General Info - Positioning For Equity

Slashdot interview with a VC.

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JBoss ended up selling to Red Hat for $420M which was 28 times trailing 12 month revenue ($15M). Red Hat is a publicly held company; its shareholders and management team are clearly comfortable with the open source business model of not owning your intellectual property and valuing the company based upon unit marketshare and support and service revenue. Unit marketshare is a proxy for long term revenue because if the number is large it indicates a lot of customers; the shareholders are betting the management team can figure out how to get revenue from customers over time (ie by potentially introducing new product and services).

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In the consumer internet space, we are looking for initial adoption by consumers. In the enterprise space, we want real businesses that have evaluated the product and would be willing to buy the product if it were available.

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Most software companies consist of intellectual property (IT), but more importantly are the skills of the founders. There are many challenges both from a technical and business perspective that must be addressed by the team. So the founding team is key.