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We’re seeing a paradigm shift in open source business models, said Benchmark Capital Entrepreneur in Residence Rob Bearden at today’s InfoWorld Open Source Business Conference. In the past, open source companies normally moved into a mature market dominated by a few large, complacent players, then found traction by offering innovation and low (or nonexistent) cost.

Now, however, there are new opportunities for the next generation of open source companies: Rather than moving into existing fields, they’re identifying new problems and being the first to address them.

Among other things, moving into a fresh market means you can start making money earlier, because you’re adding value sooner, Bearden said.

“Then your ability to monetize is not only earlier, but longer,” he said.

(It would’ve been nice to hear Bearden offer some example companies. Unfortunately, the audience question about this was a bit muddled, and Bearden seemed to just name open source companies in general, not ones on this cutting edge.)

Bearden’s predictions came at the end of his talk about how to build a business model from open source — and how to attract investments. Open source will certainly help you get money from Benchmark; in fact, Bearden said that with a few exceptions, the venture firm will now only fund companies that are either open source or offer software as a service.

The two big themes of Bearden’s talk will be familiar to the open source community. First, he said open source isn’t a business model, just a distribution strategy “to create broad awareness and rapid adoption”. In other words, once you’ve decided to go open source, you still need to work out a way to make money. (Someone in the audience objected that open source is actually a lot more than a distribution strategy, but Bearden responded that for the purposes of your business model, that’s all it is.) The key to that business model is finding the right point where you’ve got a solid (free) basic product, have built up an audience and can start charging for added features or services.

Second, Bearden said, “Community is everything.” The best way to build that community? Start by recruiting the developers.

Bearden repeated that point at the end of his talk, when he was pressed on what exactly Benchmark is looking for when investing in open source companies. His answer: “It depends.”

“What it would depend on is the space,” Bearden said. “We want to see a space approaching that critical mass of community.”

Benchmark Capital, the respected Silicon Valley venture capital firm that backed eBay, continues a hiring spree: It has just hired three new entrepreneurs-in-residence, and an executive-in-residence.

And it could herald a new model for the way VCs work in Silicon Valley: By outsourcing, or perhaps more accurately, insourcing.

The new appointees include Rob Bearden (top left), who was a senior executive at JBoss, Red Hat and OpenSpan; Lewis Cirne (top right), founder of Wily Technology; Dan Finnigan (bottom right), a senior vice president at Yahoo, responsible for HotJobs (yep, another evacuee); and Keith Krach (bottom left), who co-founded Ariba, who will serve as a CEO in residence.

Few firms have hired as many EIRs as rapidly as Benchmark. EIRs are entrepreneurs who reside at a venture capital firm’s offices to look for a great idea, and when they find it, Benchmark will then get a first shot at funding it. CEOs in residence are executives that a venture firm appoints to help run one of their portfolio companies, usually on an interim basis.

Benchmark is known for its democratic structure among partners; the partners don’t hire any associates or principles to do grunt work for them like many other firms do. The firm’s partners say they want to avoid hierarchy.

However, it appears Benchmark is relying on an increasing number of such EIRs to help source deals — so it really is a sort of “outsource” model to the VC world. Though, because they’re working in-house, we’ll call it “VC insourcing.”

I dropped by Benchmark’s offices today to meet with Steve Spurlock, a Benchmark partner, and also met with Cirne and Finnigan. Spurlock didn’t really agree with my interpretation of what was happening. He insisted Benchmark hasn’t purposefully increased its reliance on EIRs, but that it has instead been opportunistic, hiring great executives when the occasion arises.

Typically, Benchmark expects the EIRs to find their ideas and develop them within six months, though their residence times vary. While Benchmark has hired numerous EIRs lately, previous EIRs keep leaving the nest. In June of last year, for example, former Google employee Bret Taylor and Jim Norris joined Benchmark and incubated FriendFeed, a social network information sharing site. They then left Benchmark five months later to build the company full time. Other recent notable EIRs include Nirav Tolia, who has yet to emerge publicly with his idea, Mike Cassidy and Dave Goldberg.

Here are some notes on what the new guys will do:

–Bearden will evaluate new open source business opportunities.

–Cirne told me he’ll concentrate on open source and web infrastructure companies. Whenever new platforms emerge, such as today’s open source and software-as-a-service trends, web and management infrastructure companies grow up around them. Years ago, he won big by betting on the Java platform, when he created Wily around it.

