Fred @ FlatiRon Parnters

From: Aldo Castaneda
Date: Mon Oct 11, 2004 2:50:14 PM US/Eastern
To: fred@flatironpartners.com
Cc: Aldo Castañeda
Subject: Financing and early stage Open Source Development Projects - What Kim Polese might be missing!

Fred,

I read your posts about Open Source and selling MSFT. Thus this message to you.

As someone who is clearly expert in issues having to do with early stage financing of technology ventures I would like to know if you've ever run across the following concept. If it's novel I take credit for it, if not I take credit for not being well informed. Either way it would be valuable to me to know if you have run or do run across what I'm about to describe.

The basic concept:

1) (Premise) The Net/Web (call it what you want) is more than anything a hyper efficient technology for measuring the value of ideas. The following conceptualization might help you understand what I mean.

Example: Someone has an idea (Adam Curry wakes up with the idea of www.iPodder.org ), he codes and early version and then sends his idea (manifested in code) to Dave Winer. Dave Winer changes the code slightly or sends it to a coder that does. This process continues and the idea grows. The "residue" of all of this activity is code and a variety of interactions (be they websites what have you).

2) My point is that, because the technology provides a means to measure and track all of this interaction around an idea at limited cost, one can measure quantify the value of an idea as a function of the activity that results from it. Given a little thought, I think a group of attributes could be defined around this activity that would provide a means to value the core idea and the activity around it. (In considering this notion, I should mention that attributes such as "reputation" of the author and "success of previous code" are all attributes that could be manifested in this concept.....as the "reputational" elements would seem to be very important as a form of "collateral" in a open source environment)

3) In the first phase I would think that one could easily establish a system whereby capital could be efficiently distributed to those ideas/projects that have the most validity/activity. In the spirit of Open Source I believe the first implementation would be a Cooperative that would provide financing to Open Source Coder's whose activity/contribution to an idea warrants investment in the form of a low interest loan. Clearly a system could be established that would allow those who participate in the development of an idea to in effect sell it to someone in your line of work and take it private.

This is the rough sketch of the concept. Given your interest in this area I would be interested in what you think of the above. I have more details on how I might implement this concept in a manner that neither impedes the distributed, self-organizing nature of Open Source Development while not imposing limitations on the freedom of the code.

-Aldo Castañeda