7 ms·

Is Npm worth $2.6MM?

134 points by Corrado 13y ago

icambron 13y ago
> This means that a16z and GitHub management are protected from a acquisition, and can retain control of GitHub. I don't know what this means, exactly. Avoiding acquisition isn't like avoiding, say, snipers; you can just say no. Certainly acquisition is, for the moment, not feasible, but that's not exactly protection (it's actually the removal of an option). Protected from the need to be acquired, maybe? I'm not trying to be pedantic; I'm honestly confused by the phrasing.
- arthur_debert 13y ago
  Not always, i.e. drag along rights. Depending on how you structure your deal investors can override founders on acquisition offers.
  - icambron 13y ago
    Good point, but I can't quite square that with the article, so I don't think that's what it has in mind.
- rhubarbquid 13y ago
  a16z is almost certainly doesn't own a majority of GitHub, so it's not entirely their decision. I think it's about trying to take the question of acquisition off the table completely. The people who put money in to a16z's fund might be unhappy if they turned down an offer. The other people/groups (employees and angel investors) who hold shares of GitHub might be unwilling to turn down a big payout, when, in this case, a16z wants GitHub to keep existing and working closely with them. If the company is essentially overvalued from this investment, no one's going to make that offer. To your point, I don't see how that benefits GitHub's management, though, unless they value independence over profit (which is entirely possible, but I have no idea).
nivertech 13y ago
In my opinion it's OK as long as NPM Inc will follow the same model as github and docker, i.e. free public open source repositories and paid private repositories. Another reason why VCs invest in open-source ecosystem is that it indirectly helps their other portfolio companies, even if original investment doesn't pay off.
stephenbez 13y ago
Headline is incorrect. The actual value is $2.6MM.
- morgante 13y ago
  That's referenced in the article itself. The phrasing was intentional, to fulfill Betteridge's law of headlines. http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines
- joshu 13y ago
  No. The investment was $2.6MM.
- pbreit 13y ago
  It's not normal use of the phrasing but I think the author's meaning is: "Is NPM worth [a] $2.6m [investment]?" The author seems to think some VCs make investments with limited expectation for a return which I think is mostly wrong (I can easily see GitHub being acquired or IPOing).
nixgeek 13y ago
If the seed round was for $2.6MM, does anyone have an inkling as to what valuation that was done against?
- frankydp 13y ago
  If you are referring to the model and not the amount, it will simply be private repo management.
csmattryder 13y ago
Surely any money going into FOSS technologies, be it $2.60 or $2.6MM, is good news for everyone involved? I don't use Node.js - RoR is more my thing - but if this money allows the project to hire talent and increase the quality of the codebase and documentation, they're going to attract developers from other frameworks. Even the die-hard supporters that refuse to budge, Node may develop new paradigms that can be ported over. Investment in FOSS is a good thing, IMO. Just because it came from a VC shouldn't discredit its possibilities.
- rhubarbquid 13y ago
  Sure it's likely good for the FOSS community, but he's addressing the question of if it's good for the investor. On the face of it, an open source package management system doesn't have an obvious profit model, so it's not obvious to many people how anyone would expect to make a return on investing in NPM.
  - frankydp 13y ago
    The recent interview on Javascript jabber with the NPM guys was very interesting, and covered some of this.
    - nawitus 13y ago
      Link: http://javascriptjabber.com/099-jsj-npm-inc-with-isaac-schlueter-laurie-voss-and-rod-boothby/ http://javascriptjabber.com/099-jsj-npm-inc-with-isaac-schlu...
evantahler 13y ago
I have nothing insightful to add, but I like this writing style.
jzelinskie 13y ago
As someone not so familiar with venture capital, why do you denote million with "MM" and not just "M"?
- jonnathanson 13y ago
  Technically speaking, the roman numeral "M" stands for one thousand. So "MM" = "thousand thousand," or million. These days it's a matter of preference as to which abbreviation to use. You'll see different people and different firms using either/or. (And a lot of people are now using "k" for thousand and "M" for million.) If we want to get even wonkier, we could note that the English word "million" derives from the French word "mille," meaning "thousand." ("Mille" derives from the Latin, and the original Latin denotation is used to mean "thousand" in familiar words like "millennium," "millisecond," and "millipede.") The word "million" was originally invented to mean "a great thousand," or "a thousand thousand."
  - lostlogin 13y ago
    I thought MM would be 2000 if one used the Roman system. It's some sort of weird Roman system with maths in between the the Ms assuming I'm correct.
    - jonnathanson 13y ago
      True. I'll confess that I'm not 100% sure how "MM" originally came to be used in financial and accounting notation. But it's been used to mean "million" by way of "thousand x thousand." It's possible the M's in the financial notation system are not actually Roman numerals, so much as abbreviations of the word "mille" (or some equivalent thereof).
  - _delirium 13y ago
    And a lot of people are now using "k" for thousand and "M" for million. Those are the SI prefixes after all. :)
    - 13y ago
lostlogin 13y ago
Slightly off topic, but mm or MM as an abbreviation bothers me. Isn't there something better? How does it even work? Is is some sort of bastardisation of the Roman system where is would mean 2000? Am I missing something?
