A Credible Formula for Launching the RedHats of the Future

Last week Peter Levine, former XenXource CEO and current Andreesen Horowitz partner, wrote an article for TechCrunch titled Why There Will Never be Another RedHat: The Economics of Open Source. In that article he makes a reasonable case for opining that the likelihood of another company achieving RedHat-scale success based on wrapping services around an open source offering is very low. Instead, he proposes that the model that can lead to significant success is to include open source components in a service that includes additional (presumably proprietary) functionality and/or services.

He’s right, but only partly so. What is odd is that in making his argument, Levine comes right up to the edge of understanding the single factor that will enable entrepreneurs and VCs to be able to predict where such efforts are likely to succeed and where they will almost certainly fail, just as the RedHat model has failed to work for so many businesses trying to replicate its success in the past.

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