VCs Back Open-Source Upstarts - InformationWeek

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Software // Enterprise Applications
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4/8/2005
10:31 AM
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VCs Back Open-Source Upstarts

Investment flows to companies that help businesses use systems effectively, rather than tie them to one flavor of open-source software

Kim Polese has a history of spotting a hot tech market and getting venture capitalists to pony up the money to back her ideas. After making a tech-boom splash in the 1990s with Marimba Inc., Polese now has her sights set on an emerging area of the open-source software market that has investors dusting off their checkbooks.

Companies want proprietary and open-source software to coexist, Polese says.

Companies want proprietary and open-source software to coexist, Polese says.
Her new company, SpikeSource Inc., emerged last week from two years of startup incubation funded by Kleiner Perkins Caufield & Byers, and offers software and services that marry different open-source software with each other and with proprietary packages.

As the market for open-source software matures, companies such as SpikeSource are attracting the interest of well-heeled VCs such as Kleiner Perkins and of IT industry veterans. Several are doing so with a strategy similar to SpikeSource: Rather than tie themselves to particular open-source software such as Linux, Apache, or JBoss, they're trying to help companies integrate these applications into their existing IT infrastructures.

SpikeSource's technology is designed to ensure that different open-source software works in unison and to track and analyze the performance of open-source software environments. While these functions can be performed today by more traditional systems integrators, SpikeSource wants to provide an automated approach, says Polese, who in 1996 co-founded Marimba, a maker of software-management apps that in 2004 was acquired by BMC Software Inc.

SpikeSource isn't saying how much venture capital it received from Kleiner Perkins, but the company boasts a lot of star power on its advisory board. Ray Lane, a general partner at the venture-capital firm and former president and chief operating officer of Oracle, serves as SpikeSource's chairman. MySQL CEO Marten Mickos, Mozilla Foundation president Mitchell Baker, and Brian Behlendorf, a primary developer of the Apache Web server, sit on the advisory board.

GroundWork Open Source Solutions Inc., a provider of open-source-based IT-management software and services, late last month revealed $8.5 million in series B funding, led by Mayfield Fund and Canaan Partners. GroundWork has raised a total of $11.5 million to expand its product and services offerings, as well as build out its marketing and sales programs.

GroundWork's Monitor product is a combination of open-source packages. At its core is the Nagios open-source host, service, and network-monitoring application. On top of Nagios, GroundWork has included PerfParse to facilitate the storage and analysis of binary performance data produced by Nagios. Other open-source components include Network Mapper, or Nmap, a utility for network exploration or security auditing; Cacti network-graphing software; Jetspeed portal software from Apache Software Foundation; and the MySQL database.

Some question the sustainability of the open-source vendor model. After all, if users have access to the source code, what's to stop them from modifying a program beyond the vendor's ability to support it? Not a problem, says Will Winkelstein, marketing VP at GroundWork. Of GroundWork's 45 customers, he has yet to come across anyone who has gone in and changed the code.

Polese is aware that companies aren't likely to abandon the proprietary software investments they've made over the years. Instead, they're looking to make coexistence of proprietary and open-source software easier. "We don't expect that suddenly the enterprise will use a pure open-source environment," she says.

So is this venture-capital interest all too reminiscent of the dot-com era, when easy money created startups without clear profit or purpose? There's one big difference, Polese says: "Companies are already using open source. The dot-com stuff was mostly speculative."

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