I went to an interesting presentation on Open Source software and software management, hosted by a local startup, OpenLogic. While the ostensible reason for the event was to talk about liabilities and opportunities with using an Open Source-based software infrastructure, in fact much of the celebratory feel of the event was because the dozen-person startup is announcing that they’ve secured $4 million in “Series A” venture funding tomorrow morning.
I found both their business model and the path to their funding darn interesting…
Let me talk about their funding first, because venture funding is one of my favorite topics, having worked with various venture capital firms and angel investment groups in Silicon Valley during the late 1990’s boom time. In those days, one easy rule of thumb with VC money was that if the company was based more than two hours from the VC’s office, the venture group wouldn’t be interested in investing.
OpenLogic‘s funding, however, shows just how things have changed. The lead investor was Appian Ventures, a local Denver firm, but the follow-on (or “follow”) investment groups, companies that put in money because another firm agreed to “lead” the investment, are Red Rock Ventures (Palo Alto, California), Village Ventures (Williamstown, Massachusetts), and Highway 12 Ventures (Boise, Idaho). Quite a geographically disparate group!
The ramification of this change is that if you’re looking for venture money for your own startup — and you have a solid business plan, among other things — you should be casting your proverbial net quite a bit wider than you would have a few years ago. A significant change!
I also really like the OpenLogic business model because it beautifully demonstrates something I’ve been evangelizing for years: smart companies create the mortar, not the bricks. Why? Because bricks are commodities and you’ll never have a long-term successful business being trapped in the world of what IBM’s Sam Palmisano aptly calls “commodity hell.”
OpenLogic offers a far more powerful and graceful multi-package Open Source management system than anything else on the market. They don’t write any Open Source applications — indeed their solution is proprietary, as far as I can tell — but if you’ve been trying to manage your Linux or other Open Source systems using RPM, the Red Hat Package Manager, Debian’s apt-get utility, or similar, you will instantly understand the value of having a third-party firm take care of updates, patches, and cross-application compatibility for you.
They’re the mortar, not the bricks. They’re focused on the building that’s being constructed, not the construction tools.
(However, to be fair, OpenLogic doesn’t seem to realize that they have a much more powerful and broadly applicable solution than they’re promoting today. Their current pitch is that they offer a “turnkey toolbox for Java & LAMP developers” but once they get fully staffed I think they’ll quickly realize that solving this problem for multiple Open Source environments is the winning play, not being focused on one specific niche. Startup myopia or, put another way, a healthy and narrow focus on a single area where they can followed Jim Collin’s advice and be Great, the Best in the Industry)
(LAMP is an acronym for Linux + the Apache Web server + MySQL database + PHP)
It’s a brilliant business model. Keep an eye on OpenLogic, visit their Web site (www.openlogic.com). They’re going places.