Red Hat Ventures To Fund Open Source 52
joel_archer writes "According to this article on C|Net Red Hat Ventures division will take $500,000 to $2 million stakes in new companies specializing in open-source software and Internet infrastructure technology. Red Hat said it hopes to identify new business opportunities through the funding of start-ups. "
Awesome news (Score:1)
Re:No, it's simply not true.. (Score:3)
Now, take AMD as a counter example. Revenues for the last 4 quarters totals around $3.1 billion. Capitalization ~= $13 billion. Ratio=4.2.
And that doesn't even count earnings after expenses, etc. Of course, RedHat has yet to earn anything.
No, it's simply not true.. (Score:2)
Re:Uh, One Big Question (Score:2)
-JD
Redhat Linux Announces... (Score:4)
Bob Young annouced Redhat software's newest investment plan. Called "extend and embrace" Redhat plans to fund starting open source projects, then gobble them up and redistribute them under the Redhat label once they become profitable. Redhat is believed to be doing this to improve their stock prices, which plummeted when everyone realized that you shouldn't pay for milk when a cow is free.
Said one RH investor, "Yeah, turns out this linux thing is free and you can download it for almost nothing off the internet. Guess you don't have to pay $80 for it from Redhat after all. Oops."
In an unrelated comment Mr. Young was quoted as saying "640k should be enough for anyone" and has begun spending way too much money on a house in washington.
They take it at the bank, don't they? (Score:2)
Beats me. They take it at my bank and the IRS seems to like it.
I think he means shares. If they're offering stock swap, then it could be considered funny money, but cash is still cash in my books.
If not Red Hat, then who will fund it? (Score:1)
Stop complaining about money from friends - it's a lot better than the black hats buying it up any day of the week.
Good! (Score:1)
Or maybe they can find a company that provides support for Linux (even though the only people that use Linux rarely need support), cause we all know how profitable that business model can be.
And if they could find one that did both, boy, that would be great!
Redhat will be trading at $4 a share in 6 months. Dump it now.
Is it a form of R&D? (Score:2)
Re:Ponzi Scheme (Score:2)
employee around 10-12 people for one year
purchase around 200 cutting edge Intels workstations
purchase around 50 cutting edge Intel servers
purchase around 20 Sun workstations
advertise for 5 seconds during the Super Bowl .45 secs of the Super Bowl.
So, 1 person = 18 Intels = 1.8 Suns =
Company A has 3 employees, each with a desktop. Further, they have a dev box and prod box. Next, they need an office to put it in. Given one year, they would then be spending around $250,000, before marketing.
$2M would be alright for first round VC money for one company with a handful of employees. Second and (sometimes third) help with production crunches--when money coming in is less than what will be, but more employees are necessary to keep up with demand. This is typically at least $5M, so you can hire people to hire people, get an accounting dept., lawyers, etc.
Seems to me that they are looking to absorb new technologies rather than generate companies. These prices seem more like purchasing prices than VC. In other words, they may be buying first refusal from companies that already exist and will never go gangbusters (like Visicalc).
Re:Redhat Linux Announces... (Score:2)
And then began to rise steadily when someone pointed out that very few people have room for a cow in their kitchen.
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Re:Uh, One Big Question (Score:1)
Get a clue people! (Score:4)
Why it's called speculation (Score:1)
cash out,
Oops.
Trying to remind myself why I didn't sell at $300.
Well, I only bought 25 shares at $110 as I thought it might drop down a bit, then picked up 75 shares at $25 and now the 100 shares at $21 5/8. But it could go down more, mostly due to the whole drag coefficient of tech stocks in general.
It's called speculation in that you're speculating which way the price will go. It could go to zero.
In general, if you start wondering if it's overvalued or undervalued, it probably is. But that doesn't mean the market will react that way. Bank stocks are down right now due to silly reasons that a long-term investor could care less about, plus they have low P/Es and high dividend rates. They could go down more. And I'll buy more.
The problem with buying RHAT for me is that I do get a little emotionally attached to the company. Which is a risk in itself.
Re:Uh, One Big Question (Score:2)
And they aren't giving away money. They're investing it.
