Fred Wilson says that the cloud opens up a whole new vista for open source business models to make money
There has been a lot of hand wringing and writing lately over what it will take for an open source based company to exceed 1 billion dollars in revenue. Yesterday Fred Wilson, from Union Square Ventures and AVC blog fame wrote an article in The Faster Times detailing what Fred thinks is a great way for open source companies to maximize their revenue potential.
Fred was talking about one of Union Square’s portfolio companies, Twilio announcing an open source, hosted PBX system. But you can apply the same logic to any open source company that can offer their products via web services or a cloud based service. Fred says,
we believe the pairing of open source software and cloud based business models vastly increases the commercial potential of open source software
For those of you not familiar with Fred Wilson, he is one of the most widely read and quoted VCs in the industry. I was first introduced to Fred by my friend Brad Feld, who is pretty widely read and followed as well and is a good friend and often co-investor with Wilson. Over the years Fred has been dead on regarding many of the trends we are seeing in the tech world. Fred’s company was one of the first investors in Twitter, Feedburner (acquired by Google) and many others. What makes Fred special for me at least though, is not only is he an investor in these technologies, he is a consumer of them too. Fred likes to hack around as much as anyone.
So when Fred says that he thinks the cloud is a significant new revenue source for open source based companies, I put a lot of weight on that. So should you. Now in addition to the “Red Hat” monetization model, we can add hosted and web services as a way for open source companies to recognize revenue.
Actually some open source companies are already doing this. SugarCRM for instance (I will have a lot more to say about Sugar in a new series of blog posts I am working on) recognizes a good portion of its revenue from its hosted versions.
So maybe in the cloud computing era we will see open source based companies far exceed a billion dollars in revenue. Imagine that, after 20 years it took the cloud to set open source free.
