Extra Crunch roundup: Digital health VC survey, edtech M&A, deep tech marketing, more

I had my first telehealth consultation last year, and there’s a high probability that you did, too. Since the pandemic began, consumer adoption of remote healthcare has increased 300%.

Speaking as an unvaccinated urban dweller: I’d rather speak to a nurse or doctor via my laptop than try to remain physically distanced on a bus or hailed ride traveling to/from their office.

Even after things return to (rolls eyes) normal, if I thought there was a reliable way to receive high-quality healthcare in my living room, I’d choose it.

Clearly, I’m not alone: a May 2020 McKinsey study pegged yearly domestic telehealth revenue at $3 billion before the coronavirus, but estimated that “up to $250 billion of current U.S. healthcare spend could potentially be virtualized” after the pandemic abates.

That’s a staggering number, but in a category that includes startups focused on sexual health, women’s health, pediatrics, mental health, data management and testing, it’s clear to see why digital-health funding topped more than $10 billion in the first three quarters of 2020.

Drawing from The TechCrunch List, reporter Sarah Buhr interviewed eight active health tech VCs to learn more about the companies and industry verticals that have captured their interest in 2021:

  • Bryan Roberts and Bob Kocher, partners, Venrock
  • Nan Li, managing director, Obvious Ventures
  • Elizabeth Yin, general partner, Hustle Fund
  • Christina Farr, principal investor and health tech lead, OMERS Ventures
  • Ursheet Parikh, partner, Mayfield Ventures
  • Nnamdi Okike, co-founder and managing partner, 645 Ventures
  • Emily Melton, founder and managing partner, Threshold Ventures

Full Extra Crunch articles are only available to members
Use discount code ECFriday to save 20% off a one- or two-year subscription

Since COVID-19 has renewed Washington’s focus on healthcare, many investors said they expect a friendly regulatory environment for telehealth in 2021. Additionally, healthcare providers are looking for ways to reduce costs and lower barriers for patients seeking behavioral support.

“Remote really does work,” said Elizabeth Yin, general partner at Hustle Fund.

We’ll cover digital health in more depth this year through additional surveys, vertical reporting, founder interviews and much more.

Thanks very much for reading Extra Crunch this week; I hope you have a relaxing weekend.

Walter Thompson
Senior Editor, TechCrunch

8 VCs agree: Behavioral support and remote visits make digital health a strong bet for 2021

Woman having a medicine video conferencing with her doctor using digital tablet. Senior woman on a video call with a doctor using her tablet computer at home.

Image Credits: Luis Alvarez (opens in a new window) / Getty Images

Lessons from Top Hat’s acquisition spree

Image Credits: Bryce Durbin

In the last year, edtech startup Top Hat acquired three publishing companies: Fountainhead Press, Bludoor and Nelson HigherEd.

Natasha Mascarenhas interviewed CEO and founder Mike Silagadze to learn more about his content acquisition strategy, but her story also discussed “some rumblings of consolidation and exits in edtech land.”

How VCs invested in Asia and Europe in 2020

Last year, U.S.-based VCs invested an average of $428 million each day in domestic startups, with much of the benefits flowing to fintech companies.

This morning, Alex Wilhelm examined Q4 VC totals for Europe, which had its lowest deal count since Q1 2019, despite a record $14.3 billion in investments.

Asia’s VC industry, which saw $25.2 billion invested across 1,398 deals is seeing “a muted recovery,” says Alex.

“Falling seed volume, lots of big rounds. That’s 2020 VC around the world in a nutshell.”

Decrypted: With more SolarWinds fallout, Biden picks his cybersecurity team

Image Credits: Treedeo (opens in a new window) / Getty Images

In this week’s Decrypted, security reporter Zack Whittaker covered the latest news in the unfolding SolarWinds espionage campaign, now revealed to have impacted the U.S. Bureau of Labor Statistics and Malwarebytes.

In other news, the controversy regarding WhatsApp’s privacy policy change appears to be driving users to encrypted messaging app Signal, Zack reported. Facebook has put changes at WhatsApp on hold “until it could figure out how to explain the change without losing millions of users,” apparently.

Hot IPOs hang onto gains as investors keep betting on tech

A big IPO debut is a juicy topic for a few news cycles, but because there’s always another unicorn ready to break free from its corral and leap into the public markets, it doesn’t leave a lot of time to reflect.

Alex studied companies like Lemonade, Airbnb and Affirm to see how well these IPO pop stars have retained their value. Not only have most held steady, “many have actually run up the score in the ensuing weeks,” he found.

Dear Sophie: What are Biden’s immigration changes?

lone figure at entrance to maze hedge that has an American flag at the center

Image Credits: Bryce Durbin / TechCrunch

Dear Sophie:

I work in HR for a tech firm. I understand that Biden is rolling out a new immigration plan today.

What is your sense as to how the new administration will change business, corporate and startup founder immigration to the U.S.?

—Free in Fremont

Hello, Extra Crunch community!

