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Story URL: http://www.silicon.com/research/specialreports/opensource/0,3800004943,39130595,00.htm

Investors to capitalise on open source
What's cooking at Simula Labs?

By Martin LaMonica

Published: Friday 20 May 2005

An investment venture will try to replicate the model of Gluecode, an open source start-up acquired by IBM, with a fund dedicated solely to open source software.

The venture, called Simula Labs, will take open source development projects and seek to create businesses around them. This approach was employed at Gluecode, a company founded in 2001, which was bought by IBM earlier this month.

The company, which intends to announce its formation on Monday, has secured commitments from Redpoint Ventures and Mission Ventures to put in $10m to $15m for six to eight start-ups over the next three years. Winston Damarillo, who founded Gluecode and was chairman when it was sold, will act as CEO of Simula Labs.

Increasingly, entrepreneurs and venture capitalists are using open source software and a subscription-pricing model to build new companies. In particular, the area of open source infrastructure software, which is typically an expensive purchase for customers, has seen a great deal of activity.

One of the first ventures will be the creation of a company called LogicBlaze, which will be built around an open source project called ActiveMQ, Damarillo said. The ActiveMQ software is an open source version of standardised Java-based messaging software for sharing data between applications.

Simula also created a company called Mergere around Java-based software development lifecycle tools.

Other areas Simula is looking at include directories and identity management, Damarillo said.

"We're targeting mature enterprise infrastructure technologies that have a standard," he said. "We're looking at open source as a software industry transition."

The business model Simula intends to set up with these planned ventures is very similar to that of Gluecode. Companies will employ the important engineers behind an open source project and sell subscription services for support, training and more functional products based on the open source code.

Simula executives will take an active role in company creation, acting as co-founders and providing expertise. Damarillo said he intends to use an Apache-style open source licence with products.

Martin LaMonica writes for CNET News.com