midas007 13y ago
Then RubyGems (thoughtbot) would be worth more after gem signing security is set to MediumSecurity by default (warn on unsigned gems) and certificates are managed. Can do it today yourself instead... ~/.gemrc: gem: ... --trust-policy MediumSecurity # add this
ChuckMcM 13y ago
It is an interesting insight that a VC can improve their internal rate of return by investing in open source. It seems like a continuation of the process of outsourcing manufacturing engineering for hardware. It will be interesting when this becomes pitch material, something like "Hey all your portfolio companies need an HR resume/lead management system, fund us to build an awesome open source HR system and they can all use it for free!"
- camus2 13y ago
  since npm doesnt scale they will sell private repos to big businesses...kidding. well almost,since the only money to be made with npm is in consulting fees.
dmourati 13y ago
No.
deleted 13y ago
[deleted]
ilaksh 13y ago
I think that the investors may not just be looking to solidify infrustructure for other investments. The majority of start ups have little income and relatively few customers. Npm has a huge number of customers and whether it can generate a huge amount of income through private registries or whatever services, the fact that it is a core piece of infrastructure is a huge advantage in launching services. So a VC has good reason to expect a useful amount of income. That isn't actually the case for many investments. I don't see how anyone could suggest that this is a large investment for such a core piece of infrastructure.
- Oculus 13y ago
  > Npm has a huge number of customers > VC has good reason to expect a useful amount of income I'm going to be pedantic, but within reason: users != customers. I know you mentioned that they have yet to attempt to monetize, but until they try we can't make accurate predictions on their level of revenue. I think the author is trying to say VC's aren't trying to play a game of make believe when it comes to future revenue, but rather are making the investment in the community.
deleted 13y ago
[deleted]
dagi3d 13y ago
I made this question to myself and couldn't understand how would they make money. Now with these great insights the answer is clear: they don't need to I just wonder what will happen when they run out of money. Will be they able to raise another funding round?
lovemenot 13y ago
Enlightened self-interest does not usually achieve preservation of the commons. It is not clear from this article, what specific additional insights into the community an investor can expect to receive as a consequence of their investment. i.e. over and above npm being a public resource available to all (including free-riders). Perhaps it is better to think of these infrastructure services as baubles of the VC. Much as a Venetian merchant might have "invested" in opera or a cathedral. Anyway, I don't think the hit-and-miss nature of VC justifies this type of investment; where it is known in advance that a particular company does not make its 10X return.
DigitalSea 13y ago
I think this is great news. NPM is as vital to Node.js as Gems are to Ruby on Rails. If funding means NPM can provide better packages, better services and overall a better product as a result of the investment: everyone who uses Node.js wins in the end.
ksikka 13y ago
There are a lot of great insights in this post that most people who talk and write about startups completely overlook. Thanks for bringing reason and logic to HN.
deleted 13y ago
[deleted]
JoelMcCracken 13y ago
I thought basically the same thing when I heard about it, but from a different angle: what would happen to VC investments if NPM imploded? Some stability for these companies is valuable. I'm not sure of some of the implications of this article though; open source and money are not inextricably connected. While open source may be a loss leader in some cases, it does not need to be. All of what we now consider open source descends from a time when it was considered radical to think it was possible to make money from open source.
Illniyar 13y ago
Is there any evidence that this thinking is true? has any VC employee ever implied that VCs invest in infrastructure firms to increase the probability of their other investments succeeding?
- eaurouge 13y ago
  Of course not. It's pure speculation. But it was an interesting read.
bjterry 13y ago
This post is interesting, but I don't think it is entirely on target (the latter portion could be, but I'd need more evidence to be swayed). The author essentially paints a picture where open source startups are losers on their own, but that the smartest investors fund them to provide infrastructure to the community, like they are cooperating in a giant prisoner's dilemma of some sort. Also, that by investing in infrastructure you gain insight and access (this is the part I may agree with). I don't think that investors (even Andreesen Horowitz) look at ANY investment and think, "Well, some of my investments are going to fail, I can take on this one and accept the hit to my returns." Getting LP commitments is very competitive, and you are stack-ranked. You can't afford to make investments that you don't think are going to be winners. To be fair, if there is anyone that could do this, it's Andreesen Horowitz, but that doesn't make them smarter, it's because they have the benefit of the doubt with LPs. He says that these smarter investors will fund an open source project to multiply the returns of their other investments, but that ignores a likely truth. The opportunity cost of investing in the open source company to benefit from the infrastructure isn't that the infrastructure doesn't exist. It is that it is created slightly more slowly and you still get to