What is an Open Source Company Really Worth? 82
CNet has an interesting profile of MySQL, JBoss, and Zimbra, exploring what an open source company is actually worth. "Given how slowly revenue accumulates in an open-source company--assuming it is recognizing subscriptions over 12 months--bookings is probably the valuation metric being used or at least strongly considered. It surely is the metric by which the start-up wishes to be measured. So while Savio suggests we open-source entrepreneurs may be "sleeping with dollar signs in (our) eyes," there's clearly a lot of work to do before most open-source companies are worth selling. It's not worth selling out for $100 million. Not for the venture-backed companies, anyway."
There are useful formulations available by example (Score:5, Interesting)
A private company like Digium, who does Asterisk, has a NIBT and may have additional potential for digital PBX widgets (look at their recent deal with 3Com for an example). They'd probably bring in 7 years run rate as a buy price.
Hyperic, while smaller, has great community development and might bring in more, because of a wider breadth of products touched. I'd value them at 10x annual run rate.
MySQL AB did a great job. Hurray for those guys; they deserve what they got. I hope that Sun can integrate MySQL well without butchering the company and product. Professional results can pay off.
Re:Most recent example (Score:4, Interesting)
What's missing from the article is the usual valuation of a closed source company. Anyone know the answer to that?
GPLv3's Poison Pill and Open Source buyouts... (Score:4, Interesting)
You see, when Apple buys out CUPS, or Sun buys out MySQL, they can distribute the code under whatever liscence they want as copyright holders.
Which means, for THEM, its non GPL. But for everyone else, it is GPLv2 or later.
Thus you can still get community support with copyright transfer, but you have a competitive advantage in selling/using it commmercially.
I wonder if the FSF realized that this is a side consequence of GPLv3 and the "or later" clause?
The point... (Score:5, Interesting)
What is to keep another company, say NySQL Inc. from taking the source code to MySQL, compiling their own product, and then reselling it? Nothing. You might say "It's illegal!", but that's ONLY in the USA. I'd bet there are at least 3 companies in China reselling MySQL right now. Since they keep their source code release up to date, this means NySQL's product will always be up to date. And since NySQL has a bigger presence in China, Chinese customers will always go to them first.
Re:There are useful formulations available by exam (Score:3, Interesting)
Understanding open-source company strategies is a bit mind-bending, and unfortunately, I don't think Digium's current leadership gets it. They may be missing the real opportunity. Instead of making the software great and easy to use, which would lead to virtually universal adoption, they're doing the opposite, to help sell their services and proprietary solutions. If they were able to understand the value of being the provider of virtually all new telephony systems as an open-source platform, I think they'd bag their current strategy.
Problem is, most people think of open-source ventures as having 0 assets, and being worth 0.
Re:There are useful formulations available by exam (Score:3, Interesting)
Re:OSS does not eliminate old rules. (Score:3, Interesting)
But it's not really that easy, either. If you really believe you should measure Google, Microsoft, Intel, GE, P&G, Citibank, and Caterpillar using the same method, then I *guarantee* your formula isn't simple or isn't accurate.
Revenue as measured in GAAP is an accounting construct, not necessarily a great measurement of the prospects of a company. This becomes particularly apparent in cases where revenue must be recognized over time due to support contracts. It also gets modified in strange ways due to reserves for non-payment and the like (note the recent impact on financial companies due to insufficient loss reserves for the risk they were bearing)
These issues result in various differences between cash flow and revenue. In the case of software support, you end up with a revenue stream that is more predictable than it would be with a company that only sells a physical item without support (because the sale event already occurred, and you are recognizing deferred revenue; the cash flow may also differ depending on the contract).
Anyway, the greater predictability of revenue reduces the risk of that revenue, which should alter the value of the company. Note that it can alter it BOTH up and down - there are places where reduced risk implies no upside (think government bonds) and places where the increased predictability of revenue can support a higher valuation (software support contracts)
Re:The point... (Score:3, Interesting)
It's worth noting that this is technically illegal in China too, it's just that these laws are really only enforced in the US and (to a lesser extent) Europe.
Re:GPLv3's Poison Pill and Open Source buyouts... (Score:3, Interesting)
The codebase? Java.
Back in the old days, Java was licensed with a scary EULA. This was fine for the end user because it was free as in beer. But it was trapped [gnu.org]. OpenJDK [java.net] is the cure. This is fine for end users and end developers. Now if a developer sees a bug (s)he'd like to fix, the license [java.net] allows that.
Before Sun Microsystems released their code through OpenJDK, a rival GNU Classpath effort had been, and still is, producing a clean-room implementation. This prompted Sun to release their code under the same license in the hopes of cross-pollination.
The problem? Classpath and related projects have copyright assignment to FSF. OpenJDK requires copyright assignment to Sun. (Each, I think Sun does, may have copyright shared with the original author.)
So at the moment there's a something of a stand-off regarding this copyright. They're licensed under the same licensed but some code belongs to FSF and some belongs to Sun. So, effectively you either sell your soul to RMS or James Gosling! :) Ironic, given their bitter infamy over emacs!
Until lawyers of FSF and Sun can resolve this dispute, Classpath-derived code won't appear in OpenJDK and OpenJDK-derived code won't appear in Classpath. Third party repositories have been hosted for such hybrids. For the first scenario, IcedTea [classpath.org] exists while for the second scenario BrandWeg [nabble.com] has recently been announced. I quote the announcement for BrandWeg, which may be helpful in clarifying the issue: