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Linux Magazine: Take The Money And Run… Venture Capital Prospecting in Open Source… Frontier

[ Thanks to Robert
McMillan
for this link. ]

Ever wonder what open source companies are going through in
order to get funding? Linux Magazine has a story on
this
. My favorite comment is from Paul Vixie: Paul Vixie, CEO
of Vixie Enterprises, says his company has had better experiences
with individual investors than with venture capitalists. “The VCs
all want to hear a big story,” he said. “They want to hear about
paradigm shifts and about how you’re going to be the next Netscape
or Microsoft. Then they want to replace your management team and
want an exclusive on subsequent funding rounds. And they want to
bring in their cronies as managers and co-investors — all without
ever understanding a single word you’ve told them except ‘we’re
going to be bigger than Netscape.'” “Angel investors and venture
capitalists are swarming around the open source community these
days. Red Hat’s IPO created an initial buzz, but since Linux
hardware vendor Cobalt Networks followed up with the
fourth-most-successful IPO in history, the floodgates have been
opened. Investors are now courting both upstarts and established
players in hopes of staking a claim in the burgeoning open source
market.”

“This gold-rush activity is proving to be a boon for some CEOs
seeking funding for their open source efforts and a bust for
others. For sure, taking on a VC can be a double-edged sword. After
all, in exchange for their money, companies often have to offer
board seats and give up control of their management team.”

“Paul Vixie, CEO of Vixie Enterprises, says his company has
had better experiences with individual investors than with venture
capitalists. “The VCs all want to hear a big story,” he said. “They
want to hear about paradigm shifts and about how you’re going to be
the next Netscape or Microsoft.
Then they want to replace your
management team and want an exclusive on subsequent funding rounds.
And they want to bring in their cronies as managers and
co-investors — all without ever understanding a single word you’ve
told them except ‘we’re going to be bigger than Netscape.'””

Complete
Story