benefit from the majority of its power, or that you are forced to use the next best infrastructure, which, if we are being honest, is quite nearly as good. I think it's likely that the next best alternative to npm is going to be 90%+ as good for your project with the same developers. Optimizing on a thin margin like that with respect to your other investments doesn't seem like good strategy. Another factor to consider is that there have been open source companies that provided good returns to investors. MySQL sold for 20x invested capital, for example. You don't need to appeal to tenuous arguments about ancillary benefits of an investment when it could simply be that a company sponsoring an open source project with a boatload of traction just happens to be, from a risk-reward perspective, well-positioned to make returns in all sorts foreseen and unforeseen ways. We also don't know the valuation or deal structure, which could mean that the $2.6m investment is quite a bit more favorable to the investors than one's first impression. I believe the strongest point he made is the last one, "They get insight and access at unprecedented levels into the future of Node, at the cost of something they can already afford to lose." Much of the effort in being a VC actually relates to "access." If you can get into some of the hot node deals by being known to be a shop that favors node, I could see how that might be worth it, though I'd need more evidence to be convinced they are thinking this way or that it's a good strategy. (Andreesen Horowitz can probably get into any deal they want, which is not the case for True Ventures) But that's different from thinking that by investing in npm you are going to make your other companies stronger by making npm available to them. As miscellaneous commentary on his examples: GitHub is minting money, so investing in them was a crazy good decision no matter what the reason. Even if you think the liquidity event could be challenging for some reason, it still provides good reward for risk, and ultimately there are ways to handle lack of liquidity events (I also suspect that Andreesen Horowitz are more flexible in this regard for structural reasons, venture capital partnerships are quite complex in the details). Jeff Bezos doesn't have LPs so he can invest in 37Signals/Basecamp even if they are never selling, he just punches his dividend checks like the other owners, which can be just as good a return. The focus on liquidity events is a quirk of the standard fund structure rather than inherent to the asset class.
ricardobeat 13y ago
> Someone has to pay that S3 (I guess CouchDB) and EC2 bills Previous package managers have done well running on public mirrors donated by universities and businesses around the globe. rubygems finances itself via a non-profit. There is nothing necessary about NPM's business model, IMO it's just a side-effect of the incredible tolerance for private ownership within the node ecosystem. I can't imagine this model would fly for any other language/platform.
- twerquie 13y ago
  Scala seems roughly similar.
  - frowaway001 13y ago
    How?
    - twerquie 13y ago
      It is owned by a single corporate entity who is also its primary sponsor, Typesafe. This is similar to how Joyent owns node, and how they sponsor it's development, along with NodeJitsu, Microsoft, Heroku and others.
      - frowaway001 13y ago
        No. It's "owned" by the EPFL.
- streeter 13y ago
  Python's PyPI gets donations from Rackspace (hosting) and Fastly (CDN) to run. See the note at the bottom of https://pypi.python.org/pypi https://pypi.python.org/pypi
dirtyaura 13y ago
Although the idea of investing because of indirect benefits is interesting, I think the investment thesis is much simpler: You can build profitable business around open source, even if you make money by selling consulting. Redhat has $10B market cap, MySQL was sold for $1B back in the days. nginx inc. received a substantial investment. Can you build profitable business around package manager? Sure, there is a big community of developers that are using npm on daily basis for mission critical work. It's really hard to build that kind of community of professionals in any field. I don't see why you couldn't build business around that.
marcamillion 13y ago
This is definitely interesting and insightful, especially the lead-gen aspect of investing in OSS with the prospect of future leads. Kind of like a16z investing in PandoDaily - surely that won't provide a legit return, but it will give high visibility into the ecosystem. However, I disagree about the Github portion. The Github investment was the perfect type of investment. They conquered the consumer side of the market, they knew their customer acquisition cost, were growing quickly and were profitable. It was the perfect example of just pouring gasoline on a fire to accelerate things. The next logical step is to move into the enterprise, which they have been doing. I suspect that their customer acquisition costs into the enterprise are just as low as the consumer side - because they will have internal advocates from the same developers that either have a free/paid account on the consumer side. So it is the perfect, de-risked, investment for any investor. A16Z happens to be cream of the crop, so they were lucky enough to get that deal. Aside from that...OSS companies actually do make a lot of money. See Sun, RedHat, etc. Selling enterprise versions and support can be VERY lucrative. The only way to do that is to grow significantly and become a major player in the industry - which npm was slowly getting there, with the investment it did accelerate that likely. So I don't think they would see it as a loss-leader just to build out a funnel for future deals. That was likely just a bonus, or even "down-side protection" as it were.

