Feeds

Dollars and sense: tech startups discover revenue is good

No business model is so 2001

Protecting users from Firesheep and other Sidejacking attacks with SSL

Open...and Shut During the dot-com bubble, making money was optional. Given enough eyeballs, all investors are shallow, went the refrain, and money poured into silly startups that had little chance of ever making money except in equally silly IPOs and acquisitions.

Today, by contrast, revenue seems to be sexy again.

Not everywhere, mind you. A friend of mine recently talked with several startups about their revenue plans. These are name-brand web services that you likely use every day, yet their plans to make money were amazingly weak: "Our plan is to get lots of users, and we figure that sales will automatically flow from our large user base."

Except that it doesn't, as anyone from YouTube to Pets.com can tell you. In fact, the more free-riders on a server, the harder it may be to convince people to pay for the service or software. This may be why roughly one per cent of Skype's 560 million registered users ever pay the company anything.

All of which makes Opscode's decision to hire a Chief Revenue Officer refreshing - and wise.

The company, which provides open-source server management tools, suggests that it's looking for revenue to match its adoption:

When we started Opscode, we assumed it would take 1-2 years for enterprises and larger organizations to begin using the Opscode Platform, and that it would take us 6+ months to actually close the first big deals. We'd use that time to staff based on what we had learned from self-service signups and organic growth. We planned to start slow, grow incrementally, and tune along the way.

Since launching the Opscode Platform a few weeks ago, we learned that we were wrong about how long this would take. Instead of months - it happened instantly, which means that we need to ramp up our business operations now.

I don't buy this "surprised by success" line completely, given how much money Opscode raised relative to its closest open-source competitor, Puppet Labs, and how actively it has used that money in various business development activities, but even that is indicative of Opscode taking a grown-up approach to its business. That is, the company has always recognized that it's building a business, and not a fan club, and acted accordingly.

Opscode isn't alone. While revenue may not be the top priority at some web startups, it's increasingly Priority Number One at open-source startups like Riptano, which offers software, support and other commercial services around the Apache Software Foundation's project Cassandra. In a conversation I had with Riptano chief executive Matt Pfeil, he indicated an increased emphasis on marketing and sales to bolster the company's already solid engineering base.

Riptano is building its business while simultaneously building its community of developers and users, whereas yesterday's open-source startups often delayed revenue-generation until they had established a large user base.

This is the new model, and it's the right one. Why? Because cash is a hugely powerful feedback mechanism. No, it's not the only one, and in some cases may not be the most important one, but it's a fantastic signal that what you've built has real value.

That's a signal more companies need earlier in their lifecycle as the economy peters out (again). The companies that survive will be those that generate code or services for which customers are willing to pay. Everyone else will vanish. And should. ®

Matt Asay is chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfreso's general manager for the Americas and vice president of business development, and he helped put Novell on its open-source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears every Friday on The Register.

Choosing a cloud hosting partner with confidence

More from The Register

next story
Hey, Scots. Microsoft's Bing thinks you'll vote NO to independence
World's top Google-finding website calls it for the UK
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Apple CEO Tim Cook: TV is TERRIBLE and stuck in the 1970s
The iKing thinks telly is far too fiddly and ugly – basically, iTunes
Israeli spies rebel over mass-snooping on innocent Palestinians
'Disciplinary treatment will be sharp and clear' vow spy-chiefs
Huawei ditches new Windows Phone mobe plans, blames poor sales
Giganto mobe firm slams door shut on Microsoft. OH DEAR
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
OECD lashes out at tax avoiding globocorps' location-flipping antics
You hear that, Amazon, Google, Microsoft et al?
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Security and trust: The backbone of doing business over the internet
Explores the current state of website security and the contributions Symantec is making to help organizations protect critical data and build trust with customers.