We are officially hitting the stride of summer when we are post-Olympics, post-NBA/NHL playoffs, enduring the 6th (or was it the 7th?) month of MLB baseball, and so close to football season we can smell the fresh-cut grass.
One thing is for certain, the hyper enthusiasm for software and technology, in the private and public markets, has not slowed. While we can only imagine the anticipation building for expected IPOs of generational emerging technology firms like DataBricks and Hashicorp, we will continue to follow the emerging projects in OSS.
One company to note this week is Snorkel AI who announced an $85M Series C funding round (launching their valuation past $1 Billion) after raising a Series B just 4 months ago at $135M. The market is really betting there is something really really important about programmatic data labeling.
This week we interviewed Greg Bell, the co-founder and Chief Strategy Officer of Corelight. Greg has worked with open source technology for over 20 years dating back to his time at the Lawrence Berkeley National Lab and it was great to hear his perspective on how the ecosystem has evolved.
Hit subscribe!
Private Markets
Snorkel AI, creating a programmatic approach to labeling and managing the data at the heart of AI development, announced their $85M Series C at $1B valuation led by Blackrock and Addition.
Ahana, transforming open data lake analytics, announced their $20M Series A led by Third Point Ventures.
Neuron7, a suite of open-source AI tools for field services, announced their $4.2M seed led by Nexus Venture Partners and Battery Ventures.
Chatwoot, an open-source customer engagement challenger to ZenDesk, announced their $1.6M seed led by Goat Capital.
Automattic, the COSS company behind WordPress.com (and many others), invests in email startup Titan at a $300 million valuation.
Public Markets
To track the performance of COSS companies, we’ve created an equal-weighted index comprised of public names including: Kaltura, Couchbase, Confluent, MongoDB, Elastic, Talend (acq. by Thoma Bravo announced), Cloudera (acq. by KKR/CD&R announced), Rapid7, Fastly and Jfrog.
The COSS Index continues to significantly lag the broader markets but has trended up over the past month.
COSS Index -5%
NASDAQ +15%
S&P 500 +19%
The COSS Index has traded above the NASDAQ and the S&P for the last month.
COSS Index +102%
NASDAQ +90%
S&P 500 +58%
COSS companies traded up over the last month continuing their winning streak over their Emerging Cloud peers. All three indices continue to trade significantly higher than their rolling five-year average.
COSS Index: Current Multiple 16.1x | Five-Year Mean: 8.3x
Emerging Cloud Index: Current Multiple 14.4x | Five-Year Mean: 9.5x
NASDAQ Composite: Current Multiple 4.2x | Five-Year Mean: 3.2x
Interview with Greg Bell, co-founder and Chief Strategy Officer of Corelight.
OSS:
What’s your background?
Greg:
I've worked for most of my career in organizations that could be called mission organizations. They have a goal for themselves that's bigger than themselves. So universities, nonprofits, and in the last 15 years before co-founding Corelight, the national laboratory system at Lawrence Berkeley National Lab (LBNL), which was dedicated to accelerating scientific discovery and especially large scale team science and also to national defense. And while I was there, I got to know my other co-founders for the Company and came to rely on the technology that we commercialized within Corelight. And they got interested in building a company at first to be a business model for the open source project because its developers needed to be paid. And that was really the initial motivation for creating the company.
And at LBNL, I became the first customer of the Company. And then was gradually pulled in by the exhilarating thought that there's a really interesting commercial opportunity here. I got permission to volunteer as an advisor to the Company. And over time, the ratio between that volunteer time and my paid job changed so much that it became obvious I needed to quit my really wonderful federally-funded work at LBNL, and take the leap into startup land and I became the founding CEO for Corelight.
OSS:
How did you get involved in the open source community?
Greg:
At LBNL, which is one of the national laboratories and it happens to be purely dedicated to open science. So in contrast to some of the others that have different missions, open source and open science were the water we swam in. So I came up through a technical track there in network engineering and came to use open source tools all the time. And in a very, very small way, occasionally I got to contribute, but really to rely on them to put systems together and to solve problems for people. And many of the open source tools that I really liked were developed at UC Berkeley or at LBNL. So really literally in the backyard.
