Everyone wants to invest in open source startups now – TechCrunch
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Happy weekend, everyone. I hope your week has not been too hectic and that you are resourceful. Having said that, we have a lot to say.
Something that pops up more and more in my inbox, the SMS folder and Twitter DMs are startup tours with an open source backbone. Essentially, startups have their roots in an open source project, often with the ancestors of this open technology within the company itself.
Confluent is a good example at the very end of the startup world. The company went public this week with a fairly good effect, setting prices above its IPO range and appreciating later. Confluent is built on open source Kafka technology, which you’ve probably heard of.
The stock market has caught up Mike Volpi of Index Ventures, one of the first contributors to Confluent, on the day the company went public. During our conversation, we were able to nibble at the world of open source startups (OSS), which Volpi says has changed dramatically in recent years. From what he said, venture capitalists in 2015 weren’t too excited about open source startups, arguing that there was already one (Red Hat) and that it would be roughly all.
If we did our math correctly, Index ended up with a stake worth over $ 1 billion in Confluent at the price of its IPO. So the enemies got it wrong about the OSS.
That said, Volpi added that while he is as bullish as before on open source-focused startups, the market has become more and more enthralled as more investors support the model. It comes as no surprise that inventors are putting more money into working in space if you’ve read the seed funding coverage. BuildBuddy is an example I wrote about last December. Ron recently covered Tecton and Airbyte.
The trend towards corporate interest in free software has been developing for some time. Hell, VCs wrote about an explosion of open source startups for TechCrunch in 2017. But the Confluent IPO and the recent wave of funding for startups in the space seem to indicate that the market’s appetite for such companies reached a new higher plateau. . (If you’re building a free software startup and recently raised capital, say hello.)
Learn more about the Confluent IPO
The Bourse also spoke with CEO of Confluent Jay Kreps the day the company goes public. A few notes from this cat are worth our time. Here are our main takeaways:
- Investing never returns to “normal”: That venture capitalists were able to start closing deals on Zoom was only surprising. After all, you’d expect your average VC to be a bit tech-savvy. But Kreps said his IPO roadshow performed well on digital channels and that he was able to speak to more people, faster than if he had toured the country for face-to-face meetings. If the even more conservative set of public market investors agree with Zoom, the digital pitch is a done deal.
- Public markets are always ready to burn: Confluent is a rapidly growing software company that is not yet profitable. Receiving its IPO is a good indication that losing money is still perfectly acceptable in today’s market. By Kreps, if you have a huge market – he estimates Confluent has a $ 50 billion market to attack – and can show capital is invested – CEO code for not be completely set on fire by an inefficient business model and cost structure – then the losses are fine. This is important for third quarter IPO candidates who have greater growth than net income. Who is most of them.
- Even public investors love open source: The Exchange also called on Kreps to be an open source company approaching public markets. Was it positive or negative? A positive point, according to the CEO, adding that the technology has always been built around open standards, which means that free software fits perfectly into historical trends. And he added that because open source projects can have strong organic momentum, it can help public investors see future growth at the enterprise level. Cared for.
OK, how about some more open source news?
Hope you like the open source software news because I have some more for you. Earlier this month, Prefect raised a $ 32 million Series B round. I couldn’t cover the round when this happened, but caught up with the company this week for a quick chat.
The company is built around the PrefectCore, an open source project. PrefectCore helps businesses make sure their data flow is configured correctly, focusing on things like scheduling, monitoring, logging, and more. The company calls this kind of work negative engineering; it falls into a kind of dead space. Nobody really wants to work there, according to the startup.
Notably, Prefect, instead of offering a hosted version of its open source project, instead sells a monitoring service. He thinks hosting OSS projects is a little old fashioned way to monetize such projects. So instead of selling hosting or feature blocking, the company’s commercial product is an API that tracks what PrefectCore manages. If he signals all green lights, great, you’re in great shape. If not, you have a problem.
But what matters is that Confluent shows that OSS startups can grow to huge scale and become great IPOs. And Prefect says there may be even more ways to strip OSS chat when it comes to making money with open source software.
So expect more VC OSS offerings to arrive this year.