Hello in Different Languages

Image Credits: atakan (opens in a new window) / Getty Images

I began my career as an avid TechCrunch reader and remained one even when I joined as a writer, when I left to work on other things and now that I’ve returned to focus on better serving our community.

I’ve been chatting with some of the folks in our community and I’d love to talk to you, too. Nothing fancy, just 5-10 minutes of your time to hear more about what you want to see from us and get some feedback on what we’ve been doing so far.

If you would be so kind as to take a minute or two to fill out this form, I’ll drop you a note and hopefully we can have a chat about the future of the Extra Crunch community before we formally roll out some of the ideas we’re cooking up.

Drew Olanoff

In 2020, VCs invested $428m into US-based startups every day

Last year was a disaster across the board thanks to a global pandemic, economic uncertainty and widespread social and political upheaval.

But if you were involved in the private markets, however, 2020 had some very clear upside — VCs flowed $156.2 billion into U.S.-based startups, “or around $428 million for each day,” reports Alex Wilhelm.

“The huge sum of money, however, was itself dwarfed by the amount of liquidity that American startups generated, some $290.1 billion.”

Using data sourced from the National Venture Capital Association and PitchBook, Alex used Monday’s column to recap last year’s seed, early-stage and late-stage rounds.

How and when to build marketing teams at deep tech companies

Pole lifting rubber duck with hook in its head

Image Credits: Andy Roberts (opens in a new window) / Getty Images

Building a marketing team is one of the most opaque parts of spinning up a startup, but for a deep tech company, the stakes couldn’t be higher.

How can technical founders working on bleeding-edge technology find the right people to tell their story?

If you work at a post-revenue, early-stage deep tech startup (or know someone who does), this post explains when to hire a team, whether they’ll need prior industry experience, and how to source and evaluate talent.

Bustle CEO Bryan Goldberg explains his plans for taking the company public

Bustle Digital Group CEO Bryan Goldberg

Bustle Digital Group CEO Bryan Goldberg. Image Credits: Bustle Digital Group

Senior Writer Anthony Ha interviewed Bustle Digital Group CEO Bryan Goldberg to get his thoughts on the state of digital media.

Their conversation covered a lot of ground, but the biggest news it contained focuses on Goldberg’s short-term plans.

“Where do I want to see the company in three years? I want to see three things: I want to be public, I want to see us driving a lot of profits and I want it to be a lot bigger, because we’ve consolidated a lot of other publications,” he said.

It may not be as glamorous as D2C, but beauty tech is big money

Directly Above Shot Of Razors On Green Background

Image Credits: Laia Divols Escude/EyeEm (opens in a new window) / Getty Images

The U.S. Federal Trade Commission is not a huge fan of personal-care D2C brands merging with traditional consumer product companies.

This month, razor startup Billie and Proctor & Gamble announced they were calling off their planned merger after the FTC filed suit.

For similar reasons, Edgewell Personal Care dropped its plans last year to buy Harry’s for $1.37 billion.

In a harsher regulatory environment, “the path to profitability has become a more important part of the startup story versus growth at all costs,” it seems.

Twilio CEO says wisdom lies with your developers

SAN FRANCISCO, CA – SEPTEMBER 12: Founder and CEO of Twilio Jeff Lawson speaks onstage during TechCrunch Disrupt SF 2016 at Pier 48 on September 12, 2016 in San Francisco, California. Image Credits: Steve Jennings/Getty Images for TechCrunch

Companies that build their own tools “tend to win the hearts, minds and wallets of their customers,” according to Twilio CEO Jeff Lawson.

In an interview with enterprise reporter Ron Miller for his new book, “Ask Your Developer,” Lawson says founders should use developer teams as a sounding board when making build-versus-buy decisions.

“Lawson’s basic philosophy in the book is that if you can build it, you should,” says Ron.


Drupal’s journey from dorm-room project to billion-dollar exit

Twenty years ago Drupal and Acquia founder Dries Buytaert was a college student at the University of Antwerp. He wanted to put his burgeoning programming skills to work by building a communications tool for his dorm. That simple idea evolved over time into the open-source Drupal web content management system, and eventually a commercial company called Acquia built on top of it.

Buytaert would later raise over $180 million and exit in 2019 when the company was acquired by Vista Equity Partners for $1 billion, but it took 18 years of hard work to reach that point.

When Drupal came along in the early 2000s, it wasn’t the only open-source option, but it was part of a major movement toward giving companies options by democratizing web content management.

Many startups are built on open source today, but back in the early 2000s, there were only a few trail blazers and none that had taken the path that Acquia took. Buytaert and his co-founders decided to reduce the complexity of configuring a Drupal installation by building a hosted cloud service.

That seems like a no-brainer now, but consider at the time in 2009, AWS was still a fledgling side project at Amazon, not the $45 billion behemoth it is today. In 2021, building a startup on top of an open-source project with a SaaS version is a proven and common strategy. Back then nobody else had done it. As it turned out, taking the path less traveled worked out well for Acquia.