-JD
Re:Ponzi Scheme (Score:1)
I certainly hope that Redhat isn't making any money of licensing fees. If they are I'm going to be switching to FreeBSD or SuSE or something in short order. In fact if Redhat tried to charge licensing fees it would probably be illegal, as they don't own the copyright on most of the code used (and so, AFAIK, they cannot sell me the right to use it). Redhat is selling support and packaging.
Re:Redhat's market valuation in perspective (Score:2)
Re:Redhat Linux Announces... (Score:2)
Re:Uh, One Big Question (Score:1)
I think it would help a lot if they would just invest in their OWN software, then investing in open-source software..
How could open-source software make profit anyway? They don't place ads, it's free, etc etc.
- Leon Mergen
www.Solatis.com [solatis.com]
"Identify new business opportunities..." (Score:4)
"Identify new business opportunities through the funding of startups"
Sound suspiciously like:
"We don't know where to go now, but we want to be the MS of the new millenium -- so we'll throw a bunch of money at a bunch of projects, and see which ones take off -- once they become profitable, we'll "acquire" them"
Sort of like them saying (now) "Here's 10k to fund your open-source project" -- then 3-4 years down the road "Hey, remember when we gave you that 10k? We own your @$$. Join us."
Admittedly, with it being open-source, it's substantially better than MS's tactics of "let someone else come up with the good stuff, then either buy them, or make something similar, proprietary, and bundled into the OS that everyone will use instead, because we give them no choice".
$$ for open-source startups is cool - but I can't help but be skeptical when large corporations are involved. Seldom do they do things because they are "right" -- most often they do things because they are "profitable"...
I guess we'll se how it turns out - I could be completely wrong.
Re:"Identify new business opportunities..." (Score:2)
It's just good buisness sense. Sun and Oracle do the same thing all of the time. Sun *gives* hardware away to startups who have promise in exchange for partial share.
Standards (Score:2)
How am I supposed to hallucinate with all these swirling colors distracting me?
Re:Ponzi Scheme (Score:4)
My first reactionw as "Red Hat is dumping their imaginary IPO-generated money into other things before people realize its imaginary."
But I have to be slightly fairer to Red Hat. Given the number of people I've seen usign the red Hat name I assume they are actually making SOME kind of money in license fees... which is more then can be said for most Linux companies.
Still, I read their stated interests as two-fold:
(1) Encourage open software == hope to create more products they can sell without having to do actual development work themselves.
(2) Internet Infrastructure -- A relatively safe-haven for high tech IPO money against the day investors realize comapneis need to turn real profits to be worth anything.
In re 2... I have a saying based on 20 years in bleeding edge development.
"In any gold rush, the guys gauranteed to get rich are the ones selling shovels."
Sounds like a good investment (Score:2)
more here [quote.com]
Just a tad cynical? (Score:2)
If the startup they invest in takes off, they may be able to harness the energy, the product, or the community, but to acquire and control it would, I think, destroy it(as you have said). Because it's open source, they don't have to acquire it to reap the rewards, so that may not be an inevitable thing.
I don't know that you want a corporation, an otherwise souless entity, to do things because they are 'right'. Individuals and persons can choose, but corporations are almost always products of groups. What is right for a group is not always what is right for the individuals in the group. By working on profitable, a twofold benefit is achieved. Any good the corporation brings into the world is sustaining, as the corporation is in no fear of collapsing due to unprofitability. If the corporation is profitable, then there will be copycats, so then the good of the company is multiplied by that of it's copycats.
At least, I think so.
-AS
Re:Market doesn't seem to like it... (Score:2)
If I were to play the causality game, I would hazard a guess that the fall in valuation has more to do with yesterday's news:
Somewhat interesting read, mentions andover.net, too, and how it might have factored into Red Hat's decision.
Nollo Bastardo Carborundum (Score:2)
See t his [ohio-state.edu]
Re:Yeah, but I like it ... (Score:1)
We did similar things...
Not bad, put down $1400 for the 100 shares at the IPO,
Did 200 shares...
cash out,
Yep...
buy back in,
Yep...
cash out,
Oops.
Trying to remind myself why I didn't sell at $300.
