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Re: [Fsfe-uk] BBC trial of embedded Flash video

From: Ian Lynch
Subject: Re: [Fsfe-uk] BBC trial of embedded Flash video
Date: Mon, 21 May 2007 15:27:35 +0100

On Mon, 2007-05-21 at 15:04 +0100, Alex Hudson wrote:
> On Mon, 2007-05-21 at 13:47 +0100, Ian Lynch wrote:
> > On Mon, 2007-05-21 at 13:25 +0100, Dave Crossland wrote:
> > > On 21/05/07, Ian Lynch <address@hidden> wrote:
> > > > But how do the VCs get their money back?
> > > 
> > > High end development services, mainly porting, is big business.
> > > 
> > > "Selling ... "porting Gnash to your device"."
> > > - http://lists.gnu.org/archive/html/gnash/2007-03/msg00000.html
> > 
> > 
> > But if anyone can do it, where is their competitive advantage to come
> > from? I can see that you can set up a service company but usually VCs
> > don't invest unless there is clear protection from competition at least
> > for enough time for them to recoup their investment. I'm not saying its
> > not commercially viable, just that it seems like an unusual investment
> > for a VC to make.
> Historically, VC-funded businesses working on free software haven't been
> terribly successful, but I have no idea how successful (or not) they are
> compared to VC-funded businesses in general.

Most fail or end up marginally profitable, a small number are
spectacularly successful but generally all have to look like they have
the potential to be to be even considered. VCs are spread betting.

> In terms of competition, though, in the software business such things
> are sometimes naturally limited by time - VCs are usually after an exit
> in the medium-term, and they may be thinking that this kind of business
> has a life span of a similar term. After all, in ten year's time, we'll
> likely have something completely different to Flash around.

But for an exit they would normally look for a buyer of the business or
a floatation. If the life of the business is limited so will be its
attractiveness to a buyer or stock market investors who are looking
longer term. Usually the value built up is in growth rather than
profitability but there has to be an obvious revenue stream that can be
profitable. So the business needs to be rapidly scalable which I guess
it is. Its just less obvious where a protectable revenue stream is
derived. There are usually 3 key questions before investment. Who is the
competition? What is your unique selling point compared to the
competition? How is this protected?

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