Moving from dorm room to billion-dollar exit is the dream of every startup founder. Buytaert got there by being bold, working hard and thinking big. His story is compelling, but it also offers lessons for startup founders who also want to build something big.

Born in the proverbial dorm room

In the days before everyone had internet access and a phone in their pockets, Buytaert simply wanted to build a way for him and his friends to communicate in a centralized way. “I wanted to build kind of an internal message board really to communicate with the other people in the dorm, and it was literally talking about things like ‘Hey, let’s grab a drink at 8:00,’” Buytaert told me.

He also wanted to hone his programming skills. “At the same time I wanted to learn about PHP and MySQL, which at the time were emerging technologies, and so I figured I would spend a few evenings putting together a basic message board using PHP and MySQL, so that I could learn about these technologies, and then actually have something that we could use.”

The resulting product served its purpose well, but when graduation beckoned, Buytaert realized if he unplugged his PC and moved on, the community he had built would die. At that point, he decided to move the site to the public internet and named it drop.org, which was actually an accident. Originally, he meant to register dorp.org because “dorp” is Dutch for “village or small community,” but he mistakenly inverted the letters during registration.

Buytaert continued adding features to drop.org like diaries (a precursor to blogging) and RSS feeds. Eventually, he came up with the idea of open-sourcing the software that ran the site, calling it Drupal.

The birth of web content management

About the same time Buytaert was developing the basis of what would become Drupal, web content management (WCM) was a fresh market. Early websites had been fairly simple and straightforward, but they were growing more complex in the late 90s and a bunch of startups were trying to solve the problem of managing them. Buytaert likely didn’t know it, but there was an industry waiting for an open-source tool like Drupal.


IBM transformation struggles continue with cloud and AI revenue down 4.5%

A couple of months ago at CNBC’s Transform conference, IBM CEO Arvind Krishna painted a picture of a company in the midst of a transformation. He said that he wanted to take advantage of IBM’s $34 billion 2018 Red Hat acquisition to help customers manage a growing hybrid cloud world, while using artificial intelligence to drive efficiency.

It seems like a sound enough approach. But instead of the new strategy acting as a big growth engine, IBM’s earnings today showed that its cloud and cognitive software revenues were down 4.5% to $6.8 billion. Meanwhile cognitive applications — where you find AI incomes — were flat.

If Krishna was looking for a silver lining, perhaps he could take solace in the fact that Red Hat itself performed well, with revenue up 18% compared to the year-ago period, according to the company. But overall the company’s revenue declined for the fourth straight quarter, leaving the executive in much the same position as his predecessor Ginni Rometty, who led IBM during 22 straight quarters of revenue losses.

Krishna laid out his strategy in November, telling CNBC, “The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey.” So far the approach is simply not generating the growth Krishna expected.

The company is also in the midst of spinning out its legacy managed infrastructure services division, which, as Krishna said in the same November interview, should allow Big Blue to concentrate more on its new strategy. “With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence,” he said.

While it’s certainly too soon to say his transformation strategy has failed, the results aren’t there yet, and IBM’s falling top line has to be as frustrating to Krishna as it was to Rometty. If you guide the company toward more modern technologies and away from the legacy ones, at some point you should start seeing results, but so far that has not been the case for either leader.

Krishna continued to build on this vision at the end of last year by buying some additional pieces like cloud applications performance monitoring company Instana and hybrid cloud consulting firm Nordcloud. He did so to build a broader portfolio of hybrid cloud services to make IBM more of a one-stop shop for these services.

As retired NFL football coach Bill Parcells used to say, referring to his poorly performing teams, “you are what your record says you are.” Right now IBM’s record continues to trend in the wrong direction. While it’s making some gains with Red Hat leading the way, it’s simply not enough to offset the losses, and something needs to change.


South African startup Aerobotics raises $17M to scale its AI-for-agriculture platform

As the global agricultural industry stretches to meet expected population growth and food demand, and food security becomes more of a pressing issue with global warming, a startup out of South Africa is using artificial intelligence to help farmers manage their farms, trees, and fruits.

Aerobotics is a South African startup that provides intelligent tools to the world’s agriculture industry. It raised $17 million in an oversubscribed Series B round.

South African consumer internet giant Naspers led the round through its investment arm, Naspers Foundry, investing $5.6 million, according to Aerobotics. Cathay AfricInvest Innovation, FMO: Entrepreneurial Development Bank, and Platform Investment Partners, also participated.

Founded in 2014 by James Paterson and Benji Meltzer, Aerobotics is currently focused on building tools for fruit and tree farmers. Using artificial intelligence, drones and other robotics, its technology helps track and assess the health of these crops, including identifying when trees are sick, tracking pests and diseases, and analytics for better yield management. 

The company has progressed its technology and provides independent and reliable yield estimations and harvest schedules to farmers by collecting and processing both tree and fruit imagery from citrus growers early in the season. In turn, farmers can prepare their stock, predict demand, and ensure their customers have the best quality of produce.

Aerobotics has experienced record growth in the last few years. For one, it claims to have the largest proprietary data set of trees and citrus fruit in the world having processed 81 million trees and more than a million citrus fruit.

