This week’s Open Source Business Conference was a strange meeting of Enterprise IT users, venture capitalists, and free software entrepreneurs. The opening keynote was delivered by Red Hat’s freshly minted CEO Jim Whitehurst who gave a very modest speech noting that while Red Hat has been a leading open source company they have not necessarily been an open source leader. Whitehurst’s presentation lacked anything especially insightful or noteworthy and he has the advantage of being the new guy so he’s off the hook for anything that might have happened before he took the job.

What is apparent Red Hat’s no longer exciting. They’ve crossed over to respectable elder statesman of open source. The action is among the new batch of up-and-coming open source software companies who are not yet venture backed but are developing interesting technologies and services. Here are some of the companies that may well be the new open source superstars.

Appcelerator

Open Source Project: Appcelerator, rich internet application platform

Appcelerator is a fully integrated platform that enables rich internet applications via a services oriented architecture. Breezing past the the buzzwords and at the risk of the trivializing what they do, Appcelerator enables the building of widgets that can be embedded in web pages. If you look at FaceBook, the feature that is making the popular social networking platform interesting is the abundance of third party applications. With JBoss alumni Rob Beardon and Ben Sabrin on board along with Larry Augustin and Marc Fleury as advisors I think the Appcelerator team could have a breakout company some day.

Bitrock

Open Source Project: Bitnami, open source installers

One of the hardest things for new software users to do is install software especially for those users moving from Windows or Mac to Linux. RPMs and .debs are a whole new kettle of fish especially if you are used to point and click installers. Bitrock makes the installation for applications that easy for open source software (and proprietary software too). Bitrock installers are used by OSS heavyweights, SugarCRM and MySQL as well as many others. You can download installers from their project site Bitnami too. Bitrock is getting ready to launch some additional features that should apply to both software vendors and end-users who want updates.

Enomaly

Open Source Project: Enomalism is a web-based elastic computing platform

Enomaly is a company who has paid their bills and generated profits from consulting. However, they have a real opportunity to become a product company in the virtualization management space. Enomaly’s web-based virtualization management product, Enomalism, can manage virtual machines across VMware, Xen, and Amazon EC2 seamlessly. Everyone’s on board with virtualization these days and VMware is the obvious leader with Citrix Xen a distant second and companies like Virtual Iron and Sun’s VirtualDeskop way in the distance. The opportunity for new companies is for the tools to manage virtualization especially ones that are agnostic and can bridge the most popular technologies. That’s why I think Enomaly’s open source Enomalism has real promise and could someday be a very cool breakout technology. With companies like BladeLogic being snapped up by BMC for $800 million that would make me look long and hard at Enomaly. I wish Reuven, George, and the gang the best of luck.

LoopFuse

Open Source Project: LoopFuse Oneview, marketing and sales automation

As more business gets done on the web, understanding what happens on the web is becoming more critical. LoopFuse provides tools to give insight into how people travel through your website and eventually engage companies and eventually become customers. Given the alternatives like sales automation leader Eloqua built on Microsoft technology it seems to me that LoopFuse is a more compatible and extensible with the LAMP (Linux, Apache, MySQL, PHP) dominated web.

Their open source Oneview product is worth looking at especially given the expensive proprietary and the low-end feature poor alternatives. Once again LoopFuse founders Roy Russo and Tom Elrod are JBoss alumni who understand how to grow and market an open source business as well. Top that with advisors Rob Bearden and Matt Asay and I suspect they will have a homerun success on their hands.

[I even put my money where my mouth is here and was one of the first LoopFuse customers]

Mindtouch

Open Source Project: Deki Wiki, wiki and application platform

I have written about MindTouch before and I really think they do some interesting things like offering a standard WYSWIG editor and providing a migration path from MediaWiki. Above that I think the team there is smart and have fun and energy. For a full write-up read the article from earlier this month.

Ringside Networks

Open Source Project: Ringside social application server.

What drove it home for me was talking to JBoss alumnus and RingSide co-founder Bob Bickel telling me about his favorite FaceBook widget, Runlicious. He describes the problem of having a favorite application that is confined to a single platform rather than being deployed across all your favorite websites. Ringside Social Application Server is an open source platform that enables website owners to build and deploy social applications are applications that operate with existing website content and business applications while seamlessly integrating with social networks.

Past Performance, Future Success

Open source gets a lot of flack for not having the open source billionaires club that exists in commercial proprietary software. I think what will be telling thing in the future will be be the number of profitable open source companies and their success rate relative to proprietary companies launched since 1990. I suspect that these companies will illustrate that this new method of developing applications isn’t about building the next Oracle’s and Microsoft’s but about building profitable, sustainable companies without the need for huge amounts of capital.

