Bessemer Venture Partners Roadmap to Open Source Venture Businesses and Investment Assessment

It’s no secret that open source is taking over the software development world. In just the past two years, there has been over $80 billion in liquidity value generated from the acquisition, merger, and IPOs of open source software-based businesses, so it should come as no surprise that the pace of venture investments into this space is growing faster than ever.

Much has been written about the dramatic shift in attitude towards open source in recent years—from the creation of the GNU project out of MIT back in 1983, to the launch of Github in 2008, through the acquisition of RedHat by IBM for $34 billion last year—so we won’t rehash the history of open source here.

One major development is worth emphasizing: once considered the cheaper version of closed source software, open-source software is now viewed as the superior alternative offering higher quality, better support, and more flexibility.

Bessemer is looking at open source businesses from a venture perspective, and have created an investment framework with 6 categories and good / better / best categories for each one:

I don’t necessarily agree with these ratings and also believe they mainly capture success metrics looking backwards, not emerging indicators.