Why is Zend raising more money?

Zend has raised even more money. Is this healthy?

I just saw the news that Zend has raised $7 million more, in its fifth (Series E) round of funding. Zend last raised $20 million in August 2006. Zend has raised so much money that it must be bought for a bazillion dollars for its investors to get a good return from it.

There are good reasons to raise money heading into a downturn: The justification noted in the press release is to use the funds "as needed." That sounds like "in case things go awry during a recessionary period." This is smart.

One of two things must have happened. Either Zend is struggling and this was a way to give it some runway, or Zend is doing fine but the new investor gave such a rich, (relatively) non-dilutive valuation that Zend couldn't help but take the money. I'm guessing the latter.

Even so, it's worrisome that Zend has needed to raise as much cash as it has. Yes, MySQL raised a ton of cash and saw a massive exit for its investors. But most exits - open source or not - will not see $1 billion for under $100 million in sales. It's best to raise as little money as possible, if you can.

Any comment from Zend?

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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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