At OpenLogic, we've recently been talking to various venture capital firms about our business model.  These discussions have been interesting because OpenLogic's pioneering business model doesn't match that of the "typical" commercial open source vendor.  As we've been thinking about how to best communicate our business model as an open source aggregator, I have noticed that "pioneering" and venture capital don't always go together.

That may seem surprising — since venture capital firms are essentially paid to place bets and take risks.  But, VCs also want to manage risk by placing bets on ideas that have the best chance of succeeding.  In many cases, VCs will place bets on business models that are the same as already proven business models.  In the case of open source, they look to the business models of startups like JBoss, MySQL and Zimbra — companies that focus on a particular open source technology or application. 

There's nothing wrong with that approach.  If I were a venture capitalist, I would also look at what has worked in the past as a way to find ideas that might work in the future.  I'm there will be many more successful companies following in the footsteps of those open source pioneers.  However, it won't help VCs find the new pioneers.  Often the companies that blaze the trail on a new business model reap significant financial benefits over the next wave of followers.  Companies like RedHat, Salesforce.com, ebay, Facebook can provide a significant premium to investors because they figure out a business model that works and are able to optimize it and capitalize on it ahead of others. 

The question then becomes, how do you pick the new pioneers? 

Although I've posed the question, I don't think there is a formula.  I think there is a good approach to finding pioneers though.  For VCs that want to invest at least part of their portfolio in pioneers, filtering business ideas and models through the lens of customers offers the best opportunity for success.  Which ideas address real customer pains or needs or desires?  Which business models provide reasonable ways to address those customer pains? 

I believe this requires VCs to temporarily remove the filter of "what has worked before" in order to determine "what will work next". 

What are your thoughts?