It's fascinating to delve into the résumés of the technology pioneers who still roll up their sleeves at Silicon Valley startups. Larry Augustin, the CEO of customer relationship management software startup SugarCRM Inc., is no exception.
SugarCRM, which has carved a niche as a strong alternative to the two leading CRM players, Microsoft Corp. and Salesforce.com Inc., was one of the first commercial open-source startups to receive venture backing (it got $2 million from Draper Fisher Jurvetson in 2004). But Augustin, who took the SugarCRM post in 2009, long ago cemented his pioneer status with the open-source movement, which has grown from a democratic hacker ideal to a commercially viable software option for enterprises.
In fact, he was part of the group that helped coin the term "open source" in the late 1990s. He also founded in 1993 VA Research, one of the first companies to sell personal computers with the open-source Linux operating system pre-installed. Augustin almost went in a different direction while at Stanford University in the years before, having worked on a plan to start an e-commerce company with David Filo and Jerry Yang. That duo became distracted with another project, Yahoo! Inc., which they founded in 1994.
Cupertino, Calif.-based SugarCRM this month announced what is likely to be its last round of funding before eventually going public, in the form of a $33 million round led by New Enterprise Associates. The Deal magazine's Olaf de Senerpont Domis recently spoke with Augustin about SugarCRM, its initial public offering prospects and his role in the early days of open-source software.
The Deal magazine: When will SugarCRM go public?
Larry Augustin: We don't have a specific time frame but believe we can be a large public company. There has been a history of companies in the CRM space as standalones; it is a very large market. IDC says it's around $18 billion, and as a result, you can support a multibillion-dollar company in that space very easily. We know we can build a billion dollars in revenue.
How do you view the IPO option for a venture-backed company?
It is much more challenging now than it was 15 years ago. Small companies back then could go out, become public, and they grew from there. It was very good for the industry. But things change. You have to be much larger now, so the proc-ess takes much longer. That said, we've seen it get easier in the past year. Part of what has happened is that new companies going public provide investors with another set of investment options that large companies don't give them.
Investors are now at the point where they need smaller IPOs, in the $50 million to $100 million revenue range. That's where the growth is in business today. Investors are more receptive to seeing breadth and diversity in their portfolio.
The JOBS Act is also relaxing requirements on smaller companies, making the controls and overhead in place less onerous. Combining investor demand and these changes by the federal government makes it encouraging for smaller companies to go public.
How did it come to be that you helped coin the term "open source"?
A group of us had been working with what we then called "free software," which was available on the Internet and downloadable for free. Groups of us were building businesses around this software, but building a business where you tried to charge money around something labeled as "free" creates a bit of tension.
We have a set of principles about access to the code, and about the ability to control our own destiny as to how it evolves. Bruce Perens [a computer programmer in the late 1990s] created these principles. We really needed to brand this, and that effort was led by Eric Raymond [another programmer and open-source advocate]. We met in my offices in Mountain View, came up with this "open source" term after deciding the important thing is the open access.
So how did you first meet David Filo and Jerry Yang?
I got a Ph.D. from Stanford in engineering, focusing on computer-aided design. Dave and Jerry were there at the same time in the same topic. They started this little Internet directory called Yahoo!, and I started VA Linux, which was about commercializing Linux.
We wrote an Internet business plan to go out and do e-commerce and bring that to people. But they got sucked into Yahoo! I got pulled into VA Linux. Jerry introduced me to Mike Moritz at Sequoia Capital, so I owe him our first funding. Silicon Valley is a very small place.