134 points by Corrado 13y ago

> This means that a16z and GitHub management are protected from a acquisition, and can retain control of GitHub. I don't know what this means, exactly. Avoiding acquisition isn't like avoiding, say, snipers; you can just say no. Certainly acquisition is, for the moment, not feasible, but that's not exactly protection (it's actually the removal of an option). Protected from the need to be acquired, maybe? I'm not trying to be pedantic; I'm honestly confused by the phrasing.

arthur_debert 13y ago
Not always, i.e. drag along rights. Depending on how you structure your deal investors can override founders on acquisition offers.
- icambron 13y ago
  Good point, but I can't quite square that with the article, so I don't think that's what it has in mind.
rhubarbquid 13y ago
a16z is almost certainly doesn't own a majority of GitHub, so it's not entirely their decision. I think it's about trying to take the question of acquisition off the table completely. The people who put money in to a16z's fund might be unhappy if they turned down an offer. The other people/groups (employees and angel investors) who hold shares of GitHub might be unwilling to turn down a big payout, when, in this case, a16z wants GitHub to keep existing and working closely with them. If the company is essentially overvalued from this investment, no one's going to make that offer. To your point, I don't see how that benefits GitHub's management, though, unless they value independence over profit (which is entirely possible, but I have no idea).

nivertech 13y ago

In my opinion it's OK as long as NPM Inc will follow the same model as github and docker, i.e. free public open source repositories and paid private repositories. Another reason why VCs invest in open-source ecosystem is that it indirectly helps their other portfolio companies, even if original investment doesn't pay off.

stephenbez 13y ago

Headline is incorrect. The actual value is $2.6MM.

morgante 13y ago
That's referenced in the article itself. The phrasing was intentional, to fulfill Betteridge's law of headlines. http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines
joshu 13y ago
No. The investment was $2.6MM.
pbreit 13y ago
It's not normal use of the phrasing but I think the author's meaning is: "Is NPM worth [a] $2.6m [investment]?" The author seems to think some VCs make investments with limited expectation for a return which I think is mostly wrong (I can easily see GitHub being acquired or IPOing).

