Chetan Puttagunta and Jeremiah Lowin – Open Source Crash Course

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (1:21)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:46)
My guests this week are Jeremiah Lowin and Chetan Puttagunta. Jeremiah is the founder of prefect.io, an open source software company where my family and I are investors and Chetan is a partner at Benchmark Capital. Both are past guests and good friends.
I asked them on to help the audience understand the open source software business model. I've been fascinated with this model in which companies give a huge chunk of their work and value away for free to a community of developers and then make money by building additional tools, functionality and services on top of their free and open platform. While this may strike you as a wonky discussion on a niche software topic, I think it is valuable for everyone because the ideas can be applied to more than just code. I view much of my own activity as open sourcing investment research and knowledge.
It's also important because much of the world's technology is built on top of open source projects. I hope you learn something new about this emerging category. Please enjoy.
So Chetan and Jeremiah, thanks so much for doing this with me today. Our topic is going to be a single topic deep dive on open source software and the businesses that surround open source software, which has become a category that I'm personally fascinated in. I know obviously Chetan, you've invested in some of the biggest companies in this space and Jeremiah, you're building one. So I thought this would be a neat group to get together. As a jump off point, Chetan, I would love for you to describe sort of the originator business in this space, which was Red Hat as a way for the audience to understand sort of what's distinct about this sort of business model.

**Chetan Puttagunta** (3:12)
I think one of the things that's pretty interesting in the history of the firm that I work for, Benchmark, is that Benchmark was an investor in Red Hat in the very first Benchmark Fund. So Benchmark One was an investor in Red Hat. And the story of Red Hat itself is particularly fascinating. And as we look at what has happened 25 years later, frankly, in terms of the evolution of open source, which we'll get into here, it's pretty interesting how far sort of open source has come and how sophisticated it's become from where Red Hat started. And Red Hat is a particularly interesting story because in 93, Red Hat was actually two different companies that came together.
One was a catalog business that sold Linux and Unix software accessories and then a second business, which was actually Red Hat Linux, which was its own Linux distribution that Mark Ewing had started. The two companies actually came together in 1995 and that was how Red Hat, the software company, came together. Red Hat became public in 1999 and lost in sort of the history, but Red Hat had, I think, like the eighth biggest or the tenth biggest first day gain in the history of Wall Street. It sort of brought this open source business into the limelight in such a dramatic way. And what's also pretty interesting about the first Benchmark Fund is that the group had also invested in MySQL, which had also been pioneering the open source business, which, of course, then Sunbot. I think that Red Hat, starting in 95 and then four years later, becoming a public company and having this huge spike on Wall Street, it being categorized as this unbelievably disruptive force where you had this open source operating system and you had a corporation that was behind it that had the wherewithal and the balance sheet to support the R&D efforts to push the open source community forward.