Who will buy your open-source start-up?
Would you want to sell your start-up to most of the possible suitors? Neither would I.
In the Web 2.0 world, this is an easy question to answer. Everyone wants to be bought by Google or Yahoo (or, really, anyone foolish enough to part with $30 million in exchange for six months spent on a relatively lame social-networking idea). In the open-source world, however, I think the answer is not so clear.
And yes, I think the answer is more complex than, "Whoever bids the highest." Why? Because there are principles at stake.
Not for everyone, of course. Some are involved in open source because it's trendy. These are the same people that had an MBA to burn and had trouble deciding between a bozo Web 2.0 company to start/join or a bozo open-source company to start/join. These people will always prostitute themselves.
But ask Marten Mickos if the people at MySQL care about the answer to such a question. Heck, it might even be why the company is gearing for an IPO, and not an acquisition. In any company where developers have a voice, cash is not necessarily king. Principles are. (Look at how Google started--despite my concerns at times about where the company could be going, I firmly believe its founders were sincere in their "Do no evil" approach to the market.)
So, who are the companies most likely to purchase open-source companies? This is both a function of who has the wherewithal to do so, as well as the appeal to start-ups (in other words, companies that open-source entrepreneurs would actually want to work for). Here is my best guess:
- Red Hat. This is an obvious one, though it's less obvious how Red Hat would manage these. Red Hat isn't in a position to acquire dilutive companies. It needs to buy profitable (accretive) companies. I haven't seen a lot of those around lately.
- Sun Microsystems. This isn't one most would have guessed a year or two back, but the company is finally credible as an open-source player. It also has its hands in a lot of markets/products, so it could actually pick up a range of different kinds of start-ups.
- Google. This becomes increasingly possible the closer we get to having open-source companies break out of the mold of commoditizing enterprise software markets and start breaking new innovative ground. I actually could see Google acquiring something like Intellipath or OpenAds.
- IBM. IBM isn't super-hip on companies with a GPL license, but it has a soft spot in its heart for open source. As with Gluecode (Geronimo), IBM is most likely to acquire projects that can serve as a "low-end" gateway to its "high-end" products (i.e., Geronimo to WebSphere).
- Oracle. It's unclear what Oracle has left to buy, but that hasn't stopped Larry Ellison from buying more, anyway. Why have one ERP system when you can own several? I think Oracle has an open-source acquisition or two in its playbook at some point. Not for religious reasons, of course, which would probably cause all but the most cash-hungry of start-ups to balk. Oracle is a great company, but it hasn't shown itself to be a great community player. It kind of is the community in most markets that it goes into.
- Novell. Some people believe in Novell. But those same people still would demand a premium on the purchase, I suspect. Novell can't buy much on the cheap these days.
- Big incumbents. I actually think it makes a lot of sense for the big incumbent in a given market (e.g., Business Objects in Business Intelligence) to acquire an open-source leader. So, maybe Business Objects would acquire JasperSoft or Pentaho, for example, as a way to learn open source and stave off the threat from it at the same time.
- Microsoft (???). Not anytime soon, but I can see Microsoft buying an open-source company at some point. It would have to be in a completely complementary market (maybe something to do with gaming?), but I think it will happen.
Who am I missing? SAP, HP, Dell, etc., of course. I suppose many are candidates, but who would you want to acquire your company? I actually think there are very few that fit that mold. I know there are few companies for whom I'd want to work. Apple, yes, but I haven't heard that they're in the market for a content management system.
And, no, this isn't just idle speculation. (OK, it is, but humor me.) Within the next two years, there will be several open-source companies doing well north of $50 million--prime territory for an acquisition valuation about which the start-up's investors can get excited. So, the question isn't whether there will be companies worth buying, but rather whether there will be buyers worth selling to.