Mulesource, the leading open source integration framework, announced today the successful close of a $12.5m Series B. Lightspeed led the deal, with return participation from the Series A leads, Hummer Winblad and Morgenthaler.
The raise reflects five important characteristics of the company:
- large target market - the integration market is roughly $8bn
- large pricing umbrella - incumbents' products sell for ~$90k/cpu
- very active developer community - hundreds of contributors
- mission critical use cases - high conversion rates from free to paid
- ramping customer acquisition and bookings
As I wrote in a prior post, the closer to a transaction the higher the open source conversion rates. Enterprise risk controls demand that software that touches critical to revenue/transaction systems be supported.
The attached graphic, forgive my graphics design skills, helps me think through the opportunity
- how large is area A, ie the degree of overlap between a project with an active developer community and a enterprise use case that is mission critical?
- how much headroom is there in area B, ie the pricing umbrella created by the incumbents' price points, TCO, and cost of sale and implementation
I would argue that Mulesource offers a very large overlap, represented by area A, with 10x price umbrella support, represented by area B in the above graphic. The financing, but more importantly the amazing developer, customer, and employee acquisition traction validates the premise.
Congratulations to the team.
Great framework Will! One of the more thoughtful approaches I've seen to open source as a business.
ReplyDeleteTwo notes/questions:
1. The framework pre-supposes that open source companies need an extant product paradigm to ape as this is what defines the price umbrella. Agree?
2. The one gap in the framework is market umbrella no? For example if the entire proprietary ESB market is $200 million, the per CPU umbrella might be quite large, but taking the price down by 70% shrinks it to an unsustainably small market.
I went down this same path with Terracotta technology
https://www.blogger.com/comment.g?blogID=19957208&postID=3980085845867230437
which would seem to have similar characteristics to Mule.
I'd be curious to get your thoughts.
1)the framework does indeed require an existing market to create the price umbrella. open source and non-existent markets are a hard combination as commoditization and cost reduction are major drivers to look at open source
ReplyDelete2) the second point is a very good one. at 1/10th the price and a static set of use cases/application, the implication is that the market size will shrink by 90%. often, however, we find that lower cost infra opens the market to new applications and use cases and eats into the very large "build" market. the other key is to have a project that legitimately plays in more than one "market." mule, for example, plays in ESB, EAI, and app server replacement - three markets which helps asuage the market size concern