the community of developers, many of whom work on open source projects in their spare time for free."

"...Netscape Communications Corp., which gave its Internet browser away for free -- but not the source code -- went public in a stunning IPO in 1995. Netscape taught investors about the power of the Internet in growing a customer base fast, with millions of users. It dominated the Internet browser market at its IPO."

"At the show, a new company called Collab.net was announced, with funding from one of Silicon Valley's big venture capital firms, Menlo Park-based Benchmark Capital, which has also invested in Red Hat. ... Collab.net... provides services and support for open source software and its first project is called sourceXchange, a marketplace to fund software development projects, through the open source community."

"Another major venture capital firm, Accel Partners in Palo Alto, Calif., has invested in Scriptics, a start-up company founded in January, 1998 by John Ousterhout, who created the Tcl scripting language... Accel considered investing in Sendmail Inc. last year but the... company needed financing faster than Accel could approve the deal, so it went with individual investors, so-called angel investors, instead."

"Linuxcare Inc., a service provider for Linux, announced in May an investment by VC stalwart Kleiner Perkins Caufield & Byers, which was its first in a Linux company. Now, the San Francisco firm is in hyper-growth mode with over 80 employees."

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