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Red Hat is a damn fine company (Score:1)
Red Hat gets a lot of flak sometimes, but ask yourself: what could you possibly want from a free software-based company, that Red Hat isn't doing? Red Hat has been awfully good for free software, and projects like this and RHAD show that they're also being awfully good to free software.
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Member of the minority (Score:3)
The whole point about Red Hat is packaging, and I do not mean the graphics on the pretty box. They take some enigmatic element of Linux (e.g. install, adding packages, etc.) and make it usable and accessible to a strata of people who probably otherwise would not use Linux. They cater to the demand side - people want a stable OS without much hassle, and they deliver.
I wish they would look at Open Source from the demand side too. There are solutions to a great many problems already in existence out there, needing only the proper PR and "packaging" to bring them into wider use. If Red Hat devoted their money and energy to the packaging and promotion of existing technologies, it would be money and effort better spent in the cause of proliferating what most of us believe is a better way. It would most likely feed back to their greater concern now that they are public - their bottom line.
-L
Re:Uh, One Big Question (Score:1)
They might be getting it from sales. Tried to ftp into ftp.redhat.com Guess what, no. What happened?!
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please moderate up "get a clue people" (Score:1)
This guy gets a zero when the guy who's totally wrong with his figures gets a two.
Nope (Score:3)
"Ponzi scheme" describes a very specific situation where you take people's money, promise them insane percentages in interest, and pay them using the money of people who sign up later. Usually the first round of suckers will reinvest the gains in the same place after getting paid off, and attract new suckers as well. Eventually the perpetrator flees with all the money, and it all collapses.
That's not what's going on here. Ponzi schemes require a certain amount of deception. Red Hat has not promised anyone any fixed amount of return on investment and is not deceiving anyone. Their investors bought shares in spite of the well-known fact, which was no doubt printed in the prospectus, that Red Hat is not expected to make money anytime soon.
I think this misperception may have come from the widespread idea that Red Hat's capital is somehow "not real" and "only on paper." Let's set it straight: when you buy shares in a company, you pay them cash and they give you a piece of paper. The money they collect from these transactions goes into their bank account and they can do whatever they like with it. If they in turn invest in other companies, that is perfectly legitimate. In fact, there are publicly traded companies where that's all they do with their capital: invest in other companies in hopes of turning a profit thereby.
-JD
Re:"Identify new business opportunities..." (Score:2)
Yeah, but I like it ... (Score:1)
I'm pretty happy. I just bought another 100 shares, so I'm back up to 200. Not bad, put down $1400 for the 100 shares at the IPO, cash out, buy back in, cash out, and pick shares up as the price drifts lower.
But I think most investors are not happy with this latest announcement. Their loss.
Re:Uh, One Big Question (Score:1)
roche
Re:Market doesn't seem to like it... (Score:1)
It's a shotgun approach to R&D without the overhead. It gets your foot in the door before the company gains enought momentum to be attractive to competitors.
The market won't really care about something like this unless it pays off big, or the business is already operating in the red and doesn't target their investments. Then, it is like saying, "We don't know what to do! Somebody invent something! We're taking out a second mortgage for this! Hurry!"
Redhat's market valuation in perspective (Score:2)
The market does not value a company based on its current earnings but rather on expected earnings.
Look at it this way... Right now Microsoft is valued at something around G$300. Redhat is valued at about 1% of that. Does the market expect Redhat to achieve as much as 1% of Microsoft's sales/earnings? You bet it does. In fact, 10% is a much more reasonable goal and by that measure Redhat's stock still has a lot of room to appreciate.
Ironically, the way Microsoft is playing it these days they may also be destined to achieve 10% of their current earnings.
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Uh, One Big Question (Score:1)
This is funny... (Score:3)
Wow, have you guys seen our stock price today?
Yeah, our valuation is off the charts, and it keeps going up?
Yeah!!! People believe in us! So, how should we earn a return for our investors...
Uhhh....
I've GOT it!
What?
We'll invest the money people invested in our overhyped company into new companies, so when they go public and get overhyped, we'll make that return!
You're brilliant!
I know, I'm off to file with the SEC to sell some stock...
