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Record Numbers for Open Source Venture Capital Funding

The 451 Group is out with a new report on venture capital funding for open source, and the news is rosy. The first quarter of this year brought more venture capital funding for open source than ever before, totaling $203.75 million, up from $100.4 million in the same quarter for 2007. That's more than a double, for year-over-year growth, although the news immediately follows a plunge in VC funding for open source that arrived in the fourth quarter of last year. The report also includes some good analysis of how VC funds are flowing to the open source community.

Specifically, the previous record for funding was set in the fourth quarter of 2006 at $193.7 million. In the first quarter of this year, there were 20 open source funding deals that were announced (some go unannounced), which is also a record for a single quarter.

While 20 funding deals were announced for the first quarter of this year, according to the report, 17 had disclosed value, with an average deal size of $11.99 milion. In the first quarter of 2007, 11 deals had disclosed value, and the average deal size was $9.13 million. Here's a look at the breakdown since 2004:

As the 451 Group notes, though, there is a caveat: "Despite the vast improvement, there is reason for caution, however, especially when it comes to the proportion of funding invested in Seed and Series A deals, which represents the pipeline for further investment. There were just three Seed or Series A deals with a disclosed value announced in the quarter, totaling $9m, meaning disclosed Seed/Series A deals represented just 17.65% of the deals and 4.42% of the funds raised in the quarter, both record lows."

Still, the generally good news for VC funding for open source is welcome, and follows on the heels of other strong metrics for the open source community recently. For example, the number of projects using the GNU General Public License version 3 is now over 2,000.

Do you think venture capital funding for open source will continue to grow this year?

• funding

by on Apr. 01, 2008

With companies like MySQL and Zimbra seeing good returns for the investors, this trend HAS to continue. Adoption is growing. Users are growing. Awareness is growing. Investment will naturally follow.

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by on Apr. 01, 2008

Absolutely. I don't think it will get to the heady days we saw for enterprise software investments in the 90s, but this is definitely an area that the VCs will be looking at. Its also a good way for the VCs to diversify their portfolios into what could very well be seen as a "lower-risk" investment. Companies like Acquia that have established user bases, communities and deployments are automatically ripe for investment because monetization is a lot easier than, say, a new Web 2.0 startup that is going to rely solely on traffic and advertising (neither of which it currently has) to succeed.

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