nixgeek 13y ago

If the seed round was for $2.6MM, does anyone have an inkling as to what valuation that was done against?

frankydp 13y ago
If you are referring to the model and not the amount, it will simply be private repo management.

csmattryder 13y ago

Surely any money going into FOSS technologies, be it $2.60 or $2.6MM, is good news for everyone involved? I don't use Node.js - RoR is more my thing - but if this money allows the project to hire talent and increase the quality of the codebase and documentation, they're going to attract developers from other frameworks. Even the die-hard supporters that refuse to budge, Node may develop new paradigms that can be ported over. Investment in FOSS is a good thing, IMO. Just because it came from a VC shouldn't discredit its possibilities.

rhubarbquid 13y ago
Sure it's likely good for the FOSS community, but he's addressing the question of if it's good for the investor. On the face of it, an open source package management system doesn't have an obvious profit model, so it's not obvious to many people how anyone would expect to make a return on investing in NPM.
- frankydp 13y ago
  The recent interview on Javascript jabber with the NPM guys was very interesting, and covered some of this.
  - nawitus 13y ago
    Link: http://javascriptjabber.com/099-jsj-npm-inc-with-isaac-schlueter-laurie-voss-and-rod-boothby/ http://javascriptjabber.com/099-jsj-npm-inc-with-isaac-schlu...

evantahler 13y ago

I have nothing insightful to add, but I like this writing style.

jzelinskie 13y ago

As someone not so familiar with venture capital, why do you denote million with "MM" and not just "M"?

jonnathanson 13y ago
Technically speaking, the roman numeral "M" stands for one thousand. So "MM" = "thousand thousand," or million. These days it's a matter of preference as to which abbreviation to use. You'll see different people and different firms using either/or. (And a lot of people are now using "k" for thousand and "M" for million.) If we want to get even wonkier, we could note that the English word "million" derives from the French word "mille," meaning "thousand." ("Mille" derives from the Latin, and the original Latin denotation is used to mean "thousand" in familiar words like "millennium," "millisecond," and "millipede.") The word "million" was originally invented to mean "a great thousand," or "a thousand thousand."
- lostlogin 13y ago
  I thought MM would be 2000 if one used the Roman system. It's some sort of weird Roman system with maths in between the the Ms assuming I'm correct.
  - jonnathanson 13y ago
    True. I'll confess that I'm not 100% sure how "MM" originally came to be used in financial and accounting notation. But it's been used to mean "million" by way of "thousand x thousand." It's possible the M's in the financial notation system are not actually Roman numerals, so much as abbreviations of the word "mille" (or some equivalent thereof).
- _delirium 13y ago
  And a lot of people are now using "k" for thousand and "M" for million. Those are the SI prefixes after all. :)
  - 13y ago

lostlogin 13y ago

Slightly off topic, but mm or MM as an abbreviation bothers me. Isn't there something better? How does it even work? Is is some sort of bastardisation of the Roman system where is would mean 2000? Am I missing something?

midas007 13y ago

Then RubyGems (thoughtbot) would be worth more after gem signing security is set to MediumSecurity by default (warn on unsigned gems) and certificates are managed. Can do it today yourself instead... ~/.gemrc: gem: ... --trust-policy MediumSecurity # add this

ChuckMcM 13y ago

It is an interesting insight that a VC can improve their internal rate of return by investing in open source. It seems like a continuation of the process of outsourcing manufacturing engineering for hardware. It will be interesting when this becomes pitch material, something like "Hey all your portfolio companies need an HR resume/lead management system, fund us to build an awesome open source HR system and they can all use it for free!"

camus2 13y ago
since npm doesnt scale they will sell private repos to big businesses...kidding. well almost,since the only money to be made with npm is in consulting fees.

dmourati 13y ago

No.

deleted 13y ago

[deleted]

ilaksh 13y ago

I think that the investors may not just be looking to solidify infrustructure for other investments. The majority of start ups have little income and relatively few customers. Npm has a huge number of customers and whether it can generate a huge amount of income through private registries or whatever services, the fact that it is a core piece of infrastructure is a huge advantage in launching services. So a VC has good reason to expect a useful amount of income. That isn't actually the case for many investments. I don't see how anyone could suggest that this is a large investment for such a core piece of infrastructure.