The seven-year-old startup is based in Cape Town, South Africa. At a time when many of the startups out of the African continent have focused their attention primarily on identifying and fixing challenges at home, Aerobotics has found a lot of traction for its services abroad, too. It has offices in the U.S., Australia, and Portugal — like Africa, home to other major, global agricultural economies — and operates in 18 countries across Africa, the Americas, Europe, and Australia. 

Image Credits: Aerobotics

Within that, the U.S. is the company’s primary market, and Aerobotics says it has two provisional patents pending in the country, one for systems and methods for estimating tree age and another for systems and methods for predicting yield.  

The company said it plans to use this Series B investment to continue developing more technology and product delivery, both for the U.S. and other markets. 

“We’re committed to providing intelligent tools to optimize automation, minimize inputs and maximize production. We look forward to further co-developing our products with the agricultural industry leaders,” said Paterson, the CEO in a statement.

Once heralded as a frontier for technology centuries ago, the agriculture industry has stalled in that aspect for a long while. However, agritech companies like Aerobotics that support climate-smart agriculture and help farmers have sprung forth trying to take the industry back to its past glory. Investors have taken notice and over the past five years, investments have flowed with breathtaking pace. 

For Aerobotics, it raised $600,000 from 4Di Capital and Savannah Fund as part of its seed round in September 2017. The company then raised a further $4 million in Series A funding in February 2019, led by Nedbank Capital and Paper Plane Ventures.

Naspers Foundry, the lead investor in this Series B round, was launched by Naspers in 2019 as a 1.4 billion rand (~$100 million) fund for tech startups in South Africa. 

Phuthi Mahanyele-Dabengwa, CEO of Naspers South Africa said of the investment, “Food security is of paramount importance in South Africa and the Aerobotics platform provides a positive contribution towards helping to sustain it. This type of tech innovation addresses societal challenges and is exactly the type of early-stage company that Naspers Foundry looks to back.”

Asides Aerobotics, Naspers Foundry has invested in online cleaning service, SweepSouth, and food service platform, Food Supply Network.


Cloud infrastructure startup CloudNatix gets $4.5 million seed round led by DNX Ventures

CloudNatix founder and chief executive officer Rohit Seth

CloudNatix founder and chief executive officer Rohit Seth. Image Credits: CloudNatix

CloudNatix, a startup that provides infrastructure for businesses with multiple cloud and on-premise operations, announced it has raised $4.5 million in seed funding. The round was led by DNX Ventures, an investment firm that focuses on United States and Japanese B2B startups, with participation from Cota Capital. Existing investors Incubate Fund, Vela Partners and 468 Capital also contributed.

The company also added DNX Ventures managing partner Hiro Rio Maeda to its board of directors.

CloudNatix was founded in 2018 by chief executive officer Rohit Seth, who previously held lead engineering roles at Google. The company’s platform helps businesses reduce IT costs by analyzing their infrastructure spending and then using automation to make IT operations across multiple clouds more efficient. The company’s typical customer spends between $500,000 to $50 million on infrastructure each year, and use at least one cloud service provider in addition to on-premise networks.

Built on open-source software like Kubernetes and Prometheus, CloudNatix works with all major cloud providers and on-premise networks. For DevOps teams, it helps configure and manage infrastructure that runs both legacy and modern cloud-native applications, and enables them to transition more easily from on-premise networks to cloud services.

CloudNatix competes most directly with VMware and Red Hat OpenShift. But both of those services are limited to their base platforms, while CloudNatix’s advantage is that it is agnostic to base platforms and cloud service providers, Seth told TechCrunch.

The company’s seed round will be used to scale its engineering, customer support and sales teams.



Soci raises $80M for its localized marketing platform

Soci, a startup focused on what it calls “localized marketing,” is announcing that it has raised $80 million in Series D funding.

National and global companies like Ace Hardware, Anytime Fitness, The Hertz Corporation and Nekter Juice Bar use Soci (pronounced soh-shee) to coordinate individual stores as they promote themselves through search, social media, review platforms and ad campaigns. Soci said that in 2020, it brought on more than 100 new customers, representing nearly 30,000 new locations.

Co-founder and CEO Afif Khoury told me that the pandemic was a crucial moment for the platform, with so many businesses “scrambling to find a real solution to connect with local audiences.”

One of the key advantages to Soci’s approach, Khoury said, is to allow the national marketing team to share content and assets so that each location stays true to the “national corporate personality,” while also allowing each location to express  a “local personality.” During the pandemic, businesses could share basic information about “who’s open, who’s not” while also “commiserating and expressing the humanity that’s often missing element from marketing nationally.”

“The result there was businesses that had to close, when they had their grand reopenings, people wanted to support that business,” he said. “It created a sort of bond that hopefully lasts forever.”

Khoury also emphasized that Soci has built a comprehensive platform that businesses can use to manage all their localized marketing, because “nobody wants to have seven different logins to seven different systems, especially at the local level.”

