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December 17, 2006

Open Source investment rose 131% in 2006

The amount of venture capital funding invested in the Linux and open source-related vendors tracked by Computer Business Review rose 131% in 2006, vastly outpacing the IT market as a whole.

By CBR Staff Writer

According to figures collated by Computer Business Review from vendor statements, venture capital companies ploughed $404.5m into Linux and open source-related vendors in 2006, compared to $175.1m in 2005.

There were more deals struck – some 34 in 2006, compared to 22 in 2005 – but the average deal size was also larger this year at $11.9m, compared to just $8.0m in 2005.

While the total invested in open source vendors is dwarfed by the market as a whole, with $13.1bn invested in all IT vendors tracked by Computer Business Review so far this year, open source is clearly a growing sector of the market for investors. Overall the market rose only 8.3% from $12.1bn.

The companies covered in the Linux and open source category are mostly open source software and services vendors, such as XenSource, MySQL and SourceLabs, although it also includes hardware vendors that rely primarily on the Linux operating system, such as Linux Networx.

The latter raised the most funding in a single round during 2006, raising $37m in September from the likes of Lehman Brothers and Canaccord Adams, as well as Oak Investment Partners and Tudor Ventures.

Other companies raising funding during 2006 included Linux software appliance vendor rPath, which set the tone in January by landing $6.4m in funding from North Bridge Venture Partners and General Catalyst Partners, while embedded Linux specialist MontaVista ensured the year ended with a bang by raising $21m earlier this month.

2007 is likely to see further investment in open source vendors, as some of the early stage start ups pull in further investment to fuel growth and the influence of open source expands up the software stack.

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One significant milestone will definitely be reached next year. To date, the Linux and open source vendors tracked by Computer Business Review have raised $963m since the beginning of 2000. The $1bn mark is just a few deals away.

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