One of them was pcap. The pcap library for capturing network packets was written by Steve McCanne, who actually became an early investor in Corelight and an early board member and was a grad student along with Vern Paxson, my co-founder and the creator of open source Zeke. So at that time, when those projects were being created and the software was being written, the internet was in its inflationary period of explosion, and a lot of these projects came to birth. And by the time I got to LBNL, it was just, it seemed like the obvious thing to do was to get involved in open science and open source tools to accelerate that science. So I guess in a nutshell, it's just part of the culture there, part of the culture that I spent 15 years in.
OSS:
Over the past couple decades, how has the OSS community changed?
Greg:
I have a very particular perspective, I guess. And maybe I'm not a student of the entire OSS community. At Berkeley, there was definitely and still is a tradition of the most permissive possible licensing, the BSD license, anarchic license, which feels very Berkeley. And in the beginning, certainly not a sense that there would be massive public companies that would be derived from some of these open source movements. It was really like the beginning of the internet itself, a utopian effort to connect and to give. I think sometimes, in its purest form, I like to explain open source is like a neighborhood potluck where someone donates the house and someone donates the trampoline for the kids and other people bring food. And I think in the earlier phases, it really had that highly creative and maybe simpler character to it. Since then, massive multi-billion dollar businesses have evolved out of these projects. Some of them at Berkeley too, and it gets a little more complicated. The license's are more complicated, the business models are really diverse.
There's one thing I appreciate more and more is how each open source company is different and each open source community is different. So I work in the security space where there aren't so many developers, hardcore developers, but there are a lot more grateful users of the open source technology. So we have to think about the personas in our open source community. It's not a simple thing. On the dev ops side or in the big data side, the communities are really quite different just as the licensing models can be different too.
So I guess it's, I talked about the inflationary moments in open source earlier, and I guess what's happened now after the big bang of it is that a lot of complexity has evolved, which is interesting, but hard to summarize. Just in the same way that the universe evolved complexity in life over time in a way that makes it a little hard to generalize. I think it's super exciting and I love participating in it, but my corner of it might be quite different from the corners that other people you've talked to inhabit.
OSS:
What are the key ingredients that have made Corelight/Zeek a commercial success?
Greg:
First of all, bulletproof technology that's fit for purpose that was really, really well designed from the beginning. And just for your readers, our journey has been a long slow burn. So the software was created over 20 years ago and it's taken a long time for it to become a viral success in large organizations, but that has happened. But it wouldn't have happened if the original conception of it and the architecture of it wasn't well-considered. And then a second ingredient is that for a decade or more after that, there was this beautiful feedback loop between the computer scientists developing now and elsewhere who were working to develop the software and the operators who were using it.
So the operators weren't the people that were going to write protocol parsers. They just needed the data that we produce, real-time data we produced to do their job. They would send feedback to the developers who would then iterate. And that feedback loop was really critically important to making the software better and better and better over time. So that's the basic thing, the software has to be stable and incredibly useful. And then for us as a Company, it's been super helpful that the software has achieved a cult status. It's now generally recognized as the gold standard for making sense of network traffic. And so as we set out to commercialize and to build an economic model for the community development and do all that together, we benefit enormously from this big deployed footprint of open source Zeek.
And we don't even know how many organizations have used it. It's certainly tens of thousands or more. And they won't all become our customers, but as our product gets better and better over time, more and more of them are interested. And so that really has accelerated our growth. And because of that, we're spending a lot more time and effort on engaging that community, supporting it, not just with technical contributions, but with a lot of content. And almost using the modern marketing tech stack tools to understand it and to communicate with it. So that's maybe the third phase is just applying some really good community engagement practices to the community and making sure it's really well-served.
OSS:
For founders building a new project, what should they do to get the most out of the open source community?
Greg:
I would recommend a book actually. It's called People Powered by Jono Bacon. So I would recommend starting with this book because it's a recent book that is exclusively devoted to techniques for building communities, whether they're open source communities or maybe even communities that companies would want to build. But the techniques are really similar and it's a little bit like a product-oriented technique you might use. Who are the personas and what are their needs? And really understanding what would motivate someone in the community to get involved, what they need, how they find meaning in the community is critical.
And so I would urge any young founder who wants to explore and leverage the power of community to really understand that psychology. It's maybe not the most obvious answer. The obvious answer is probably a little more technically-oriented, but unless you ultimately, you understand the why of what motivates people to get involved, it won't be a sustainable and viral community. And so that'd be my first advice. General advice to young founders is to move fast, make mistakes, and don't be afraid of making dumb mistakes because everyone does and you will, and you'll correct them. But specifically on community, I'd say start by understanding the why.