Open Source vs. Proprietary: The New Frontier in Tech Investment
April 10, 2025, 4:54 pm
Location: France, Ile-de-France, Paris
Employees: 11-50
Founded date: 2023
Total raised: $1.26B
In the world of technology, a battle rages on. Open source versus proprietary software. A recent study by Matthieu Lavergne at Serena has thrown down the gauntlet. It reveals that open source companies are not just surviving; they are thriving. This 25-year analysis of venture capital data paints a vivid picture of a shifting landscape.
Open source is no longer the underdog. It has emerged as a formidable investment category. The numbers tell a compelling story. Since 2019, open source has seen an average of 250 funding rounds each year, with a staggering $9 billion in annual investments. The year 2024 marked a watershed moment. A record 211 deals raised $26.4 billion for commercial open source software (COSS) companies. This accounted for 5% of total VC investments in software.
What’s driving this momentum? High-profile funding rounds have captured attention. Databricks raised $9.5 billion. xAI secured $11 billion across two rounds. Mistral AI attracted $600 million in its Series A. These figures are not just numbers; they are a testament to the growing confidence in open source.
The United States remains the epicenter of this revolution, hosting 65% of VC-backed open source companies. However, Europe is catching up, now representing 20% of the market. Companies like Aiven, BrowserStack, and Odoo are leading the charge. The tide is turning.
Speed is another advantage for open source firms. They are 20% faster at raising Series A funding and 34% quicker to reach Series B. At the Seed stage, they raise 1.45 times more than their proprietary counterparts. At Series A, the figure is 1.33 times higher. These startups are not just moving faster; they are also achieving better graduation rates. A remarkable 91% of open source startups transition from Seed to Series A, compared to just 48% for the software sector overall.
But the study also challenges some long-held beliefs. The assumption that GitHub community engagement directly influences fundraising success is largely unfounded. The number of stars on GitHub has minimal impact on valuation or round size, except in niche areas like DevOps tools and data platforms.
When it comes to returns, open source companies shine brighter. They achieve significantly higher valuations at IPOs and acquisitions. A striking 12% of VC-backed open source companies have successfully exited through mergers and acquisitions or IPOs. At IPO, these companies boast a median valuation of $1.3 billion. In contrast, proprietary firms languish at just $171 million. The difference is stark. In M&A deals, the median valuation for COSS companies is $482 million, while proprietary firms barely scrape by at $34 million.
The implications of this shift extend beyond mere numbers. Open source software is a catalyst for innovation. It fosters global collaboration and modular reuse. It builds trust through transparency and community governance. It empowers countries and companies to regain control over their tech stacks, reducing dependence on closed platforms.
As nations and organizations seek greater sovereignty, the importance of open source cannot be overstated. It is not just a business model; it is a movement. The study underscores a fundamental truth: commercial open source software is the winning strategy for startups, entrepreneurs, and investors alike.
Meanwhile, across the Atlantic, Europe is making its own moves. The European Commission has unveiled its “AI Continent Action Plan.” This ambitious initiative aims to transform Europe’s traditional industries into powerhouses of AI innovation. The plan includes the creation of AI factories and specialized labs to enhance access to high-quality training data.
The EU is responding to criticisms that its regulations stifle innovation. The AI Act, while intended to protect citizens, has drawn ire from tech leaders. They argue that cumbersome rules hinder startups and slow down progress. The new AI Act Service Desk aims to ease compliance burdens, providing a central hub for information and guidance.
The EU’s plan mirrors the UK’s recent AI Action Plan, both seeking to bolster domestic AI infrastructure. The stakes are high. The EU faces pressure to compete with the U.S. and China in the AI race. Tech leaders are calling for a shift in focus, urging regulators to embrace innovation rather than stifle it.
Critics from the U.S. have also weighed in. They argue that Europe’s regulatory approach could hinder its tech industry. The U.S. administration has called for a more optimistic view of AI’s potential.
The landscape is evolving. Open source is gaining ground, while Europe seeks to position itself as a leader in AI. The interplay between these two forces will shape the future of technology.
