When IBM agreed to pay $ 34 billion for Red Hat in late 2018, the deal marked a turning point for open source software and proved that companies can package free tools into very valuable products.
This purchase price may soon look like a quaint relic of the past.
On Friday, MongoDB’s share price rose about 25% after the open source database developer beat analysts’ earnings estimates and gave an optimistic forecast. Founded in 2007, nearly 15 years after Red Hat, MongoDB’s market cap has surged to over $ 32 billion, getting within reach of becoming the most valuable open source company of all time.
But that’s only in the public market.
Earlier this week, Databricks, only eight years old, said it raised $ 1.6 billion on a $ 38 billion valuation in a private funding round led by Morgan Stanley’s Counterpoint Global. Databricks was founded just eight years ago to commercialize the open source data processing platform Apache Spark and help companies store huge amounts of data.
Open source software has underlying code that can be used by developers and, in some cases, modified with little or no restrictions. Open source software is generally available for free, but companies build commercial businesses on it by offering additional services such as customization, advice and support, or by packing various open source tools into proprietary product suites.
Companies like MongoDB and Databricks, which have developed market-leading products that work quickly with the major cloud providers Amazon, Microsoft and Google, are thriving as customers invest in moving their data and applications from traditional data centers to the cloud.
According to MongoDB, revenue rose 44% to $ 199 million in the second quarter, while the Atlas cloud database grew 83% to account for more than half of total revenue.
“What we hear from customers is that they need to act quickly because they are feeling a lot of pressure, either from people trying to disrupt their business or from disruptors trying to disrupt the big incumbents,” said MongoDB -CEO Dev Ittycheria, in an interview on Friday with CNBC’s TechCheck. He said the company now has 29,000 customers, ranging from steadfast companies like Toyota, AT&T, Morgan Stanley and Verizon to “modern startups” like UiPath and DataRobot.
MongoDB said full fiscal year revenue will be $ 805 to $ 811 million, up from its previous forecast of up to $ 784 million in revenue. In the middle area this would correspond to a growth of 37% compared to the previous year.
MongoDB IPO on Nasdaq October 19, 2017.
MongoDB was worth only $ 1.2 billion when it went public in 2017. It is now the only publicly traded open source company valued at $ 30 billion or more.
But many other stocks in this space are good rewards for investors.
Confluent, a data analytics provider that emerged from LinkedIn in 2014, is worth over $ 15 billion after rising 64% since it went public in June. Elastic, which markets open source enterprise search tools, is valued at approximately $ 15 billion and has increased nearly five-fold since it went public in 2018.
But there are exceptions.
JFrog, which provides a software development platform, has fallen 13% since the company’s IPO last year. Cloudera, which focused on the Apache Hadoop data analytics framework, approved a $ 5.3 billion sale to private equity firms in June. Cloudera merged with competitor Hortonworks in 2019 as both companies struggled to move to the cloud.
In contrast, Databricks was built for the cloud age and, as of this week, has been the world’s most valuable venture capital backed enterprise software company, according to CBInsights.
With annual recurring revenues of more than $ 600 million, Databricks said it will use the fresh capital to invest in its open source project called Data Lakehouse, which helps the company clear the messy data that is stored in various repositories are to clean up.
Ali Ghodsi, CEO of Databricks, said that during the Covid-19 pandemic, companies saw the need to bring all of their data sources together and apply artificial intelligence to the analysis.
“Something happened after the pandemic and I think data and AI, cloud computing, open source technologies seem to be more important to executives of different companies,” Ghodsi told CNBC’s TechCheck on Tuesday after the announcement. “These are secular trends that will continue for a long time.”
He also said Databricks will join the ranks of public corporations at some point, but there is plenty of private cash available right now. In February, Databricks said it raised $ 1 billion on a valuation of $ 28 billion.
“We are going public for six months straight,” said Ghodsi. “Each and every one of these fundraisers reshapes the cap table and brings with you the big mutual funds, the big investors that you want to develop relationships with over the next decade.”
SEE: Databricks Raises $ 1.6 Billion in Recent Funding Round