Alex
Ponzi Scheme (Score:1)
Count me in
Re:open source ass (Score:1)
Cool, (Score:1)
I wonder... (Score:3)
Does it have to be hard core technical stuff - or can it be media/advocacy? Or even a major content site that has little/no content on Linux - but is built using those tools, and expands on the existing tools... hence giving back to the Linux community in the process.
Addressing funding problems for free software (Score:2)
Funding for new companies has been one area which has been relatively neglected. Although hobbyists do an excellent job (kudos due) I think that to penetrate into the mainstream market Linux/BSD/whatever needs companies to both write software at an increased rate with better resources, but also to direct resources into areas such as documentation which traditionally has recieved little attention (compared to say the technical aspect of the software which is nigh on excellent).
Money was well used IMHO when Keith Whitwell received a donation from id software to enable him to take further leave from work to finish writing a section of the Mesa project. Similar funding in the future, in a similar vein to contract work to work on a certain part of a piece of software, would be benificial to the community as well.
In short - the more funding the better. And there is more of it around than there used to be, which is generally A Good Thing (tm).
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"Registry error. Switch off or install Linux to continue......"
Good idea... (Score:4)
(The Beatles did the same thing, with their Apple record label, and nearly went bankrupt.)
"So, be more selective!"
If you know the results beforehand, there's no point in doing the work. If Red Hat knew what people will want in 10 years time, they wouldn't be gambling on start-ups. They'd be hiring some developers themselves, producing the stuff and making a fortune.
"So, be more restrictive!"
That's not easy, with this kind of gamble. Miss out on the Next Big Thing, you risk someone else getting the kudos & cash. Miss out on several, and you risk going under. But if you don't know which those are, you HAVE to throw a lot of money out to be sure of limiting the risk.
But, if the cost of minimising the risk exceeds Red Hat's budget, then either path is a path to oblivion.
Too many skilled inventors have been turned down by companies, and too many hackneyed ideas have been funded, to be sure Red Hat has any hope, going down this road. If it works, and they somehow figure out a way to fund just the Dream Designs, more power to them! But I'm going to stay cynical until I see it happening.
Market doesn't seem to like it... (Score:3)
I'd be happy if they'd dump that $2 million into helping get Linux truly ready for the average user's desktop - before Microsoft does it for them with Word for Linux, or whatever...
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just like their father Bill... (Score:1)
Re:"Identify new business opportunities..." (Score:1)
I don't think that it's necessarily wrong for Red Hat to be trying to make a profit by doing this. It's mandated that companies in this country try and make a decent return (or return at all, for that matter) on their shareholder's money, so Red Hat's just looking for other ways to generate income. The Open Source business model is hard enough as it is without making them feel guilty for trying to run a company.
I think that if things go well for some of the startups, it will be mutually beneficial for all involved. Symbiotic relationships exists, even when the big fish get involved (e.g. the Microsoft/Symantec relationship.) No one can argue that the anitivirus companies, for instance, have suffered because of the proliferation of Windows. =P
Turn on ourselves and we'll die.. (Score:2)
RedHat's stock is down, so what.. a lot of tech stocks are down.. it's a market thing.. they go up and down. Be smart and take this chance to buy all you can afford. The market value, it seems to me, of a company is more politics and media glitz than profits. The actual profit being made is largely in the stock value itself. That is what allows these companies to exist and grow. This is nothing new. If you want RedHat to do better then go buy it's stocks. Higher demand can only mean it becomes worth more.
This is great news that RedHat is helping others in our community grow. I hope they take the next step and do some angel investing and possibly give advice on what it takes to start a company from a free software project. The more OSS companies we have that are doing well the more OSS programmers we have that are well fed and able to spend their time coding for us.
(Note: First post glory hounds should be circumsized with dull rusty spoons.)
Other projects (Score:1)
Hey, Redhat, we're Linux geeks, and we are guerilla artists - care to invest?
(*The copy I won in the AfterY2K lookalike contest, no less!)
The Divine Creatrix in a Mortal Shell that stays Crunchy in Milk
Re:Ponzi Scheme (Score:2)
My first reaction was "Red Hat is dumping their imaginary IPO-generated money into other things before people realize its imaginary."
What is so imaginary about the IPO-generated money?
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