In conclusion, the battle between open source and proprietary software is far from over. The findings from the Serena study illuminate a path forward. Open source is not just a trend; it is a transformative force. As Europe embarks on its AI journey, the lessons learned from the open source movement may provide valuable insights. The tech world is watching closely. The next chapter is just beginning.
Open source is no longer the underdog. It has emerged as a formidable investment category. The numbers tell a compelling story. Since 2019, open source has seen an average of 250 funding rounds each year, with a staggering $9 billion in annual investments. The year 2024 marked a watershed moment. A record 211 deals raised $26.4 billion for commercial open source software (COSS) companies. This accounted for 5% of total VC investments in software.
What’s driving this momentum? High-profile funding rounds have captured attention. Databricks raised $9.5 billion. xAI secured $11 billion across two rounds. Mistral AI attracted $600 million in its Series A. These figures are not just numbers; they are a testament to the growing confidence in open source.
The United States remains the epicenter of this revolution, hosting 65% of VC-backed open source companies. However, Europe is catching up, now representing 20% of the market. Companies like Aiven, BrowserStack, and Odoo are leading the charge. The tide is turning.
Speed is another advantage for open source firms. They are 20% faster at raising Series A funding and 34% quicker to reach Series B. At the Seed stage, they raise 1.45 times more than their proprietary counterparts. At Series A, the figure is 1.33 times higher. These startups are not just moving faster; they are also achieving better graduation rates. A remarkable 91% of open source startups transition from Seed to Series A, compared to just 48% for the software sector overall.
But the study also challenges some long-held beliefs. The assumption that GitHub community engagement directly influences fundraising success is largely unfounded. The number of stars on GitHub has minimal impact on valuation or round size, except in niche areas like DevOps tools and data platforms.
When it comes to returns, open source companies shine brighter. They achieve significantly higher valuations at IPOs and acquisitions. A striking 12% of VC-backed open source companies have successfully exited through mergers and acquisitions or IPOs. At IPO, these companies boast a median valuation of $1.3 billion. In contrast, proprietary firms languish at just $171 million. The difference is stark. In M&A deals, the median valuation for COSS companies is $482 million, while proprietary firms barely scrape by at $34 million.
The implications of this shift extend beyond mere numbers. Open source software is a catalyst for innovation. It fosters global collaboration and modular reuse. It builds trust through transparency and community governance. It empowers countries and companies to regain control over their tech stacks, reducing dependence on closed platforms.
As nations and organizations seek greater sovereignty, the importance of open source cannot be overstated. It is not just a business model; it is a movement. The study underscores a fundamental truth: commercial open source software is the winning strategy for startups, entrepreneurs, and investors alike.
Meanwhile, across the Atlantic, Europe is making its own moves. The European Commission has unveiled its “AI Continent Action Plan.” This ambitious initiative aims to transform Europe’s traditional industries into powerhouses of AI innovation. The plan includes the creation of AI factories and specialized labs to enhance access to high-quality training data.
The EU is responding to criticisms that its regulations stifle innovation. The AI Act, while intended to protect citizens, has drawn ire from tech leaders. They argue that cumbersome rules hinder startups and slow down progress. The new AI Act Service Desk aims to ease compliance burdens, providing a central hub for information and guidance.
The EU’s plan mirrors the UK’s recent AI Action Plan, both seeking to bolster domestic AI infrastructure. The stakes are high. The EU faces pressure to compete with the U.S. and China in the AI race. Tech leaders are calling for a shift in focus, urging regulators to embrace innovation rather than stifle it.
Critics from the U.S. have also weighed in. They argue that Europe’s regulatory approach could hinder its tech industry. The U.S. administration has called for a more optimistic view of AI’s potential.
The landscape is evolving. Open source is gaining ground, while Europe seeks to position itself as a leader in AI. The interplay between these two forces will shape the future of technology.
In conclusion, the battle between open source and proprietary software is far from over. The findings from the Serena study illuminate a path forward. Open source is not just a trend; it is a transformative force. As Europe embarks on its AI journey, the lessons learned from the open source movement may provide valuable insights. The tech world is watching closely. The next chapter is just beginning.