–Finnigan told me he’ll focus on the Internet advertising market. He thinks there are large opportunities in vertical marketing algorithms for advertising. He thinks the advertising industry can be boiled down to about 13 or so industry verticals, and that they’ve been underserved, but that new technologies will change that. Companies are beginning to exploit user profiles to allow for better targeting. Local advertising, too, has remained underserved, though Google changed that recently, he said — leading to big possibilities when you combine efforts that are both vertically focused and local. Recruitment, in particular, intrigues him. Companies like Jobfox, and companies doing video speed-dating are helping create new ways of matching that didn’t exist before, he said.

Benchmark Capital, one of Silicon Valley’s leading venture firms, has just finished raising its sixth fund, totaling $500 million, the firm told VentureBeat earlier today.

Partner Steve Spurlock said the firm’s partners haven’t changed, and that its focus will remain on enterprise software, internet and security companies. The latest fund is somewhat larger than the firm’s previous 2004 fund of $425 million, in part because the firm has added two more partners, but also because it wants to invest in later stage deals (which requires larger amounts of money) opportunistically.

The firm hit it big in the late 1990s with eBay’s IPO, was somewhat barren during the downturn immediately after 2000, but has had a roll of profitable returns on investments lately: MySQL, Zimbra, Vontu and Tellme have all been acquired for large multi-hundred million dollar amounts. Other recent IPOs or sold companies were Infinera, Business.com, Good, Avamar, Entrisphere and Ingenio.

Benchmark is known in the valley for having a very equal partnership structure — where each partner owns the exact same portion of profits, and there are no senior versus junior partners.

Update: Turns out, PEHub got to this story before we did.

If you’re an entrepreneur, you may want to avoid the Web 2.0 area, which is littered now with unpromising me-too ideas. You may want to consider something less sexy — data security, for example.

Vontu, a six-year-old Silicon Valley (Cupertino, Calif.) company which makes software to avoid data loss, said it has been acquired by Symantec, the maker of Norton security software, for a cool $350 million. That’s ten times the amount invested in Vontu by venture capitalists, meaning that management and investors both saw a nice profit.

Symantec said it plans to use Vontu to help customers prevent the loss of confidential information wherever it is stored.

There are lots of companies doing something similar to Vontu, but they all seem to have done well. There’s Oakley Networks (which was bought by Raytheon for $193 million), Port Authority (bought by Websense for $90 million), and others that are still private, including Tablus, Reconnex and Vericept.

Investors in Vontu include Venrock and Benchmark Capital, which had the lion’s share because of early investments, followed by U.S. Venture Partners and General Motors Asset Management.

This is a win by Benchmark partner David Beirne, who tried to hit big during the Internet boom with bets on companies like WebVan. WebVan, of course, was sexy, but was a notoriously bad investment, soaking up more than $1 billion in invetor’s money before going out of business. Vontu, on the other hand, is an example of how patience — over many years of toiling — can lead to solid, robust results. Benchmark first invested in 2002, after the hype of the bubble was long gone.

Vontu said it is close to profitability and expects to make $43 million in revenue this year.

Yahoo is set to announce the acquisition of open-source email provider Zimbra, a company that has made headway providing services for other big companies such as Comcast. The news was first reported by AllthingsD, but there was no price mentioned. It’s rumored to be $350 million, according to Techcrunch.

San Mateo, Calif.-based Zimbra’s clients include ISPs and a number of colleges. It was backed with $30.5 million in three rounds from Benchmark Partners, Redpoint Ventures, Accel Partners, Sumitomo and Duff, Ackerman & Goodrich.

The great thing about Zimbra is its flexibility (see past coverage). Its Ajax interface allows nimble switching between calendars, contacts and other features, including mashups so that addresses within emails can pop up as Google maps — although those who have used the service say the user experience is mixed. It kept promising a consumer version, but until now hasn’t delivered it, thus limiting its popularity.

Benchmark Capital and Redpoint Ventures, in particular made a killing. They each owned a quarter of the company after investing about $9 million, the firms told Dow Jones.  They each receive roughly $90 million with this deal, giving them a ten-fold return in four years.

This is the latest result that helps Redpoint redeem itself. The company launched with great fanfare near the top of the bubble in 2000, but didn’t produce anything until about a year ago.

