Should you sell out your next big open source idea?

Open-source vendors, like proprietary vendors, have a decreasing array of exit opportunities. Should they sell out?

The Guardian probes an interesting dilemma for startups: Should you flip or float (an IPO)?

The truth is that innovation blackmail [Starting an industry-changing company] and selling out is becoming an increasingly attractive option. With the world's financial outlook so torrid that even the most strapping City magnates are being shrivelled up by paranoia and turned into tiny human prunes, we can't expect much different.

Nobody gets into the startup business just to be average. You've got to have big ambitions: change the world, make a fortune, get famous - or perhaps all three. The scrutiny that young dotcoms are under means very few entrepreneurs are simply hoodlums who think they'll blackmail their way to a retirement fund. But there are two real exit strategies for a startup founder: to flip or float. Option two is disappearing fast....

The post comes in response to Tom Foremski's post about disruptive startups selling out to the very companies they should be putting out of business. Foremski's is a fair critique, but as The Guardian notes, it may be that startups have little choice but to succumb. Entrepreneurs like cash, too.

As for open-source startups, Tim O'Reilly posited a year ago that open-source disruptors would mostly end up feeding the hands that they had been biting: "I will predict that virtually every open-source company (including Red Hat) will eventually be acquired by a big proprietary software company."

One year and Zimbra and XenSource later, Tim's point seems increasingly prophetic. There simply aren't many open-source "biggies" capable of paying adequately for open-source startups.

There's a case to be argued for "disrupting from within," and I believe Marten and the MySQL crew would argue that they're helping Sun to become more open and transparent, just as JBoss has helped Red Hat to see beyond the operating system. But these are open-source startups opening up other open-source companies. Has Zimbra or XenSource made a dent in the corporate cultures of Yahoo! or Citrix? Probably not. (In the case of Yahoo!, which is already friendly to open source, maybe there isn't much work to do...?)

I'm coming around to the idea that everything will be a blend of open source and proprietary software or services, at least for the foreseeable future. If true, perhaps it wouldn't hurt to have Oracle digest SugarCRM, Tibco acquire MuleSource, etc. These established players are unlikely to adopt the business models of such targets, at least not wholesale. But perhaps such acquisitions would provide an in-house laboratory in which to experiment with open source business models as yet another way to find new customers.

What do you think? Should open-source vendors hold out for IPOs or should they capitulate? Can open-source entrepreneurs make a difference in a large vendor like IBM, Oracle, or (gasp!) Microsoft?

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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