The new funding, he said, will allow Soci to make the platform even more comprehensive, both through acquisitions and integrations: “We want to connect into the CRM, the point-of-sale, the rewards program and take all that data and marry that to our search, social, reviews data to start to build a profile on a customer.”

Soci has now raised a total of $110 million. The Series D was led by JMI Equity, with participation from Ankona Capital, Seismic CEO Doug Winter and Khoury himself.

“All signs point to an equally difficult first few months of this year for restaurants and other businesses dependent on their communities,” said JMI’s Suken Vakil in a statement. “This means there will be a continued need for localized marketing campaigns that align with national brand values but also provide for community-specific messaging. SOCi’s multi-location functionality positions it as a market leader that currently stands far beyond its competitors as the must-have platform solution for multi-location franchises/brands.”


Drain Kubernetes Nodes… Wisely

Drain Kubernetes Nodes Wisely

Drain Kubernetes Nodes WiselyWhat is Node Draining?

Anyone who ever worked with containers knows how ephemeral they are. In Kubernetes, not only can containers and pods be replaced, but the nodes as well. Nodes in Kubernetes are VMs, servers, and other entities with computational power where pods and containers run.

Node draining is the mechanism that allows users to gracefully move all containers from one node to the other ones. There are multiple use cases:

  • Server maintenance
  • Autoscaling of the k8s cluster – nodes are added and removed dynamically
  • Preemptable or spot instances that can be terminated at any time

Why Drain?

Kubernetes can automatically detect node failure and reschedule the pods to other nodes. The only problem here is the time between the node going down and the pod being rescheduled. Here’s how it goes without draining:

  1. Node goes down – someone pressed the power button on the server.
  2. kube-controller-manager

    , the service which runs on masters, cannot get the


    from the


    on the node. By default it tries to get the status every 5 seconds and it is controlled by


    parameter of the controller.

  3. Another important parameter of the



    , which defaults to 40s. It controls how fast the node will be marked as


    by the master.

  4. So after ~40 seconds
    kubectl get nodes

    shows one of the nodes as


    , but the pods are still there and shown as running. This leads us to


    , which is 5 minutes by default (!). It means that after the node is marked as


    , only after 5 minutes Kubernetes starts to evict the Pods.

Drain Kubernetes Nodes

So if someone shuts down the server, then only after almost six minutes (with default settings), Kubernetes starts to reschedule the pods to other nodes. This timing is also valid for managed k8s clusters, like GKE.

These defaults might seem to be too high, but this is done to prevent frequent pods flapping, which might impact your application and infrastructure in a far more negative way.

Okay, Draining How?

As mentioned before – draining is the graceful method to move the pods to another node. Let’s see how draining works and what pitfalls are there.


kubectl drain {NODE_NAME}

command most likely will not work. There are at least two flags that need to be set explicitly:

  • --ignore-daemonsets

    – it is not possible to evict pods that run under a DaemonSet. This flag ignores these pods.

  • --delete-emptydir-data

    – is an acknowledgment of the fact that data from EmptyDir ephemeral storage will be gone once pods are evicted.

Once the drain command is executed the following happens:

  1. The node is cordoned. It means that no new pods can be placed on this node. In the Kubernetes world, it is a Taint

    placed on the node that most of the pods tolerate.

  2. Pods, except the ones that belong to DaemonSets, are evicted and hopefully scheduled on another node.

Pods are evicted and now the server can be powered off. Wrong.


If for some reason your application or service uses a DaemonSet primitive, the pod was not drained from the node. It means that it still can perform its function and even receive the traffic from the load balancer or the service. 

The best way to ensure that it is not happening – delete the node from the Kubernetes itself.

  1. Stop the

    on the node.

  2. Delete the node from the cluster with
    kubectl delete {NODE_NAME}



is not stopped, the node will appear again after the deletion.

Pods are evicted, node is deleted, and now the server can be powered off. Wrong again.

Load Balancer

Here is quite a standard setup:

kubernetes Load Balancer

The external load balancer sends the traffic to all Kubernetes nodes. Kube-proxy and Container Network Interface internals are dealing with routing the traffic to the correct pod.

There are various ways to configure the load balancer, but as you see it might be still sending the traffic to the node. Make sure that the node is removed from the load balancer before powering it off. For example, AWS node termination handler does not remove the node from the Load Balancer, which causes a short packet loss in the event of node termination.


Microservices and Kubernetes shifted the paradigm of systems availability. SRE teams are focused on resilience more than on stability. Nodes, containers, and load balancers can fail, but they are ready for it. Kubernetes is an orchestration and automation tool that helps here a lot, but there are still pitfalls that must be taken care of to meet SLAs.


Keeping Open Source Open, or, Why Open is Better

Keeping Open Source Open

Last week Elastic announced that they were “Doubling Down” on open source by changing their licensing to a non-open license – MongoDB’s Server Side Public License, or SSPL.  Let me clarify in my opinion this is not doubling down – unless, as our good friend @gabidavila highlighted, that maybe the thinking was a double negative makes a positive? VM Brasseur posted on her blog that she feels Elastic and Kibana are now a business risk for enterprises.  Peter Zaitsev has penned why he felt SSPL was bad for you before this announcement and then sat down with me to discuss his thoughts last week as well.

