Friday, May 15, 2009

How Many Times Can Monty Sell MySQL?

UPDATE 2009-05-27: Monty's spoken to Matt Aslett, and I've responded.

COMMENTARY UPDATE 2009-05-27: If you're just reading this for the first time, after posting this it became clear (through back-channel to me) that Sun did have Monty under an Non-Compete, and chose to allow Monty to get out of it. I've commented about that in the comments [which you should really read] and in the Proggit thread. I still think Monty's actions are pretty bad looking even given that, but you should understand that there was a Non-Compete, and Monty was let out of it by Sun, before you read the original article below.

I've been thinking this since it was announced, but Monty's current attempt to monetize MySQL by hamstringing the eventual owner of his original attempt is really quite, ahem, ballsy. For a much less ranty analysis with quotes from M-Dawg himself, see Stephen O'Grady of RedMonk's writeup.

Let me give the Kirk "worked for 3 database companies and founded one expressly to compete with MySQL" Wylie synopsis:

  • Monty writes MySQL way back in the day, largely so that he has a database system which doesn't have any of the complex features of an RDBMS that make it work well (you know, referential integrity, transactions, views, proper metadata support).
  • People start using it, largely because it's Free-as-in-Beer (this was back in the days of minimum $100K Oracle buys just to run a simple web site), but also because it's easy to setup and administer (which Oracle/Sybase/SQLServer/DB2 were not).
  • Monty wants to get rich.
  • In an effort to get rich, he takes a boat load of VC funding to push MySQL from being a small open source collective to a Real Company.
  • VC funding requires a business model that has real revenue behind it.
  • Company adopts a split licensing model (which pissed off a lot of people at the time), and starts being effective in attracting revenue and very, very smart people as executives.
  • Monty's dreams of success are realized when Sun pays a king's ransom for MySQL.
  • Monty wants to have his cake [1] and eat it too, and gets all pissy and storms off in a strop and founds an attempt to get rich a second time on the same project.
  • Oracle buying Sun means people take this attempt even more seriously and he attracts people who never liked the post-VC-funding MySQL business model in the first place to the cause.

So here's the question that everybody should have on their minds: How many times will Monty attempt to get rich off the same project? [2]

Now I wasn't privy to any of the contractual arrangements around MySQL's incorporation, or his common stock stake, or the Sun buyout, or any of his employment agreements [3]. I will, however, postulate that if Monty doesn't have Fuck You money at this point given a $1Bn buyout of the firm he founded, he did something Seriously Wrong, and you probably shouldn't trust his business instincts.

So one of two things is going on here:

  • f(Cake + Eating) == Cake
  • He fundamentally doesn't agree with a split licensing model and thinks it's doomed to failure. I really hope this isn't the case, because if it is, he was acting disingenuously at best when working for the Original Monty MySQL-Based Get Rich Scheme, by supporting a model that he didn't believe in.

If it's the latter, why did he start down the path of taking VC money in the first place? Seriously, did he honestly believe that he could take a boat-load of risk capital, and not have to provide returns to the limited partners at the core of any risk capital facility? Did he lose some type of boardroom squabble over the direction of MySQL and has been nursing a grudge ever since? [4]

Here's something any founders of Open Source projects need to realize: VC money comes with strings attached; do not take that money if you don't want to take the strings. The strings are entirely financial: VC/risk capital requires a very hefty payout in a relatively short (5-10 years max) timeframe to the limited partners who provided the VC firm with its capital to invest. In order to ramp up revenues in a reasonable timeframe, you will need to have some facility to generate reproducible, cheap-to-deliver revenue in that timeframe. Open Core is one approach, Split Licensing is another, all manner of Services are a third, there are a whole host. But you have to come up with one. Otherwise there's no point in raising risk capital, which must have a hefty payout.

If you just want to have a lifestyle business (and many lifestyle businesses can, over time, still provide you with Fuck You money if you structure them properly), while constantly maintaining an environment where you can do what you want technically in a purely-Libre environment, don't take risk capital. Grow your business organically, and enjoy the life that you've created for yourself.

But the moment you accept that term sheet, you've crossed the barrier beyond a pure hacker coding for fun, and a company executive who must deliver returns to his investors (and that may require doing things that the hacker side of you finds distasteful). If you're not willing to sign up to the transition between pure Open Source techie and Business Executive, don't accept the term sheet. And for the love of the FSM's noodly appendage, don't accept the term sheet thinking that you're going to screw your investors in the long term by going back to your roots once you've got your payout. [5] Doing so screws it for the rest of us.

Here's the #1 problem Monty's move has caused for anyone attempting to make Fuck You money off Open Source: it should make VCs very nervous indeed about Open Source investments. Let's examine what I would consider to be a logical thought process:

  • If we invest in an Open Source company, the most likely outcome is an acquisition by another firm.
  • If founders of projects make it a habit of storming off to fork their invention because they don't like the monetization model they helped establish, other firms are very unlikely indeed to buy Open Source companies.
  • If other companies are unlikely to buy Open Source companies, our return on investment in them will be much lower.
  • Therefore, there's no point in looking at them.

None of this impacts Monty: he presumably already has his Fuck You money.

But if I were a VC looking to invest in an Open Source company, I would insist on an enforceable non-compete if I could [6], and I would make sure that my exits prevented the founders from being able to fork. Otherwise, my assets are really only there to make the founders enough money that they can pursue their dream of working on pure Open Source code with enough money that they no longer have to try to get rich. Which is great for them, but not for the rest of us who aren't rich but wish we were.

Remember: going for the brass ring and taking VC money requires that you compromise something. If you don't like it, don't take the money. But once you have, realize that you may need to walk away from your baby once you've got the money for the sake of everybody else.

Just as an aside, bear in mind that nothing should stop you from doing Open Source work, including starting an entirely new project on the same basic idea, once you have your payoff. It happens all the time in other industries (how many networking hardware companies have been founded by the exact same executives?). But resist the urge to fork your original project. It's unseemly at best, and flat-out unethical at worst. If Monty had started MariaDB from scratch, that would be one thing. But he didn't. And that's the thing that makes this all seem, well, just a little bit wrong to me.


[1]: By cake, I mean chedda/dead presidents/papa. Cash money, yo.
[2]: Clearly more than once.
[3]: Hence I am totally unqualified to comment here. I'm doing so anyway, because if you keep reading, this turns less Monty-directed and more general-parable.
[4]: There's a reason nobody ever saw the code for my Compete-with-MySQL Open Source Database startup.
[5]: I'm not actually accusing Monty of this, and nor do I believe it to be the case (believe it or not). I think there's something else going on here. But I could see that some people might think that unethically, and you really shouldn't.
[6]: Yes, there are ways to structure this, usually during the M&A stage, by having deferred payments to the founders which don't trigger if they fork for some period of time, that even comply with California and UK restraint-of-trade law.
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