Monojit Basu
Founder and Director, TechYugadi IT Solutions & Consulting, Bangalore
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Technology and Investments: A Quick Introduction
Investments in Open Source: Global Perspective
The Scenario in India
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In order to be successful, a product or project
needs steady stream of funds
▪ For both R&D and Go-To-Market
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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
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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
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DCF may be difficult for early stage company
▪ Comparables and other approaches possible
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Ideally Valuation should factor in IP
▪ Software Patents could be a little different
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And Intangibles !
▪ Management team, ecosystem, dev community, ..
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Valuation process may introduce biases
▪ Despite best practices to avoid them
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Technology and Investments: A Quick Introduction
Investments in Open Source: Global Perspective
The Scenario in India
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Confluent
▪ Technology: Event driven architecture based on
Apache Kafka
▪ Funding:
$125 M (Series D, 2019), $250 M (Series E, 2020)
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Hasura
▪ Technology: Graph Query Language Engine
▪ Funding:
$100 M (2022)
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Firstly a small subset of VC funds are
currently showing interest in open source
▪ But the number is growing fast
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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
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Customer Support (Red Hat Linux)
Cloud Strategy:
▪ PaaS-ification or SaaS-ification
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Freemium: Advanced Enterprise Features
Tools and Customization
Consulting and Professional Services
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First, investor that understands Open Source
Accelerated Development: ramping up teams
Marketing Dollars
Guidance on scaling
Earning Customer Confidence
Fewer Controls
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Investment is deemed to be successful when
there is a successful exit
▪ .. Few years down the line
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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)
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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
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Australian Company that offers data
platforms on the Cloud
▪ Untampered open source as is
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Kafka, Cassandra, OpenSearch, Redis,
Postgresql, Zookeeper, ..
Received $20 M + funding in two rounds
between 2016-2018
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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
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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)
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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
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Technology and Investments: A Quick Introduction
Investments in Open Source: Global Perspective
The Scenario in India
There are two important and distinct scenarios
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Open Source Projects
initiated in India and
funded by VCs around
the world
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Open Source Projects
initiated in India and
funded by VCs in India
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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)
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Need a few more role models in technology
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Huge Developer Community
▪ Around 6 M on GitHub (as of 2020)
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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?
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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
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Unique competencies
▪ Open Source Agritech platforms?
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Product Vision and Selling the Vision
Strategic Partnerships
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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