This is not the first and regrettably, this won’t be the last “open” company to run away from open source or the model which got them as a company to where they are today.

Why Do Some Companies Have Open Source Problems Today?

I personally have no direct problem with companies selling proprietary software. I have no problem with companies selling software with new licensing, and I have no problem with cloud services.  I simply feel that open is better. Open gives not only paying customers but the entire community a better and more viable product. It’s ok if you disagree with that.  It is ok if you as a company, consumer, or other entity, choose proprietary software or some other model, I won’t hate on you. What gets me angry though is when people wrap themselves in the veil of openness, ride the coattails of open software, pretending to be something they are not, and fool customers into getting locked in.  Companies that use open source as their gateway drug to get your applications completely dependent on paying them forever or risk massive costs migrating away.

Let Me Give You an “Outside of Tech” Example

My father in law worked on the line for GM for over 30 years. One of the things he really enjoyed when he was not working was golfing.  He traveled the state he lived in and tried all kinds of courses, but there was one, in particular, he really liked.  It was a resort in northern Michigan that had four golf courses with plans to add a couple of more.  He decided to plan his retirement by buying a lot on one of the soon to be built golf courses after painstaking research. He was going to build his dream house and spend his retirement golfing.  He was so thrilled about the plans he would drive me up and force me to trudge into the woods to show me his future spot.

A few years later as he was nearing retirement the resort announced that they would no longer be building the extra courses and would not invest in the infrastructure to build the homes/community where he had invested.  My father in law, who invested so much in this, was left with worthless land in the middle of nowhere.  Sure, he could retire somewhere else, but he invested here and now there is a terrible cost to try that again.

It’s similar to the current trend in open source.  You adopt open source because you have options, you can get things started easily, and if you love the product you can expand.  You do your research, you test, you weigh your options, finally, you commit.  You invest in building out the infrastructure using the open products, knowing you have options. Open source allows you to be agile, to contribute, to fix, and enhance.  Then, one day, the company says, “Sorry, we are now only sort of open and you have to play by the new rules.”

The Impact of Financing

So what the hell is happening? A few things actually.  The first is that open source companies scored some big exits and valuations over the last 15 years. Everyone loves a winner. The rush to emulate the success of those early companies and models was viewed by many entrepreneurs and investors as the new digital gold rush. Let’s look at this from an investor’s point of view for a second:

  • Free labor from the community = higher profit margins
  • Free advertising from the community = higher profit margins
  • Grassroots adoption and product evolution = better products and higher profit margins
  • Community-led support = better profit margins
  • People adopt, then they need help or features … so we can sell them a better more stable version (open core) = better profit margins

So investors poured in.  Many open source startups were started not because the founders believed in open source, but it was a quick and very popular way to get funding. They could potentially gain a huge audience and quickly monetize that audience. Don’t take my word for it, the CEO of MongoDB Inc admits it:

“[W]e didn’t open source it to get help from the community, to make the product better. We open sourced as a freemium strategy; to drive adoption.” – MongoDB CEO Dev Ittycheria

If you look at their publicly available Wall Street analyst briefings, they talk about their strategy around “Net Expansion” and their model is predicated on getting 20-25% expansion from their existing customer base.  Unless you spend more the model breaks.  The stock price continues to rise and the valuation of the company continues to grow despite not being able to be profitable.  In the stock market today growth – delivered by getting more users, beating earnings, squeezing your customer base, and locking you in – is rewarded with bigger paydays. Again let’s pull a quote, this time from a Wall Street analyst:

In Billy Duberstein’s article, If You Invested $1000 in MongoDB’s IPO, This Is How Much Money You’d Have Now, he wrote:

 “…the database is a particularly attractive product, even by enterprise-software standards, because it stores and organizes all or part of a large corporation’s most important data. If a company wanted to switch vendors, it would have to lift all of that data from the old database and insert it into a new one. That’s not only a huge pain; it’s also terribly risky, should any data get lost. Therefore, most companies tend to stick with their database vendor over time, even if that vendor raises prices. That’s how Oracle became such a tech powerhouse throughout the 1990s.”

Essentially, database companies are a good investment because, as well as storing your most important data, once your data is captured it’s painful and risky for users to switch. While this is great for investors, it is not always good news for enterprise customers or any consumers.

Making the Right Decisions for Your Customers

This brings in the debate around retention, expansion, and stickiness. Retention in a pure open source business is difficult. I won’t lie about it.  You have to continually up your game in support, services, features, and tooling.  It is hard!  Really hard!  Because in a pure open-source model, the user can always choose to self-support.  So your offering has to be so compelling that companies want to pay for it (or they view it as “insurance”).

