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VC Funding Down in 2009 for OSS, But There's Good News Too

04.07.2010
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The 451 Group released its data today regarding venture capital funding for open source software in 2009.  As a result of the struggling world economy, open source VC funding took a hit last year with a drop in the number of deals and in the average size of the deals.  However, the drop in funding was better than the 451 Group predicted and the economic climate is also a good thing for OSS because more companies are looking for IT cost savings.

Total VC funding for OSS vendors was down 37% to $375.4 million in 2009.  The total number of VC deals for open source companies in 2009 was 67, down a quarter from 2008.  The average deal size, $5.96 million, was also down 37%.  It wasn't all bad news though.  Seed/A funding was up 0.2% to $64.9 million and the Seed/A percentage of funding was 17% in 2009, up from 10% in 2008.  The Seed/A percentage of deals was 30% in 2009, up from 26% in 2008.  The 451 Group also says that OSS-related vendors did better in terms of investment compared to the software market as a whole.  This is because more organizations were looking to save money last year.

The 451 Group included a broad look at venture funding for open source, which starts in 1997.  Since then, OSS vendors have received a total of $3.6 billion in VC funding.  In twelve years, 181 vendors made 453 deals with 7 vendors going public with an IPO.  46 OSS vendors have had venture-backed mergers and acquisitions, and 10 have ceasing trading.  The major spikes for private investment in OSS came in 2000 and 2006, which reached levels of over $400 million and $600 million respectively

In another survey the 451 Group polled IT organizations in 2009 to see if the economic climate was influencing their likelihood of buying open source.  45.6% of those surveyed said they were more likely to use open source in the face of current economic conditions.  47.7% said they had no change in attitude from the economy.  Only 2.5% said they were less likely to adopt OSS and 3.2% said they were not likely to buy any software until things got better.

This previous survey also found that organizations were extremely satisfied when they did make the move to open source.  A staggering 90% said that open source solutions met or exceeded cost savings projections. Less than 5% said that OSS did not meet expectations.