Google rivaled by open source in angel investing?

The search giant grabs the headlines for its active angel network, but even a small industry like open source may be re-investing more actively than Google alumni.

Nearly six years ago, Google went public and unleashed over $170 billion in employee wealth--money that is now being actively re-invested in building the next wave of Googles.

Is Google the exception, or is such reinvestment the rule for Silicon Valley entrepreneurs?

Is Google finding more deals than open source?

A quick scan of the industry suggests that Google is, indeed, exceptional, but perhaps not to the extent that people think.

Googlers aren't alone in spending their wealth on technology investments, of course. Well-known entrepreneurs like Marc Andreessen and other angel investors have gone on to fund new start-ups like Twitter and LinkedIn.

Such angel investors get the headlines, but the reality is that the vast majority of entrepreneurs from Netscape, Microsoft, Yahoo,, and even Google choose to spend their money on things other than venture capital.

Some, like several of the most successful open-source entrepreneurs, choose to invest time rather than money. And sometimes both.

In fact, it's very possible that Google is actually a laggard in funding the future, even when compared to the open-source world, which has returned the comparatively small sum of $3 billion to investors and employees.

Incoming Eucalyptus CEO Marten Mickos has famously summarized the principle by which open-source companies make money, suggesting that they sell to those who spend money to save time, rather than those who spend time to save money.

Mickos, JBoss founder Marc Fleury, and others have invested a great deal of time in advising other open-source entrepreneurs. This may not be surprising, given the economics of launching an open-source business, and the very nature of open source, as Mickos told me:

It's not about the money, especially not in open source. You can start an open-source company with virtually no external funding. What you need is advice, guidance, support, somebody to challenge your ideas, etc. This, I believe, is abundant in the open-source world. Many former JBoss and MySQL execs are helping start-ups and entrepreneurs.

And then I would also go back to my old postulation that open source is not a business model (and hence not an industry), but a production and distribution model. People tend to stay in, and invest money in the industries they know. Open source is a very strong movement, but it lies horizontally across many industries.

That said, in e-mails to me former JBoss executives Fleury and Sacha Labourey challenged the notion that Googlers have been exceptionally active as investors. Google has created $170 billion in wealth for its employees and investors, roughly 40 of whom have been investing in start-ups.

The open-source world, by contrast, has generated $3 billion in exits for its entrepreneurs, which suggests that to be on par with Googlers and their 200 investments, only 3.5 companies would need to be funded by open-source entrepreneurs.

JBoss, alone, has funded more than that. Add in those from Red Hat, MySQL, VA Software (formerly VA Linux), and the open-source world appears to be punching above its weight.

Fleury thinks the lesson from Google may be as simple as the fact that it made "a lot of people rich and some of them clearly have the angel fiber. Good for them."

In the grand scheme, which would you rather have--time or money from Aydin Senkut, a leading ex-Google angel investor? Both, if you could get it. But arguably Senkut's time is worth more to an entrepreneur than his money because money is relatively easy to come by for a good idea. However, turning a good idea into a good business requires real expertise.

It also costs a lot less money to start a technology company today, thanks in part to the low-cost infrastructure that open source provides. So time may well matter more than cash in starting a company.

This is where open source may actually lead Google: committed hours rather than committed capital.

For example, Mickos didn't last more than two years after selling MySQL to Sun Microsystems before he was on to a new open-source start-up, Eucalyptus. In between he advised a range of start-ups as an entrepreneur-in-residence with Benchmark Capital and Index Ventures.

This pattern is similar to what I've seen with other open-source executives: they tend to find their ways to other open-source start-ups, cross-pollinating start-ups with their expertise more than their money.

Of course, Google is an exceptional company, and Google's former and current employees are doing a great deal of good in the industry. But they're certainly not the only ones.

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