This has led to a discussion that occurs at every open source company in the world.  How do we generate “stickiness.”  Stickiness is the term given to the efforts around keeping paying customers as paying customers.  Here’s an example: MySQL AB had a problem with the “stickiness” of MySQL Enterprise, so they developed the MySQL Enterprise Monitor.  People who used this tool loved it, so they kept paying for MySQL Enterprise. This approach is the right one, as it helps customers that need functionality or services without penalizing the community.

Open core is another form of “Stickiness” – If you want to use these features you have to pay. While stickiness is not always bad, if you have such an awesome product and service offering that people want to pay you, then great. However, oftentimes this stickiness is basically vendor lock-in. It’s a fine line between creating compelling and awesome features and locking your customers in, but that line is there.

Ask yourself, if you wanted to do this yourself without paying the licensing fees how hard would it be?  If you would have to rearchitect or redesign large portions of your application, or you need to reinstall everything, you are locked in. In other words, companies taking this approach do something unique that the community cannot replicate. If it would take additional time and resources it is a value-added service that makes you more efficient.  Using the MySQL Enterprise monitor example, you can monitor MySQL without this specific feature, it just was a value add on that made it easier and more efficient. It created stickiness for the product but without lock-in.

Companies start to be focused on shareholder value and increasing the stock price at all costs.  The mantra I have heard from CEOs is, “I work for the shareholders, I do what’s best for them.”  In many areas, this conflicts with open source communities and culture.

When I work on an open-source project I view it like I am part of the project or part of the team, even if I am not paid.  I am contributing because I love the product, I love the community, and I want to make a difference. As a user of open source, my motivations tend to be a bit different.  I want software that is evolving, that is tested by millions around the world. I want the option and freedom to deploy anywhere at any time. I want incremental improvement, and I only want to pay if I need to.

This is where there is a disconnect between shareholders and the community and users comes in.  If you’re looking at the priority list, shareholder value in many of these companies will come at the expense of the needs of the community or the users.  Peter Zaitsev founded Percona in 2006 because MySQL AB started that shift to shareholder first, and it deeply upset him.

When Circumstances Change

MongoDB started as a shareholder value first company, focused on the “freemium” model.  I think Elastic falls into a second category of companies.  What are some of the characteristics of this second category?

These companies start off as open.  They do build the company on free and open principles and they put users and community as a higher priority.  But, as they take funding or go public, the demands of revenue, profit, increased expansion by shareholders get louder and louder.  These companies start bringing in industry veterans from big companies that “know how software companies should be built.” Oftentimes these executives have little or no background in open source software development or community development.

Executive pedigree matters a lot in valuation and Wall Street acceptance, so coming from a multi-billion dollar company makes a huge difference.  Every hire a company makes changes culture. These companies end up not only having external shareholder pressure but also pressure from the executive management team to focus on increasing profits and revenue.

Keep in mind that this shareholder pressure is nothing new. This is how “Big” business tends to work.  In the 1970s and 1980s, American car companies sacrificed quality and safety for better margins. In the 90s and 00s, airlines reduced seat size, eliminated “amenities” like free baggage and magazines, and added charges for things that used to be included.  Sacrificing the benefits and features of the users or customers to make more money is nothing new.  The pressure to get more growth or revenue is always there. In fact today we can often see companies “Meet Earning Expectations”  or in some cases beat expectations – and still lose value.

As I outlined above, we are now in an environment where the expectation is to beat revenue estimates, continue to show massive growth, and focus on exceeding the expectations of your shareholders. Outside risk factors that could cause volatility or risk slowing growth need to be addressed. For many database companies, the cloud is both a massive risk as well as a massive opportunity to deliver shareholder value.  This is especially true for companies that are not profitable. Wall Street is banking on eventual profitability just like eventual consistency.  If you look at the margins and spending from both MongoDB and Elastic, they are losing money.  They are spending on sales and marketing to capture a larger market share which they hope will lead to expansion dollars and then profitability.

Why Is This Market Special?

Database vendors have been calling out cloud vendors for a couple of years.  The big complaint has been that cloud vendors take advantage of open source licensing by offering “Database as a Service” using their software without paying anything back.   The open nature of some licensing puts cloud providers completely within their rights to do this.  Similarly, however cloud providers do offer other open source software (like Linux) through their services without the same sort of level of blowback.

In the case of MongoDB and Elastic (and others I am sure), it is not a simple matter of database providers withering and dying due to the stranglehold of the cloud.  In fact, they probably make more money from the cloud being available than they would without it.  More than half the open source databases we support here at Percona are in the cloud. Coupled with the fact that both MongoDB and Elastic are growing their quarterly and yearly revenue, it hardly seems like they are on the ropes.  So why the angst?

A couple of theories:  first, the loss of “Potential Revenue” and seeing the money and revenue the other guys are making and you are not getting any of it.  Second, back to growth. Increasing shareholder value and getting to the magic break-even number is job #1.  If they can win or claim the business other vendors have, they can accelerate that growth. As mentioned, both companies are overspending for growth now, so the faster they can reach profitability the better.

In my opinion, the cloud is the convenient excuse here for trying to accelerate growth and increase shareholder value. “If the cloud played fair, our growth would be 40% instead of 30%! Think of how much more our stock would be worth!”

