Thursday, Jul 24, 2008
The stumbles of a Kleiner Perkins-funded Linux start-up prove that money isn't everything in the world of free software.
Apr 11, 2000 | The news that Linuxcare and its CEO Fernand Sarrat were "parting ways" sparked a predictable hubbub in the Linux-watching community over the weekend -- kind of like a beehive poked with a stick. Never mind that Linuxcare co-founder Art Tyde is calling Sarrat's departure a "non-event." To put it mildly, it is never good news when a start-up loses its CEO just before it is scheduled to go public. Potential investors are unlikely to be amused.
The wider community of Linux enthusiasts is also unlikely to be impressed. In the current stock-market climate, when nearly every public Linux company is trading at an all-time low, Linuxcare's stumble, at first glance, seems to offer yet more ammunition for anti-open-source snipers. Now that the euphoria encouraged by last year's Red Hat and VA Linux IPOs has faded like the buzz from a New Year's Eve party in the cold light of a hangover, an impressive amount of doom-and-gloom is billowing out of open-source hangouts. Sagging stock prices are taken as evidence that there is no viable commercial model for open-source software. And the unseemly events at Linuxcare -- did Sarrat resign or was he axed? -- are being hailed as the clearest signal yet that the Free Software Emperor is buck naked.
But before we start practicing our eulogies, it might be worth taking a closer look at two closely related points. First, just what kind of company is Linuxcare, anyway? And second, is it really useful to judge the health of Linux by watching stock prices surge up and down?
The answer to the first question sets up the second. Linuxcare, the most high-profile example of a company attempting to base a business model on selling support services for open-source software, is largely the creation of Silicon Valley's premier venture capital firm, Kleiner Perkins. Back in early 1999, Linuxcare exploded onto the scene with all the fireworks one might expect from a company with access to the never-ending funding spigot of Kleiner Perkins and the networking abilities of the likes of John Doerr and Vinod Khosla. At the March 1999 LinuxWorld convention, Linuxcare hosted a huge party for thousands of convention goers, and shortly afterward nominated Linus Torvalds for president in a full page Wall Street Journal advertisement. In short order, it boasted an expensive public-relations firm and brand-name executives hand-picked by Kleiner Perkins to give the start-up instant street cred in the financial community.
Other Linux entrepreneurs who had struggled for years to make businesses out of an unknown operating system could only stand by and watch in amazement at the spectacle of what Kleiner Perkins' millions could buy. Big money had come to play, and the game would never be the same again. Months before Red Hat's IPO, Kleiner Perkins' entry offered the clearest proof yet that free software had become entangled in the New Economy nexus of Silicon Valley and Wall Street. Sure, Linuxcare founders like Art Tyde would repeatedly tell the press that they weren't doing this for the IPO, that this was all about supporting "the community" -- but no one could possibly believe that the venture capitalists had the same motivation. Kleiner Perkins wanted a piece of the oncoming Linux IPO pie, and so they pounced, hard and fast.
It must be hugely embarrassing to Kleiner Perkins that one of the executives it chose to lead its Linux start-up has left under a cloud right before the company was scheduled to start the "road show" touting its merits. Not what you would expect from the valley's VC crhme de la crhme. Tyde once noted, proudly, that the decision to fund Linuxcare was "the quickest deal Kleiner Perkins ever did." Perhaps they should have taken a bit more time.
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