Monojit Basu
Founder and Director, TechYugadi IT Solutions & Consulting, Bangalore
Technology and Investments: A Quick Introduction
Investments in Open Source: Global Perspective
The Scenario in India
In order to be successful, a product or project
needs steady stream of funds
▪ For both R&D and Go-To-Market
Younger Generation today is more willing to
take risks and be entrepreneurs
Caveats
▪ Innovation and Proof-of-Technology comes first
▪ Investors look for teams, addressable market,
scalable business models, customer references, …
EARLY STAGE
PRE-IPO STAGE
LATE STAGE
(PROOF OF
TECHNOLOGY)
(VALIDATED MARKET)
(POSSIBLY UNDERPERFORMING)
VENTURE CAPITAL
PRIVATE EQUITY
ANGEL INVESTORS
Equity and Control
Full Control
Small Equity
•Several Rounds
•Exit Options: IPO, M&A
(Representative but not universal)
Revive and Sell
Quantum of Investment depends on valuation
But at the end of the day valuation is an
opinion, one data point
A common valuation model
▪ Discounted Cash Flow (DCF)
▪ DCF = CF1 + CF2 + .. CFn
(1+r) (1+r)2
(1+r)n
▪ r = hurdle rate / internal rate of return / risk metric
DCF may be difficult for early stage company
▪ Comparables and other approaches possible
Ideally Valuation should factor in IP
▪ Software Patents could be a little different
And Intangibles !
▪ Management team, ecosystem, dev community, ..
Valuation process may introduce biases
▪ Despite best practices to avoid them
Technology and Investments: A Quick Introduction
Investments in Open Source: Global Perspective
The Scenario in India
Confluent
▪ Technology: Event driven architecture based on
Apache Kafka
▪ Funding:
$125 M (Series D, 2019), $250 M (Series E, 2020)
Hasura
▪ Technology: Graph Query Language Engine
▪ Funding:
$100 M (2022)
Firstly a small subset of VC funds are
currently showing interest in open source
▪ But the number is growing fast
Why was the product open sourced?
What are the monetization options around it?
Does it solve a significant customer problem?
Addressable Market: Not just end customers,
but developer community
Ecosystem and Strategic Partners
Customer Support (Red Hat Linux)
Cloud Strategy:
▪ PaaS-ification or SaaS-ification
Freemium: Advanced Enterprise Features
Tools and Customization
Consulting and Professional Services
First, investor that understands Open Source
Accelerated Development: ramping up teams
Marketing Dollars
Guidance on scaling
Earning Customer Confidence
Fewer Controls
Investment is deemed to be successful when
there is a successful exit
▪ .. Few years down the line
Investment in Open Source: recent phenomena
Have to wait until we can evaluate success
Some positive examples:
▪ Confluent IPO (raised $800 M)
▪ MapR (acquired by HPE)
Organizational Structure and Behavior
Commoditization of Underlying Technology
Monetization Options not aligned with Core
Competencies
Perceptions among developer community
due to change in licensing policies
Australian Company that offers data
platforms on the Cloud
▪ Untampered open source as is
Kafka, Cassandra, OpenSearch, Redis,
Postgresql, Zookeeper, ..
Received $20 M + funding in two rounds
between 2016-2018
Sometimes licensing changes are applied as a
monetization option
Examples: MongoDB and ElasticSearch
Restrictive licenses or shift towards
commercialization
Important to manage perceptions in
developer community
Original open source shifts to more restrictive
/ commercialized license: it is forked
MariaDB is a fork of MySQL
There is often significant backing for the
unrestrictive version of source code
MariaDB raised more than $100 M recently
Similar case: OpenSearch (forked from
ElasticSearch)
Open Processor Architecture
Backed by universities and chip design firm
Si-Five
More than $350 M invested already
Strategic Interests from other chipmakers
including Intel
Technology and Investments: A Quick Introduction
Investments in Open Source: Global Perspective
The Scenario in India
There are two important and distinct scenarios
Open Source Projects
initiated in India and
funded by VCs around
the world
Open Source Projects
initiated in India and
funded by VCs in India
India: incredibly vast consumer marketplace
still growing at an incredible pace
Investment in open source from VCs in India
will have to compete with other opportunities
▪ Investment in Tech Platform vs Investment in
consumer facing apps (ecommerce, payment)
Need a few more role models in technology
Huge Developer Community
▪ Around 6 M on GitHub (as of 2020)
More than 100 educational institutions part of
GitHub educational program
More than 1 lakh students part of GitHub
Developer Pack
Time for Open Source Incubators in
educational institutions?
Getting the basics right: Github stars,
community forums, events and meet-ups, ..
Turning the thought process inside out
▪ From end user apps to underlying technology
Unique competencies
▪ Open Source Agritech platforms?
Product Vision and Selling the Vision
Strategic Partnerships
Not all investments have to be big ticket !
Platform built on
ZERODHA
ERPNext
Backed
by
Rainmatter
Capital
Recent Funding:
(INR 10 crore)
monojit@techyugadi.com
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