Let’s not lie about it.  Companies are switching licensing not for the good of the community or their users but for the good of their bottom line and in an effort to improve their true overlords:  Shareholders and Investors.  There is nothing wrong with a for-profit company focused on shareholders. Just don’t lie about it and pretend to be something you are not.  In my opinion, open source driven by an active community of contributors, users, and inventors leads to better quality, faster innovation, and more freedom.

The user base, the contributors, and the “community” as a whole got the most successful open source companies where they are today. Communities are built on trust and goodwill.  Open Source is about innovation, freedom, and collaboration.  These recent changes hurt all three.  They turn what were iconic open source companies into just another company focused on the shareholder over the users, customers, and community that got them to where they are.

I will leave you with this.  As a user or a paying customer of any product, but certainly, as an active member of a community, my position is built on trust.  I may not agree with all changes a community, project, or company makes but I want them to be open, honest, and transparent.  I also want companies to show me with consistent actions, and not tell me in empty words, how I will be impacted.  It is very hard to trust and build respect when you say one thing and do another.

Using Elastic as an example here – and thanks to Corey Quinn on his Twitter feed for pointing this out –  over a year ago Elastic changed their licensing to a more open core model.  At the time they told us this via Github release notes:

Github elastic

The last time they made changes that upset the community, they promised they would leave these products open.  A year later and the license changed.  This leaves those users and community members of the product wondering what will change next?  Can we trust that this is it?  Can we trust when they say really SSPL is “just as good”?  And that they won’t move the line of what is acceptable in the future?

I am going to stand up (as many of you are) for more innovation, more freedom of choice, and certainly more truly open software!


MySQL 8.0.23 Is Available: Highlighting Some Important Points

MySQL 8.0.23 Is Available

MySQL 8.0.23 Is AvailableAs many of you have seen already, MySQL 8.0.23 is available for download (release notes).

Today our dear LeFred thanked all the numerous contributors to bug fixes.  About this: let me mention our two people involved in bug fixing, Venkatesh Prasad Venugopal and Kamil Ho?ubicki. Great work guys!

On my side, I have reviewed the release note yesterday and want to highlight some points that had my attention. I will follow the order as presented in the release notes and not by what is more relevant for me.

  • We have the shift in the syntax from CHANGE MASTER TO  to CHANGE REPLICATION SOURCE TO. There are many scripts out there will need to be modified just because of this small change. Seems a small thing, but it will have some negative side effects for sure.
  • Another one is the work lead on the HASH JOINS. The Oracle implementation so far was not as efficient as expected and I think it will be worth some test/bench-marking to see if the new way is really better. I have pinned this task and will let you know as soon as I have some results. In the meantime, you can refresh your mind by reviewing the FOSDEM 2020 presentation.
  • One thing I would really like to have someone testing is the “Dropping a tablespace with a significant number of pages referenced from the adaptive hash index.” This has been a problem reported by our customers in several situations. Anyone in the community willing to accept the challenge?
  • Asynchronous connection failover is now GR cluster-aware. This was the next step I was wishing to see and that I was pushing in my old article. I will test and see if it will help us for real.  In any case, I suggest you go and read/test yourself. This can be a significant help for architecture resiliency when designing DR or any geo-distributed solutions.
  • Red-Flag about “Replication channels can now be set to assign a GTID to replicated transactions that do not already have one… … This feature enables replication from a source that does not use GTID-based replication, to a replica that does.”. Not sure if this rings the same bell in your mind that it did in mine!
    But if it works for real (you know me, I need to test things to be convinced), I see several possible scenarios, from migration major-major to MariaDB to Percona Server for MySQL. Meaning once the big initial effort is done, keeping the destination up to date is less difficult. And more! In my mind, it is worth exploring.
  • Also important in this area: “three-actor deadlocks with the commit order locking, which could not be resolved by the replication applier, and caused replication to hang indefinitely” New code in the replication applier allows it to initiate an automatic process of retry for the locked transactions, and eventually stop the replication in a controlled way instead of hanging there.

There are additional things and I would like to test them all one by one, but the time I have available is limited, so I invite you to choose a topic and investigate/understand/share.

Great MySQL to all!


Talking Drupal #278 – Insider: Q1 Content Planning

This is a unique episode. We record our first quarterly content planning meeting.



Content Categories:

  • Drupal news (weekly)
  • Drupal Association (quarterly)
  • Modules/Core/Initiatives/Problem Solving (monthly)
  • Front/End Design (bi-monthly)
  • Community / Business (Quarterly)
  • Backend Coding (experimental – try)
  • Non-Drupal specific web dev topics (monthly)
  • Developer’s Life (quarterly)


Stephen Cross – www.stephencross.com @stephencross

John Picozzi – www.oomphinc.com @johnpicozzi

Nic Laflin – www.nLighteneddevelopment.com @nicxvan

Powered by WordPress | Theme: Aeros 2.0 by TheBuckmaker.com