Cloud Native Open-Source Tools Are Ripe for Gen Z VCs
Since the CNCF kicked off its very first and most successful project to date, Kubernetes, we have seen an influx of other successful projects get accepted and accredited by the organization.
I recently realized that these open-source tools often require venture capital funding. But instead of investing in another Silicon Valley-style startup, there is an exciting opportunity for VCs to look at investing in new and upcoming open-source projects.
The cloud-native open-source space is ripe for Gen Z investors’ interest — the next generation of investors that have the potential to revolutionize the industry.
Gen Z investors have an entrepreneurial spirit, a strong understanding of tech, and a desire to get involved in projects that could potentially make a difference in the world. These younger investors are often more fiscally responsible.
What CNCF Niche
I am specifically exploring Cloud Native Networking projects in the runtime category. These are tools to run a container and the resources associated with it. Think of projects like Istio and Service Mesh. [1]
I’m approaching these projects as an open-source contributor and also a VC too.
CNCF’s Technical Oversight Committee
These are top-tier engineers from the leading companies in the cloud native computing space, including Google, Spotify, Microsoft, etc. They are also frequent contributors. A level I hope to achieve. They review new projects, define standards, etc.
Level of Projects
Sandbox: These projects disrupt the industry with their tool. The CNCF TOC also believe they warrant experimentation. The projects also extend across the CNCF stack. Then they only have a few contributors and are ripe for VC money to help them do PR, attracting more contributors.
Incubating: These projects are already used by more than 3 independent adopters. Also, they have frequent contributors.
Graduated: A common sign is that these projects have committers from huge organizations.
It's interesting to see that the project level is a signal of what Enterprises should have adopted them. Signals like the rate of adoption for the project, a healthy rate of incremental changes to new innovation with proper testing & validation, then how many committers from multiple organizations are contributing to it.
This is just my brief exploration into the ecosystem. I hope to dig deeper as time goes by.
Is the CNCF the New Y-Combinator?
This is what is in a few Cloud Analysts’ mouths. This is because the CNCF seems to be acting like Y-Combinator.
Briefly, what does Y-combinator do?
They help Startups take off. Just like the CNCF helps open-source projects take off too.
But Y-combinator differs in other ways too.
YC invests in Startups
They help founders deal with investors and enterprise buyers.
They help startups deal with legal work.
The investment y-combinator puts into Startups is what makes them differ from the CNCF.
However, we might see the investment process similar when venture capitalists invest in an open-source tool.
Seed
Series A
Growth (Series B & C)
Scale (D+)
These sought investments as said before, can help an open-source tool market itself better, and even hire top engineering talent to maintain and develop the open-source tool until it gets to the Graduate level.
So in conclusion, the CNCF is not really the same as Y-Combinator but since both are aimed towards helping projects take off, CNCF can be thought of as a close relative. They do however both provide a platform for founders/developers and investors to become involved in projects. They both also require some investment to be successful.