Technorati Tags: Appcelerator, applications, Bitnami, Bitrock, Business, Conference, Enomaly, Loopfuse, MindTouch, Open Source, Red Hat, Ringside Networks, startups

Interestingly, we don’t call someone who exhibits all of the personal characteristics ofan entrepreneur – opportunity sens- ing, out-of-the-box thinking, and determination – yet who failed miserably in his or her venture an entrepreneur; we call him or her a business failure. Even someone like Bob Young, of Red Hat Software fame, is called a “serial entrepreneur” only after his first success; i.e., all of his prior failures are dubbed the work of a serial entrepreneur only after the occurrence of his first success. The problem with ex post definitions is that they tend to be ill defined. It’s simply harder to get your arms around what’s unproven. An entrepreneur can certainly claim to be one, but without at least one notch on the belt, the self-proclaimed will have a tough time persuading investors to place bets. Those investors, in turn, must be willing to assume greater risk as they assess the credibility of would-be entrepreneurs and the potential impact of formative ventures.

STANFORD SOCIAL INNOVATION REVIEW / spring 2007
Social Entrepreneurship: The Case for Definition, Sally Osberg and Roger Martin

Technorati Tags: Bob Young, failure, Red Hat, serial entrepreneur, success

The only problem with this hiring mentality was that it completely ignored human nature. If you’ve done it all, there’s little challenge left in the new job.  And challenge you need: that’s what makes you strive to become an over-achiever, which is what a startup needs.  The been there, done that types often have a sense of entitlement, having descended on the startup world, they expect smooth sailing till the IPO, than retirement.  Smooth sailing is not what you need in a startup: you need fighters.

He goes on to comment that a lot of people that thrived in the big corporation lose their edge without their support structure.

Another problem with hiring former corporate hotshots is that they  often turn out to be quite incapable of performing without their previous support infrastructure and staff.  They are leaders, not doers – a startup needs both in one person.

I have been involved with technology start-ups my whole career. This is my fourth which I refrain comment on since we are still in that hiring/honeymoon/growth stage. Of the previous three I have sat on the executive team with a number of Ph. D.’s and MBAs who were very smart but not able to function at multiple levels needed for success. In contrast I have worked with guys with a high school education and no experience that have knocked my socks off doing things that even the most educated and accomplished would have struggled through.

Beyond the credentials  the distinguishing factor has been creative thinking, and a lack of fear to try new things. There can be too much of a good thing too.  I have been in a startup were there was very little experience and that one didn’t make it. I think the key is to get the right mix of experience and creativity so that the combined group succeeds. The one point worth noting is that if you look at the some of most successful tech companies it seems that they were started and managed to the billion dollar range by founders with little or no operational experience:

• Apple – Jobs (Woz made it pretty far too)
• Microsoft -  Gates and Balmer
• Google – Page and Brin

[Yeah I am sure there's a great pun in the title of this post too too]

(Via Dharmesh Shah)

(photo courtesy of This Year’s Love)

Technorati Tags: executives, hiring, management, pedigree, Start-Ups

Ted says that he’s not out to punish venture capitalists. He just wants to refocus them on what should be their goal: “backing savvy entrepreneurs to move the fundamental technologies of humanity forward.” And some of TheFunded’s readers say they get more out of the site than a mere chance to vent. Stephen Bell, founder of a video-shopping site called ShangBy, says he used TheFunded to research VCs before meeting them.

TheFunded looks like an interesting resource for entrepreneurs though it looks like some VCs have spent some time stuffing the ballot box (small shops with tons of reviews versus the big guys with relatively few). It’s pretty ballsy to run the site and come clean. As a serial entrepreneur I guess Adeo realizes the risk he take by sticking his tongue out at the venture capitalist community.

Technorati Tags: Start-Ups, venture capatilists

Under the terms of the agreement, Dell will purchase EqualLogic for approximately $1.4 billion in cash. The acquisition of EqualLogic is expected to close late in the fourth quarter of Dell’s fiscal year 2008 or early in the first quarter of fiscal 2009. The company expects the acquisition to be dilutive to earnings per share, excluding the amortization of intangibles, by $0.02 to $0.05 in aggregate for Fiscal 2009 and Fiscal 2010. The acquisition has been approved by the board of directors of each company and is subject to regulatory approvals and customary closing conditions.

EqualLogic was planning on going public and according to their filing they only made $68 million in revenue last year. That’s a purchase price of 21 times revenue. It’s also been a good year for acquire-es in open source business with a 50-500x acquistion of Xensource and a 60x revenue acquisition of Zimbra . However, it’s amazing to me that we can see so many acquisitions at 20x revenue and up. Maybe it’s my background as a financial guy that makes me go…hmmm.

As I look at these acquisitions I wonder over what time period they will be considered success. If you use a multiplier of 10X revenue for that business that was acquired (which is still generous) that means Dell would have to realize at $140 million in revenue from EqualLogic to recoup their investment in increased stock valuation (which would be diluted in their hardware-centric business so even then it’s not a  great measurement). That would mean Citrix would have to realize $50 million in direct revenue from Xensource and Yahoo! would need $38 million from Zimbra. Maybe you would have to wait until that business threw-off revenue to recoup the purchase price as the measure of success which would take even longer.

I can see EqualLogic enabled by the Dell channel seeing the quickest ROI but I have to wonder over what period we will see Xensource and Zimbra pay-off. On the other side maybe that’s the only way software behemoths can grow and in their case it might be worth it. Food for thought.

Technorati Tags: acquisitions, Dell, EqualLogic, financial, Xensource, Zimbra