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October 10, 1999

NetBeans – a Silicon Valley Start-Up From Central Europe

By CBR Staff Writer

NetBeans Inc, a Java development tools specialist, is a Silicon Valley type company in the middle of Central Europe. Its founder, Roman Stanek, is a Czech living in Prague, who in the early 1990s was running VSD, a government-owned company that distributed Informix database software. It was a fortunate position to be in. Following the fall of the iron curtain in 1989, many people across Eastern Europe were facing austerity and unemployment. For Stanek, however, such job security was not enough. In August 1997, he realized his goal of setting up his own company.

Stanek had, in fact, stumbled across the idea for NetBeans on the web pages of a group of local Czech university students when he was surfing the internet one day. As part of a course project, the students had built Xelfi, a Java development tool, and had begun selling it over the internet on a semi-commercial basis. What was special about their product, says Stanek, is that whereas almost all other Java development tools had been written for specific environments – Microsoft Windows NT Workstation, for example – Xelfi had been written in Java itself, and could therefore run on any platform supporting version 1.1.7 or below of the JDK (Java development kit) environment.

The benefit of this approach, says Stanek, is that the product (now itself called NetBeans), is more customizable than Windows- based Java development tools. It also gives third-party developers the ability to build add-on modules to NetBeans to enhance its capabilities. The downside, however, is that because it is coded entirely in Java, developers need particularly powerful machines for it to run at a satisfactory speed.

Nevertheless, NetBeans has sufficiently impressed technology guru and venture capitalist Esther Dyson – who takes a close interest in the technology markets in Eastern Europe – as well as a number of other ‘business angels’, to encourage them to invest just over $1m in the product in two rounds of financing. Although low by American standards, such an investment goes much further in Eastern Europe than in Silicon Valley. Like many Eastern European countries, the Czech Republic enjoys an abundance of highly trained mathematicians and computer engineers, and their wages are a fraction of the cost of their Silicon Valley counterparts. Prague is very cost efficient. We would not be able to build the same type of company with this amount of funding in the US, says Stanek. All staff do, however, have Silicon valley-style stock options.

To date, NetBeans has seen scarcely any revenue. Early versions of the product have been given away for free over the internet in a bid to seed the market. This year alone, more than 80,000 copies have been downloaded – given that there are only an estimated 750,000 Java developers worldwide, that represents more than a 10% penetration rate. Feedback from newsgroups, meanwhile, suggests that NetBeans Developer is a popular tool.

The next step is to release a commercial, enterprise version of NetBeans Developer, due before the end of the year. This will include features such as support for Java database connectivity (JDBC) and for Enterprise Javabeans (EJB), as well as support for the remote method invocation (RMI) and common object request broker architecture (Corba) middleware standards.

But NetBeans is operating in a crowded, competitive market. For example, one-time market leader Inprise, formerly known as Borland, has seen revenues shrivel in the last five years and has had only one profitable quarter in the last five. Meanwhile, Select Software Tools, once an up-and-coming vendor like NetBeans, went into administration earlier in 1999.

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Part of the problem of trying to garner revenues from a tool such as NetBeans is that software giants, including Microsoft and Oracle, either sell their tools cheaply or give them away to help drive application support for their core platforms. Stanek recognizes these difficulties, but points out that Sun Microsystems, inventor and owner of the Java programming language, and therefore potentially the most formidable competitor, has not yet produced any development tools for Java – the two it had, Java Workshop and Java Studio, were discontinued earlier this year.

Nevertheless, the next year will be crucial for NetBeans. A sales office will open soon in California to coincide with the release of NetBeans Developer Enterprise. Staff there will be briefed to pursue partnerships with vendors of application servers, databases and enterprise resource planning software that need to be able to offer Java tool suites, but lack either the resources or the expertise to build their own. Such partners may, however, prefer to acquire the technology rather than license it, and so acquisition, rather than a public offering, is the most likely conclusion for Stanek’s ambitions. Press reports have already speculated that Sun itself might be the buyer.

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