Recently the fantastic OStatic blog posted an interesting article about venture funding in the open source space. It is great to see that VCs seem to warm up to open source projects (total spending in Q2 2008 was $115m, up from $101.5m a quarter before) and start to fund them - although it is notoriously hard to fund these projects as often open source projects are more or less a loose structure without a clear ‘ownership’ (which is not meant as in ‘ownership of intellectual property’ but more in the sense of a clearly defined group of people/organization driving the project). Further, the sheer nature of open source often forbids an ownership structure which could possibly work for a VC firm.

Yet, beside these more fundamental topics, it puzzles me that all the funded open source companies are in the area of corporate solutions - rPath does software appliance, Neocleus does virtualization and funambol for example operates in the space of mobile communication. Where are the consumer oriented plays?

First of all I believe it is important to note that there are tons of consumer applications in the open source space - yet a lot of them miss the all important marketing clout which makes them accessible to a wide consumer audience (to speak in our beloved MBA lingua: They haven’t crossed the chasm). The ones which do are few and far apart - top of my head the three projects which jump to mind are Mozilla with Firefox and Thunderbird (which is an obvious one), Songbird (a media player with a focus on music) and Miro (a video player and platform).

Why is that? You would imagine that volunteers should be easier to rally behind a common goal and cause if you set out to provide something in the space of consumer tech (e.g. a better alternative to iTunes rather than something seemingly boring like an alternative to Salesforce.com).

Having said that, this seems to be a large part of the problem: The large enterprise open source projects all have a revenue-generating structure behind them (and are often organized in proper legal entities which make them fundable by venture capital as you can buy and sell shares in them). This makes it significantly easier as it allows the project to establish an infrastructure with people who are paid to run the show, spend (some) money on marketing and PR and so on. The consumer projects mostly lack this infrastructure - which is even more so a problem as they operate in a space where marketing, PR and business development are actually paramount to success (the consumer space is unforgiving - see my post about marketing spend here).

This all strikes me as an interesting challenge - one which cries out for a good, robust, scalable solution. Options could include a publicly funded (through government grants and/or donations) organization which provides marketing, PR and business development capacities as a shared resource to these projects; effectively helping them break through the ‘noise barrier’ of consumer markets. Taking this idea to an even higher level and you could create a fund (again build on top of publicly available financing sources and similar to the funds being setup for Facebook or iPhone apps) which gives out grants to open source projects to help them break into consumer markets.

What is your take on this?