Lot’s of news lately about Larry and the Wild Bunch setting their sights on open source companies, which begs an interesting question of what it is you are buying when you acquire an open source company.
Natch but it’s not so straightforward. One of the interesting quirks of copyright law is that in order to license something, even under a public license like GPL, someone has to own it, which also means that the owner reserves the right to change the license at any time.
Any company that offers a product under the GPL can change the terms of that license but it would not grandfather to product that was already put out. In other words, you can change the terms of the license to make it a proprietary product for version 2.0 but you can’t change the GPL terms of version 1.0 ever.
What this all means is that any product put out under an open source license can in fact be “forked” to create a new product on the same code base and licensed under subsequent version as GPL even if the originating product is reverted back to a proprietary license.
Absolutely, and this is probably one of the most valuable components in any of these deals, which pretty much blows to shit the notion that the most valuable intellectual property in any deal is the technology itself. Companies like Red Hat, JBoss, Apache, and MySQL have fantastic brands as a reflection of their commitment to their communities and the strength of their products in their customer base.
In all of these companies brand is carefully cultivated as a reflection of the open source community, their technology saavy as being a critical enabler of the community process around their products, and increasingly, their enterprise bona fides as open source moves up the food chain.
Definitely. In fact, this is the single greatest asset that any open source company holds, and what ultimately defines the barrier to entry to new competitors in what is essentially a level technology playing field because according to the technology point above, a company can create a competing product off the same code base. With open source it’s not just the community of people who are deploying and using the software, it’s the community of developers that are extending it as well and while they may be fickle they are also terribly loyal and resistant to change.
There are definitely some interesting aspects of open source M&A deals, indeed things that challenge the traditional M&A mindset. It would be easy to dismiss an acquisition in this area as a commodity buy but I don’t believe this to be the case at all. Just because someone can take the codebase and create a new open source company doesn’t mean they have an easier path to building a company around that product. The one caveat that I would seriously ponder before doing any acquisition in this area is how the support and community process dovetails with the acquirers tradition and reputation because poor support will result in a loss of value quicker than any other aspect, and create an opportunity for a new competitor to exploit.
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