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Software Valuation Of Open Source Software (OSS) — It’s Not All Free Beer!

Dwight Olson

V3Data, Principal, San Diego, CA, USA

How do you put a value on free? That’s the question facing investors in and business owners of open source software today. Few doubt that open source and open collaboration are reshaping the business landscape. Many believe there is only one open source landscape and it is “free beer” for everyone. However, those who believe that there is only one model called free beer, miss some very important aspects of value in the open source movement. It is very important to remember OSS (open source software) is not FOSS (free open source software) and they should not be confused with each other. For any information on FOSS, the reader may wish to surf the Internet with the key word “FOSS” and “free open source software.”

In OSS when there is no direct revenue or income from the OSS product, valuations are undoubtedly a new challenge. Plus, current valuation methods and principles may or may not be the best method or principles to determine the value of any potential OSS investment transaction. Companies and individuals looking to have their OSS acquired or to be funded through venture investment must be familiar with current practices of valuation as well as possible new OSS methodologies and principles. It will be especially important for the OSS owner to be prepared to defend new asset value discussions and OSS monetization models.

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