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With a New CEO, How Much Is Eucalyptus Worth? $100M?

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Photo of Marten Mickos courtesy of James Duncan Davidson via Flickr

Eucalyptus Systems, the Santa Barbara, Calif.-based company based on an open-source cloud management platform, last week shuffled its management deck — it replaced Woody Rollins with former MySQL chief executive Marten Mickos, who until recently was an EIR at Benchmark Capital. In his new role, Mickos is being tasked with turning Eucalyptus into a big business.

Eucalyptus, which started out as an open source project funded by the National Science Foundation and headed up by Dr. Rich Wolski, essentially allows companies to build their own private cloud, negating the need to make use of public cloud offerings. Its platform is compatible with Amazon Web Services’ (s amzn) API as well as others like GoGrid. Eucalyptus is giving away the core software but will make money from add-ons and proprietary extensions.

Mickos’s first task is likely to be that of raising more money. From what we’ve heard, the company might be raising a big slug of it — at a $100 million valuation. Such a high number makes sense to me — after all, when you add a star CEO like Mickos to a company, its valuation jumps almost by default. Eucalyptus previously raised $5.5 million from Benchmark Capital and BV Capital.

Yet Mickos clearly has his job cut out for him. While Eucalyptus has done many things well, it nonetheless faces the classic dilemma of any startup based on open-source software: how to get rid of the perception of being a “free” offering. Sure you can upsell a lot of other services, but that market is never really large enough. Unless you are, say, Red Hat (s rhat).

You could argue that Mickos faced the same issues with MySQL (which also had Benchmark backing), but given the sheer size of the database market, MySQL was a fairly unique opportunity. It came at the right time — just before the so-called Web 2.0 revolution. MySQL trounced it competitors — both proprietary and open source — because of its wide adoption.

Eucalyptus, given that it offers a whole different class of a product, will have its adoption challenges. There are way too many competitors (such as VMware (s VMW)) and open-source options out there — the market is up for grabs. Which means that Mickos will have to show that history does in fact repeat itself.

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4 Responses to “With a New CEO, How Much Is Eucalyptus Worth? $100M?”

  1. I don’t think Eucalyptus will have as much trouble making money as more ‘vanilla’ pure-play open source projects.

    There is a good opportunity for them to create an ecosystem around their offering, that offers them revenue streams from areas other than the core product and core support.

    This is ESPECIALLY the case for green field builds.

    Not to say it isn’t a challenge, but I think it’s much more manageable than say a SugarCRM or a MySQL.

  2. I agree with the point that MySQL came into it’s own along with the web and became pervasive. Which begs the question, “Will Eucalyptus become the defacto open source cloud platform and will the same model of converting a very small part of the overall platform work for them?” Or am I not getting the nuances of their business? The question I have is the enterprise upgrade extremely compelling or do they need a huge user base where they monetize some very small portion percentage? I do agree that the technology is very interesting but is that enough to make a viable business?

  3. tolleson

    Eucalyptus is a company that has a terrific business model and market opportunity. Unlike some of the nonsense you guys write about this is a serious company.

  4. Bill Hurst

    MySQL came just before the Web 2.0 Revolution? The word “before” is absolutely correct…
    Perhaps eucalyptus comes just before the Cloud 2.0 Revolution. Who knows…