What enterprise software can learn from community sites: Gary Little

Hi, I'm Don Marti, and I am here with Gary Little, a partner at Morgenthaler Ventures. Welcome to the podcast, Gary.

Well thank you for having me.

So, tell me a little bit about your company's investment in open source companies.

I have been a partner with Morgenthaler for about ten years now. I focus pretty much on software-related investment and over the last five years that has been in both consumer Internet companies and open source companies. Sometimes people say,"How do you do both enterprise types of investment as well as consumer?They seem like two different fields. And actually I think that basically open source companies have a lot in common with consumer Internet companies.

You have invested in both JasperSoft and MuleSource. What made you look at those companies as good investment opportunities?

JasperSoft actually started life as a traditional enterprise software company called Panscopic, and over a couple years saw that the traditional enterprise software business model was tough. You build a product then you buy a list of potential customers, you do direct mails and the sales force does phone calls, and you then wrap sales engineers around them to try and do proofs of concept. And you know, maybe six to nine months later you start to get some sales.

We found that that traditional model of enterprise software was becoming a challenge to invest behind because of that up-front cost in sales and marketing on one hand and then in many aspects a smaller market as all of the different software companies have spliced and diced those respective areas. So starting when Oracle started to roll up even huge giants like PeopleSoft, we decided we needed a more disruptive approach to the marketplace. Panscopic acquired JasperReports, which was the open source leader in business intelligence reporting, and we changed our name to JasperSoft.

I think that it was the first acquisition of an open source project, and we tried to basically offer the best of what open source can deliver but backed by a corporation. And I have to say, I think that was just the right thing to do. So instead of buying leads and doing cold calls, in the open source community it is very different. You have typically a hundred thousand users downloading your product monthly and they are coming to a site because they are getting value. If you have enough value they come again, they start inviting their friends in and they start downloading the product. What open source companies try to do is then have commercial value added that is paid, and among those hundred thousand users that are using your product, when they have a need for the commercial value added they raise their hand, contact you and say, "We have so much going on that we would like to have a relationship with you to get the seven by 24 customer support." Or training or whatever it might be.

So how does the sales process change when everyone in the room is already using and familiar with the software?

Typically where we get involved with customers these days is after they have already done at least proof of concept and typically are going into production, live, and therefore the nature of the sales call is quite different. Instead of having your classic enterprise software elephant hunter who has to be able to both cold call, open doors and sell up and down and across an organization, it tends to be more of a telesales approach because the requests are coming inbound either from the Web, through e-mails or people calling our 1-800 number. And they are fairly specific about what it is they are looking to buy, because they have already looked at the commercial terms on the website and it is typically again a conversation saying; "The software is becoming so important to us that my boss feels we would sleep better if we had seven by 24 support, and therefore we would like to buy your gold support package or your silver support package. And, we have eight servers we would like to cover over this year and it may grow over time." Leads are coming in as opposed to trying to generate leads through outbound devices.