Accel invested later, in a $15 million second round in 2005 and Duff Ackerman & Goodrich, Inventures Group and Presidio STX invested as part of a $14.5 million third round last year.

Two more high-level Google engineers have left the Googleplex — this time to join well-known venture capital firm Benchmark Capital.

Bret Taylor (left) and Jim Norris (right), two of the masterminds behind Google Maps and several other Google products, have joined the firm as “Entrepreneurs in Residence.” This gives them paid positions to hang out at Benchmark’s offices on Silicon Valley’s Sand Hill Road and think through starting a business. They have a specific idea in mind, but are secretive about it, telling VentureBeat only that it’s a “consumer Internet” company.

Benchmark has been loading up on EIRs lately — we reported last week on the hiring of Mike Cassidy for a similar position — in part because it is more aggressively investing in earlier companies. It now has four EIRs, up from two on average over the years. The EIR arrangement lets the firm build goodwill with entrepreneurs. In return, Benchmark expects entrepreneurs will look to Benchmark as their first source of funding. However, that requirement is not part of the contract, stresses Peter Fenton, a Benchmark partner.

Fenton looked up Bret Taylor last year. The two stayed in touch, and three months ago, Taylor indicated he was ready to start a company. Jim Norris was always in the picture, too, because he and Taylor are virtually inseparable. Both 26, they studied together at Stanford, sharing most of the same computer science courses, and have stayed together since.

There were six Google employees responsible for creating Google Maps. Taylor was the overall project leader, while Norris was responsible for the Web server side of the product. Google Maps became hugely popular, one of the first to be syndicated widely across the Web in the form of “mashups,” and is now stitched inside of tens of thousands of sites. The two joined Google in 2003. While early enough to benefit them considerably at the IPO, it wasn’t enough to give them the many millions that earlier employees enjoyed. They’re likely to want help with venture backing for their company, they said.

However, they said the move to Benchmark is really about the experience the firm offers. “It’s not about the money,” said Norris. While the pair are confident in their ability to build their idea, they want help learning what it takes to run a business, he said.

Like Cassidy, the duo will be able to sit in on pitches made by other entrepreneurs to Benchmark. Is there a risk they will steal ideas, as one commenter asked in our Cassidy post? Benchmark’s Fenton said their role will be disclosed to entrepreneurs, who will have the option of requesting that they not partake of the pitch. Fenton said most entrepreneurs welcome the opportunity to have EIRs in on meetings; it adds to the discussion.

Aside from Google Maps, the pair also worked on the Google Maps API, and several products that emerged from the group, including Local and Satellite Maps. In 2006 they each received the Google Founders’ Award, the highest honor given a Google employee, for their work on maps.

Benchmark’s Fenton said the plentiful capital available in Silicon Valley for mid-stage financings makes it more lucrative for Benchmark to invest in earlier stage companies. Valuations are low when companies are young, so Benchmark pays less to own a stake in those risky seed-stage companies. When those companies mature, they have an easy time raising money from other venture firms.

Jeff Jordan, a former eBay and PayPal executive, has joined San Francisco online reservation service OpenTable as chief executive.

His mandate is to help take the company to the next level, now that it is seating two million diners a month.

OpenTable has said very little about its financial performance. In an interview with VentureBeat Tuesday Jordan declined to mention whether the company is near profitability. However, the company says 7,000 restaurants use the service, and that it has seated 40 million diners since launching in 1998.

Jordan said he enjoys helping companies scale, just as he did with eBay and PayPal. He led eBay’s North America operations for four years until 2004. A CEO change was made at OpenTable, Jordan said, because Thomas Layton, who led OpenTable for nearly six years as chief executive, considers himself a start-up guy. He remains on the board.

Restaurants pay a monthly fee for OpenTable’s combination of hardware and software (you often see the machines at a station at the front of restaurants, where managers can update the system in real-time). It also charges a fee per diner seated. That fees vary according to the size of the restaurant and the number of machines it orders.

The company is backed by Benchmark, and Layton together with Benchmark’s Bill Gurley helped recruit Jordan to the company. Benchmark had originally helped recruit Jordan to eBay in the first place. Indeed, Jordan said OpenTable feels like eBay and PayPal, offering value to small business owners and consumers by linking them up.

In that way, Benchmark as firm feel like a one-trick pony. It has invested in so many online marketplaces you’d think that is all it has up its sleeve. However, it has created enough successes that you can’t criticize the strategy.