Oculus 13y ago
> Npm has a huge number of customers > VC has good reason to expect a useful amount of income I'm going to be pedantic, but within reason: users != customers. I know you mentioned that they have yet to attempt to monetize, but until they try we can't make accurate predictions on their level of revenue. I think the author is trying to say VC's aren't trying to play a game of make believe when it comes to future revenue, but rather are making the investment in the community.

deleted 13y ago

[deleted]

dagi3d 13y ago

I made this question to myself and couldn't understand how would they make money. Now with these great insights the answer is clear: they don't need to I just wonder what will happen when they run out of money. Will be they able to raise another funding round?

lovemenot 13y ago

Enlightened self-interest does not usually achieve preservation of the commons. It is not clear from this article, what specific additional insights into the community an investor can expect to receive as a consequence of their investment. i.e. over and above npm being a public resource available to all (including free-riders). Perhaps it is better to think of these infrastructure services as baubles of the VC. Much as a Venetian merchant might have "invested" in opera or a cathedral. Anyway, I don't think the hit-and-miss nature of VC justifies this type of investment; where it is known in advance that a particular company does not make its 10X return.

DigitalSea 13y ago

I think this is great news. NPM is as vital to Node.js as Gems are to Ruby on Rails. If funding means NPM can provide better packages, better services and overall a better product as a result of the investment: everyone who uses Node.js wins in the end.

ksikka 13y ago

There are a lot of great insights in this post that most people who talk and write about startups completely overlook. Thanks for bringing reason and logic to HN.

deleted 13y ago

[deleted]

JoelMcCracken 13y ago

I thought basically the same thing when I heard about it, but from a different angle: what would happen to VC investments if NPM imploded? Some stability for these companies is valuable. I'm not sure of some of the implications of this article though; open source and money are not inextricably connected. While open source may be a loss leader in some cases, it does not need to be. All of what we now consider open source descends from a time when it was considered radical to think it was possible to make money from open source.

Illniyar 13y ago

Is there any evidence that this thinking is true? has any VC employee ever implied that VCs invest in infrastructure firms to increase the probability of their other investments succeeding?

eaurouge 13y ago
Of course not. It's pure speculation. But it was an interesting read.

bjterry 13y ago

This post is interesting, but I don't think it is entirely on target (the latter portion could be, but I'd need more evidence to be swayed). The author essentially paints a picture where open source startups are losers on their own, but that the smartest investors fund them to provide infrastructure to the community, like they are cooperating in a giant prisoner's dilemma of some sort. Also, that by investing in infrastructure you gain insight and access (this is the part I may agree with). I don't think that investors (even Andreesen Horowitz) look at ANY investment and think, "Well, some of my investments are going to fail, I can take on this one and accept the hit to my returns." Getting LP commitments is very competitive, and you are stack-ranked. You can't afford to make investments that you don't think are going to be winners. To be fair, if there is anyone that could do this, it's Andreesen Horowitz, but that doesn't make them smarter, it's because they have the benefit of the doubt with LPs. He says that these smarter investors will fund an open source project to multiply the returns of their other investments, but that ignores a likely truth. The opportunity cost of investing in the open source company to benefit from the infrastructure isn't that the infrastructure doesn't exist. It is that it is created slightly more slowly and you still get to benefit from the majority of its power, or that you are forced to use the next best infrastructure, which, if we are being honest, is quite nearly as good. I think it's likely that the next best alternative to npm is going to be 90%+ as good for your project with the same developers. Optimizing on a thin margin like that with respect to your other investments doesn't seem like good strategy. Another factor to consider is that there have been open source companies that provided good returns to investors. MySQL sold for 20x invested capital, for example. You don't need to appeal to tenuous arguments about ancillary benefits of an investment when it could simply be that a company sponsoring an open source project with a boatload of traction just happens to be, from a risk-reward perspective, well-positioned to make returns in all sorts foreseen and unforeseen ways. We also don't know the valuation or deal structure, which could mean that the $2.6m investment is quite a bit more favorable to the investors than one's first impression. I believe the strongest point he made is the last one, "They get insight and access at unprecedented levels into the future of Node, at the cost of something they can already afford to lose." Much of the effort in being a VC actually relates to "access." If you can get into some of the hot node deals by being known to be a shop that favors node, I could see how that might be worth it, though I'd need more evidence to be convinced they are thinking this way or that it's a good strategy. (Andreesen Horowitz can probably get into any deal they want, which is not the case for True Ventures) But that's different from thinking that by investing in npm you are going to make your other companies stronger by making npm available to them. As miscellaneous commentary on his examples: GitHub is minting money, so investing in them was a crazy good decision no matter what the reason. Even if you think the liquidity event could be challenging for some reason, it still provides good reward for risk, and ultimately there are ways to handle lack of liquidity events (I also suspect that Andreesen Horowitz are more flexible in this regard for structural reasons, venture capital partnerships are quite complex in the details). Jeff Bezos doesn't have LPs so he can invest in 37Signals/Basecamp even if they are never selling, he just punches his dividend checks like the other owners, which can be just as good a return. The focus on liquidity events is a quirk of the standard fund structure rather than inherent to the asset class.

