Venture Dollars Flow to Open Source

Open-source software, once seen as the province of propeller heads and anticapitalist visionaries, is winning the respect of the most clear-eyed capitalists of all: the venture capital community.

In the last few years, venture funding for open-source companies has jumped from $72 million in 2002 to $262 million in 2005, according to Venture One. Meanwhile, the number of open-software start-ups funded in those years climbed from 11 in 2002 to 30 in 2005.

Open-source companies have received just a small fraction of the total VC money going into technology. Indeed, "conventional" software start-ups garnered $5.5 billion in venture funding last year, 20 times more than their unconventional siblings. But investors with long experience in the tech wars of Silicon Valley say the momentum behind open-source software is stronger than it appears. ...