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

Apr 13, 2000, 05:53 (0 Talkback[s])
(Other stories by Wendy Goldman Rohm)

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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.'""

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