What enterprise software can learn from community sites: Gary Little

Gary Little, a partner at Morgenthaler Ventures, explains the interaction between an open source company and its user community, and how companies don't just cash in on the community, but the community changes the shape of a company.

By Don Marti, LinuxWorld.com, 10/16/07

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Hi, I'm Don Marti, and I am here with Gary Little, a partner at Morgenthaler Ventures. Welcome to the podcast, Gary.

Well thank you for having me.

So, tell me a little bit about your company's investment in open source companies.

I have been a partner with Morgenthaler for about ten years now. I focus pretty much on software-related investment and over the last five years that has been in both consumer Internet companies and open source companies. Sometimes people say,"How do you do both enterprise types of investment as well as consumer?They seem like two different fields. And actually I think that basically open source companies have a lot in common with consumer Internet companies.

You have invested in both JasperSoft and MuleSource. What made you look at those companies as good investment opportunities?

JasperSoft actually started life as a traditional enterprise software company called Panscopic, and over a couple years saw that the traditional enterprise software business model was tough. You build a product then you buy a list of potential customers, you do direct mails and the sales force does phone calls, and you then wrap sales engineers around them to try and do proofs of concept. And you know, maybe six to nine months later you start to get some sales.

We found that that traditional model of enterprise software was becoming a challenge to invest behind because of that up-front cost in sales and marketing on one hand and then in many aspects a smaller market as all of the different software companies have spliced and diced those respective areas. So starting when Oracle started to roll up even huge giants like PeopleSoft, we decided we needed a more disruptive approach to the marketplace. Panscopic acquired JasperReports, which was the open source leader in business intelligence reporting, and we changed our name to JasperSoft.

I think that it was the first acquisition of an open source project, and we tried to basically offer the best of what open source can deliver but backed by a corporation. And I have to say, I think that was just the right thing to do. So instead of buying leads and doing cold calls, in the open source community it is very different. You have typically a hundred thousand users downloading your product monthly and they are coming to a site because they are getting value. If you have enough value they come again, they start inviting their friends in and they start downloading the product. What open source companies try to do is then have commercial value added that is paid, and among those hundred thousand users that are using your product, when they have a need for the commercial value added they raise their hand, contact you and say, "We have so much going on that we would like to have a relationship with you to get the seven by 24 customer support." Or training or whatever it might be.

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