Open Source Investments: Talend’s Third Round, News from an Insider

In such a down market, raising $12m with Balderton Capital and get Bernard Liautaud, founder and CEO of Business Object, on board is a testimony of the fact that some VCs keep investing in open source companies.

Marc Brandsma, a Partner at Chausson Finance who advised Talend on its three rounds of funding, yesterday twittered about the deal, and I asked him few question about his personal story with the company, and why he thinks that Talend is a great company.

Talend is a great company at first because it has met its community, its customers and its partners. Open Source companies are often strong in one or two of these. But it’s extremely infrequent to find one that’s been able to build equally on the three. Talend has a great community that is contributing a lot to the product and to support the users. It has more than 400 customers of the subscription based version of the software, from small companies to very large accounts. And it has the largest partners network I know in the FOSS industry.

Talend consulting and technology partners are quite a few actually, plus some training partners (France, USA) and a recently launched certification program targeting individuals. The importance of the distribution channel in Talend’s open source business model seems clear, and Liautaud will likely  push it even more.

Marc, did it all happen because of open source?

Don’t induce yourself in thinking that the Open Source model is doing all the work here. There is a lot more at work to achieve such a tremendous success.

1- Talend is targeting a very large and well defined market. The data integration market is huge, more than $13bn annually only for software and services. It is a growing market with competitive positions quite stable since the last big wave of acquisitions. It can be seen as an oligopoly despite the high number of new niche entrants. But the incumbent players, mostly IBM and Informatica, are well entrenched with a high value/high price proposition. They focus on large accounts and extract infamously high prices for their old technologies. This is exactly what you need: unsatisfied customers, either because they don’t find an appropriate tool on the market at an acceptable value for money level, or because they are tied to a vendor whose sole sales pitch is to threaten them with major IT blackouts if they don’t buy this nice to have component or renew this fancy maintenance plan.

2- Talend has a great community. But it didn’t wait for the community to build itself from sometimes lengthy and loose iterations. Talend has stimulated its community, attracted people, and helped contributors with a wonderful online support. Beyond that, Talend is a product for geeks, for IT guys, for rank-and-file programmers. Thus, its users are the ones most likely to contribute directly. Such an intimacy between the company, its product and its users is a sure recipe for success as it maximizes the intensity and value of the community’s feedback. But Talend also has a very large community of business partners like OEMs and System Integrators. As for the contributors, such “friends” have to be convinced to work for you. They only do so if they feel they have an interest in collaborating with you. So be prepared to share a lot with them, to invest a lot in supporting them and to have some disappointing moments before they align with you and start working for you. Communities around Open Source companies are obviously key, not only in product development, but also in sales and marketing.

3- Talend has the right business model for what it does. Not only is it extensively seeding the market with Talend Open Studio, its Open Source flagship product, but also has it build the best fitted commercial version for its customers to upgrade. Sometimes, FOSS companies working in the  enterprise space find it hard to draw the line between the free version and the paying version of their software. A bad positioning of the cursor could either lure customers away due to an unusable free version, or jeopardize revenues due to not-so-differentiated paying version. Talend solved the equation by releasing 2 versions of the same product that target 2 different populations in the customer’s organization: the free one is for the programmer, and the paying one is for the CIO. The programmer finds with Talend Open Studio a wonderful product, very helpful and agreeable to use. The CIO finds with Talend Integration Suite, a professionally packaged product with all required warranties and safety belts.

Mapping open source into a business model definitely starts targeting the right segment of customers, as Marc points out. Sponsored projects like Talend Open Studio have to carefully invest time and resources to foster their communities, and again here Marc is right saying that is also about marketing, and sales in the end. About the way Talend draws a line between the community version and the enterprise version, it is an approach used by proprietary vendors as well, but on top of a community of partners and developers has a different taste.

Lesson learn?

Having worked with the Talend team since before the inception of the company, I could write a book about what should be done and avoided when dealing with an Open Source software on the Enterprise market. But my key take will be more generic: what makes a great company, in this field like in any other, is a passionate team of entrepreneurs.

Thank you Marc, I wish you and Talend a prosperous future!