Drupal benefits from venture capital

Things are heating up in the Drupal world as both CommerceGuys and SubHub raised venture capital money. We're still waiting for an official announcement, but word on the street is that CommerceGuys raised around 1 million euros to develop a number of e-commerce products and services for Drupal. SubHub raised more than 1.2 million euros to date to develop SubHubLite, a hosted service for Drupal 7 comparable to Drupal Gardens and Buzzr. In addition to CommerceGuys and SubHub, I know of at least two other Drupal companies that are in the process of raising money from investors ...

Selling a product has more upside potential than selling consulting and professional services which you can only bill by the hour. However, it is difficult to bootstrap a product based business without a major investment of funds -- usually from outside investors. I've seen many try and fail. In almost all cases, it failed because the company was under-capitalized. It takes a lot of resources to create a successful and defensible product. Furthermore, people tend to forget about sales and marketing. It's not enough to build your product -- you have to bring it to market as well. That is not trivial either.

I know bootstrapping is hard because I'm bootstrapping Mollom. I know building a product is hard because every day at Acquia, I see how much time and effort goes into our different products.

I don't have a rich uncle, so I would not have been able to co-found Acquia without venture capital financing. We decided that we wanted to focus on being a support and software product company with a strong partner eco-system. Starting Acquia wasn't the easiest route for me, but looking back at the past three years of Acquia, I believe that I made the right decision. Based on how much Acquia has contributed to Drupal and what it has enabled me to do, I like to believe it would have been a loss if I had taken a more conventional route -- or had I decided to continue to work on Drupal as a hobby project.

It's refreshing to see that more and more Drupal companies aspire to become successful product companies and that they are seeking venture capital. I always admired the Ruby on Rails community for its seemingly entrepreneurial attitude. I'm glad to see more of it in the Drupal community as well. There is a good deal of fear surrounding venture capitalists but if Drupal is going to grow, we should expect to see more venture-backed companies building Drupal products. Venture capital financing can be good, especially if these companies give back to Drupal and if they build products and services that make our life easier. We all benefit from that.

Comments

Steven (not verified):

I don't have a rich uncle,

Hey, I know already, no need to rub it in extra ;-)

December 14, 2010 - 09:57
Miles Galliford (not verified):

Dries, your post is spot on. Developing a significant webservice is a huge undertaking and it is really easy to underestimate the time, resources and money that it requires. Whatever estimates we came up with we ended up doubling them! We needed twice as much time, money and resources! This is a good rule of thumb for every entrepreneur. As Biz Stone once said it takes five years to create an overnight success.

That said I would encourage every entrepreneur to look at the opportunities presented by Drupal and add-on services which can work with this framework. If any entrepreneurs want to learn from our mistakes and triumphs I would be happy to share our experiences; just send me an email.

We are proud to be part of the Drupal community and now that SubHubLite is in the wild we look forward to contributing back stuff we have been working on over the last six months.

Miles Galliford
Co-founder SubHub

December 14, 2010 - 10:39
JBIngold (not verified):

"How Drupal benefits venture capital" but also the other way around "How venture capital benefits Open Source" would be an interesting talk for you to give at the opening of http://www.lecamping.org/ (the start-up accelerator at Palais Brongniart, the former French stock exchange in Paris) on the world wide Drupal 7 launch party. :)

December 16, 2010 - 10:18
Keith (not verified):

Dries, what you're saying here touches on something really important.

For what it's worth... I'm part of a start-up company that has put together a 2-part plan for raising early stage capital as well as for bootstrapping the company. Yes, we will be developing communities based on Drupal. But one of the main concerns related to giving back directly to Drupal in the form of revenue and development. i.e., How do we ensure that our start-up, even while it raises capital, can maintain this commitment?

We embedded this mission into our founding corporate documents, including business plan (full disclosure). We created a series of things to help us stay on task with this. We outlined a process for ensuring that various modules we develop would be placed into open source. Ultimately, we developed our own subsidiary development team. The plan is build up our first community, create cash flow through sale of educational services, and use this to fuel development.

I'll let you know how it goes. If successful, I'll be happy to share with you any lessons we learn in the process.

May 8, 2011 - 00:21

Add new comment

© 1999-2014 Dries Buytaert Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License.
Drupal is a Registered Trademark of Dries Buytaert.