Subject: Re: open source definition
From: peterd@Bunyip.Com (Peter Deutsch)
Date: Sat, 25 Apr 1998 17:13:21 -0400

[ You wrote: ]

> Peter:
> Part of your note got truncated.  Can you fill in the blank:
> > ... some good people moved on. To my surprise,
> > this didn't seem to bother the VCs, who seemed to feel
> > that ????

Sorry about that. I lost my link while I was still typing
and when I logged back on noticed that the message was
despatched. Here's the finished version. The above
sentence was cut, but read "who seem to feel that loosing
some programmer during the transition was normal and in
some cases would be desireable".

				- peterd


[ You wrote: ]
.  .  .
> Thanks for expanding.  If you are able to say, I (and I think others)
> would be interested to hear more about the negotiating process you
> went through with the investors to get them to agree to this.  What
> were the concerns they raised, and how did you respond?  From your
> note, clearly the skillset shortage helped your case.

Actually, the negotiating process was long and incredibly
painful, but that had absolutely nothing to do with what
we plan to do with source code on projects and mostly to
do with revamping ourselves to be the kind of company VCs
invest in.

BTW, please take all of the following with a grain of
salt, as parts may not apply in the States, which is I
think farther along in understanding the Internet and it's
impact on business practices.

The first major hurdle we faces was that we were perceived
as a custom code and service shop wanting to move over
into products and Quebec VC firms are leery of these. Their
experience is that it's a different mindset and requires
skills that code shops don't have. And they're right. I
have always thought of us as a self-finance software
developer who leveraged from project to project, but admit
that we have never dealt in volume sales and that this
demands skills we didn't have and would need to acquire as
part of the project.

In short, we had to show we could engineer needed changes
and attitudes. Anyone starting from scratch would have the
same challenge. As one example, complaining you spend half
your time on "business crap" wouldn't cut much ice, as
recognition of the value of that half is what's usually
missing from would-be entrepreneurs.

Also, although we had (by now) six years of business
experience, we have never sold ourselves using the
traditional "nice offices, suits and marketing team
approach" and we had problems convincing them we were
"real" (ths is more of a non-Silicon Valley thing. I wear
a lot more ties than I used to because until we started
this I tended to work almost entirely outside Quebec). We
basically gained credibility over time as we made
predictions and they came true, as they became familiar
with our track record and standing in the industry.

We also had to show the ability of our business plan to
generate revenue. We did that in parallel basically by
continuing to work on the plan as we negotiated and
continuing to hit every milestone. Once we'd acquired a
critical mass of the predicted contracts they came on
board. I remember telling one of them a couple of months
ago that if he waited much longer we'd have profits
rolling in. he joked "well, we'll wait until then" and I
replied "and at that point, we wont be willing to take
your money". It may be a coincidence, but we got a
settlement shortly after! :-)

This process was not easy, for them or for us, but I found
that convincing them that we were a real company was the
biggest challenge, and I freely admit that we had to
change our focus and presentation of ourselves
considerably to do that.

Anyone starting from scratch should focus on showing that
you recognize the need for, and have (or can acquire) the
full business team. That doesn't mean programmers (who are
actually seen as a commodity) but:

	- a functional and experienced Board of Directors
	- experience working with business professionals
	   (auditors, legal advisors, etc)
	- delegating responsibility amongs a management
	  team (eg. production, marketing, administration, etc)
	- preferably experience working with outside shareholder

If you can't do this, expect to have the needed skills
parachuted in. If you don't think these are important, I
urge you not to start a company...

I have a friend who has run his own company for 10 years,
has had decent revenue and now has a pretty good product
prototype and he thought financing would be a shoe-in. But
he doesn't have a Board, uses a small accounting firm for
his audits (which he only does because his bank requires
them for an overdraft) and he obviously can't delegate
responsibility (he has noone higher than manager in his
firm). He never wanted other shareholders and thought he
should only have to give up a small portion of the company
for the million he wanted because he was "done" and had
only to market the product. He didn't get the money and I
doubt he will until he fundamentally changes his attitude
to partners and teams.

As I trust you all see for us the question of producing
free software was basically a non-issue. We explained that
we will be doing certain things to make money and as part
of that, we'd be seeding the market with some free
software as this was common on the Internet.  Because we
could show experience in the field, initial contracts in
hand and we'd addressed their concerns about business
strategy they've left this decision entirely in our hands.
They believe we want to make money as much as they do. I'm
sure if I'd insisted that all code be freed it would *not*
have worked. But I don't believe that's appropriate,
either and wouldn't recommend it.

> Also, your use of the Netscape example leads me to ask if you built in 
> a time delay between release of your product and unrestricted
> redistribution of the source code?

Nope. We plan to seed the market with certain programs and
generate revenue for our actual product in doing so. Some
components of the actual product (or in some cases
stripped down versions of such components) will be
released. We recognize that our value is in the packaging
of those modules into specific products and in on-going
innovation. Thus, showing we could keep innovation going was
more important than showing that we'd never release source.

				- peterd

     Peter Deutsch,                                   (514) 875-8611  (phone)
  Bunyip Information Systems Inc.                     (514) 875-8134  (fax)

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