Index Ventures’ Mike Volpi won big in Hortonworks deal and Elastic IPO


Volpi is one of the few venture capitalists to make a name investing in open-source software, a difficult task because it often requires that companies successfully commercialize a product that also has a free version customers can use. Another big investor in the space is Benchmark’s Peter Fenton, who also backed both Elastic and Hortonworks.

Volpi first poured money in Hortonworks in 2011 and followed by investing in Elastic in 2013. At the time, many of his counterparts in venture were skeptical, but today Elastic is worth close to $5 billion and the combination of Cloudera and Hortonworks is valued at over $5 billion.

Now, Volpi said, the open-source deals are much more competitive. That’s to be expected considering Salesforce spent $6.5 billion this year on MuleSoft, and Microsoft shelled out $1 billion more than that for GitHub. Both were venture-backed open-source companies.

“Investors are very straightforwardly motivated by making money,” said Volpi, who was a senior executive at Cisco prior to his years in venture capital. “If they see other people making money they jump into the fray. Today there are a lot of top-tier venture firms who jump into open source. It was contrarian six to seven years ago; it’s not contrarian anymore.”

Index’s current stake in Elastic, which sells software for business search and data analytics, is worth $460 million. The firm’s Hortonworks shares are valued at almost $54 million, according to FactSet.

Volpi said most of the work on the Cloudera-Hortonworks deal was done last week. Part of what made it difficult was the historic rivalry between the two companies, which both commercialize Hadoop data tools, he said.

Cloudera CEO Tom Reilly said that at an all-hands meeting at the company’s Silicon Valley headquarters on Thursday, many employees were in shock. But that turned to excitement when they started to realize the potential growth and cost savings, he said.

Joseph Jacks is one of the new investors in the open-source arena, having seen how powerful it can be to have large communities of developers contributing to a single project. Jacks, who previously co-founded Kismatic, a start-up focused on the deployment of the Kubernetes open-source software, announced the formation this week of OSS Capital, which aims to invest solely in open-source start-ups and provide them with advice on matters like finance and law.

“I think this is the most profoundly exciting week for commercial open source in the history of commercial open source going back 20 years,” Jacks told CNBC in an interview. “Our slogan is open-source software eats everything.”

In addition to the Cloudera-Hortonworks merger and the Elastic IPO — Jacks also talked up big funding rounds for companies like JFrog, which is commercializing the Artifactory open-source software. He saw all those headlines fly by this week from his office in San Francisco.

For Volpi, the long week was slated to end back in San Francisco on Friday night, after another meeting in New York with a portfolio company and a couple more press briefings.

“I’m not sure what time zone I’m in and I haven’t gotten a lot of sleep,” he said, a few hours before heading to the airport. “It’s been a little busy this week.”

— CNBC’s Ari Levy contributed to this report.

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