You can’t help getting the feeling that Benchmark is putting the pressure on OpenTable. It has raised a significant $50 million in funding from Benchmark Capital, Impact Venture Partners and Integral Capital Partners.

Updated

Collactive is a new company that lets users mobilize friends and others to get more attention for causes they care about by overwhelming news-ranking sites such as Digg.

Users identify articles or video clips they care about, and then specify what actions they want their friends to take, such as voting for the video or article on Yahoo, Digg, Reddit, YouTube and other news sites. Collactive blasts the request out to the user’s contacts, and makes it easy for them to vote for the story on the news-ranking sites. See screenshot below. There’s a story about it today in the WSJ.

It provides links to the user’s cause “bulletins” so that friends can post it on their Web sites. Collactive, a Delaware-registered company with operations mainly in Israel, is backed by Sequoia Capital’s Israeli office (Update: funding amount is $2 million). The service is free for individuals, but will charge businesses, politicians and some nonprofits for usage. Apparently, it has already been used successfully by the Genocide Intervention Network, a Washington, D.C. nonprofit, to boost visibility about the conflict in Darfur, Sudan.

Notably, it is run by Eran Reshef and Amir Hirsh, the co-founders of Blue Security, a company that developed an innovative anti-spam technique: It would deluge spammers by sending them massive amounts of spam back. While momentarily successful, a Russian based spammer counter-attacked, and brought Blue Security to its knees about a year ago. Ironically, the co-founders have joined the other side, using what they’ve learned to essentially spam news sites under the pretense that is for good causes. Blue Security had been backed by Sequoia’s rival, Benchmark.

Red 5 Studios, a new start-up formed by the team that built popular online game World of Warcraft (WoW), has raised $18.5 million in venture capital to create online games that integrate more social networking aspects from the outset.

The funding comes from Benchmark and Sierra Ventures. Red 5 Studios is based in Aliso Viejo (southern California), not far from the team’s former employer, World of Warcraft’s parent Blizzard. The new company is led by Mark Kern, team leader on developing WoW, and two other Wow creators. The investment is significant because it comes at a time when gaming has become popular and investors hope to leverage the power provided by social networking on the Web. Last week, we reported that Shawn Fanning is forming Rupture, to form Web communities around games.

The investment is the latest move by Benchmark partner Bill Gurley to invest in interactive entertainment (he is an investor in Jamdat, acquired for $650 million last year, and Second Life, which has become hyped lately). Benchmark Europe is also an investor in Sulake, maker of the popular interactive game Habbo Hotel. Gurley told VentureBeat his interest in the sector began during his travels to China several years ago, when he visted gaming companies Shanda and TenCent, but was unable to invest. He scoured the sector back in the U.S. and became interestng interested in Blizzard’s team, seeing a drive and focus he hadn’t seen in other companies.

Red 5 wants to become the leading studio for popular MMO games (MMO stands for Massivey Multiplayer Online games), where thousands of players play at one time.

Historically, Gurley says, the winners in the gaming space have been publishers, rather than independent studios. Gurley says he thinks Red 5 will change that. Red 5 Studios’ first title is under development; it is financed and will be distributed globally by Webzen, which has given a large sum of money — totaling more than Benchmark’s investment — but it is not an equity investment.

MMOs have so far been a niche sub-sector of the games industry, accounting for less than ten percent of the industry’s developers. But WoW has grabbed the industry’s imagination, Kern said. The Red 5 team will focused on the PC, not the console.

Benchmark’s cash will help pay for an extensive back-end infrastructure, including server, database and networking needs. In fact, $18.5 million is not much, Kern says. Movie budgets are getting to the $60 to $100 million range, he noted. “Games aren’t there yet, but they’re expensive to create.”

The team has been together since January, and has been self-funded. Kern said staying at WoW was not an option. He and his team hankered to create something new — namely blend games with Web 2.0 social networking.

So how does he plan to make money, if the game is opened up to the wider Web community, and not controlled like WoW? Kern says continues to think through this question, and has ideas on paper, but asserts that the development process will take years. “It’s really early,” he said.

Moreover, while Napster’s Fanning is creating a company, Rupture, to create social networks around existing games, Kern believes Fanning will get only so far without tight integration with games and help from developers. “They’re too closely guarded, and worried about their value leaking out,” Kern said of publishers.