ricardobeat 13y ago

> Someone has to pay that S3 (I guess CouchDB) and EC2 bills Previous package managers have done well running on public mirrors donated by universities and businesses around the globe. rubygems finances itself via a non-profit. There is nothing necessary about NPM's business model, IMO it's just a side-effect of the incredible tolerance for private ownership within the node ecosystem. I can't imagine this model would fly for any other language/platform.

twerquie 13y ago
Scala seems roughly similar.
- frowaway001 13y ago
  How?
  - twerquie 13y ago
    It is owned by a single corporate entity who is also its primary sponsor, Typesafe. This is similar to how Joyent owns node, and how they sponsor it's development, along with NodeJitsu, Microsoft, Heroku and others.
    - frowaway001 13y ago
      No. It's "owned" by the EPFL.
streeter 13y ago
Python's PyPI gets donations from Rackspace (hosting) and Fastly (CDN) to run. See the note at the bottom of https://pypi.python.org/pypi https://pypi.python.org/pypi

dirtyaura 13y ago

Although the idea of investing because of indirect benefits is interesting, I think the investment thesis is much simpler: You can build profitable business around open source, even if you make money by selling consulting. Redhat has $10B market cap, MySQL was sold for $1B back in the days. nginx inc. received a substantial investment. Can you build profitable business around package manager? Sure, there is a big community of developers that are using npm on daily basis for mission critical work. It's really hard to build that kind of community of professionals in any field. I don't see why you couldn't build business around that.

marcamillion 13y ago

This is definitely interesting and insightful, especially the lead-gen aspect of investing in OSS with the prospect of future leads. Kind of like a16z investing in PandoDaily - surely that won't provide a legit return, but it will give high visibility into the ecosystem. However, I disagree about the Github portion. The Github investment was the perfect type of investment. They conquered the consumer side of the market, they knew their customer acquisition cost, were growing quickly and were profitable. It was the perfect example of just pouring gasoline on a fire to accelerate things. The next logical step is to move into the enterprise, which they have been doing. I suspect that their customer acquisition costs into the enterprise are just as low as the consumer side - because they will have internal advocates from the same developers that either have a free/paid account on the consumer side. So it is the perfect, de-risked, investment for any investor. A16Z happens to be cream of the crop, so they were lucky enough to get that deal. Aside from that...OSS companies actually do make a lot of money. See Sun, RedHat, etc. Selling enterprise versions and support can be VERY lucrative. The only way to do that is to grow significantly and become a major player in the industry - which npm was slowly getting there, with the investment it did accelerate that likely. So I don't think they would see it as a loss-leader just to build out a funnel for future deals. That was likely just a bonus, or even "down-side protection" as it were.