A total of nine people have joined Red 5 from Blizzard. Gurley calls the new company “the Pixar of online games.”

Updated

Zimbra, the open source messaging software company, has just announced that it has sold four million Zimbra mailboxes, an impressive milestone for the three year old San Mateo company.

Zimbra, you’ll recall, gives you an email platform that implements the latest AJAX majic. It started last year by letting you do things like pull up Google maps by scrolling your mouse over an address written in the e-mail, or pop up your calendar when you mouse over a date in an e-mail, or a day of the week — avoiding the need to clunkily switch back and forth from your e-mail and your calendar.

It is one thing to look good, quite another to execute. Since then, it has come out with Zimlets, which let developers do even more. This has proven unexpectedly popular with Internet service providers, Satish Dharmaraj told us today. “I can’t believe what we sold this quarter,” he said. He wouldn’t provide revenue numbers.

He said service providers are hosting Zimbra’s email service for individuals and small and medium sized companies.

The providers like Zimbra because it is “skinnable,” meaning it can be tailored for a consumer feel, or for a business feel. Service providers can choose to monetize the email service by running Google Adwords or Adsense, for example. Zimbra gives them a way to make a cut if a user clicks an ad from within their email to buy an iTunes song for 99 cents, or a book from Amazon. Like Gmail, Zimbra indexes every word within an email, and so knows what is being written, and can offer relevant advertising or other services — depending on what the service provider wants.

Before and after Zimbra’s launch, there have been numerous companies seeking to improve on Microsoft or other email services.

Zimbra’s product is compatible with Microsoft Outlook and other popular e-mail platforms, such as Apple Mail. Zimbra really runs the back-end of the e-mail service, making it a competitor to Microsoft’s e-mail server offering, called Exchange. But Zimbra can keep the familiar “front-end” part of Microsoft’s e-mail platform, which users interact with, called Outlook.

Zimbra has been selling its high-end “enterprise” mailboxes at $28 a pop, but these are meant to compete with Exchange and have the bells and whistles. Most of Zimbra’s uptake has come through service providers serving individuals, however. Those service providers can have up to 20 million users, and Zimbra gives them a major discount based on volume. (In other words, you can’t multiply 4 million by $28 to get Zimbra’s revenue; not even close.)

Besides service providers, Zimbra adopters have included dozens of universities and other companies, such as Digg.com and Times of India (the announcement lists many more). As noted before, Zimbra has raised at least $30 million from Benchmark, Accel, Redpoint and others over three rounds.

Yelp, the Web site offering user-generated reviews of bars, restaurants and other places, has raised $10 million in venture capital from Benchmark Capital.

We recently mentioned Yelp’s wave-making with its parties.

Yelp, like other recent Internet companies, is challenging incumbent sites like Citysearch by developing a community of local reviewers. By encouraging loyalist users to review often, Yelp bets its site will be fresher and more compelling.

It is noteworthy that the venture money comes from Peter Fenton at Benchmark. We recently featured Fenton’s argument that companies should only get funding after they’ve achieved some traction with customers. Yelp had 1.5 million unique users in September, a 200 percent increase from January, the company says. So it fits in the “post-adoption” category, Fenton told us today.

Fenton will join Yelp’s board.

After launching initially in SF, the SF-based Yelp has since launched in Boston, Chicago, Los Angeles, New York, San Jose and Seattle.

Yelp’s other investors include Bessemer Venture Partners and PayPal Co-Founder Max Levchin.

Rather than unleashing armies of people to go out and build a massive repository of reviews, like Citysearch did, Yelp has managed to build a local community that keeps reviews fresh, giving Yelp a more lively feel, says Fenton. And with more reviews, you can begin to parse them in different ways — for example classifying them to show which one are written by 20-year-olds, and which ones by 40-year-olds. That way, users can judge reviews based on their preferences.

Fenton said he made the decision to invest after talking with several locales, including Quince, a restaurant in San Francisco. He asked the waitress if she’d heard of Yelp. “Have I heard of Yelp?,” she asked. “I obsess about Yelp.” Fenton said she described in detail a negative review, and remembered the date the customer visited, and what went wrong that evening.

Fenton says $14 billion is spent each year on yellow page advertising every year in the U.S., and that he Yelp can make money by getting advertising on its sites from local establishments. Yelp is not yet making money.

The company had raised $6 million previously.

When asked about the girl-kissing-girl photos appearing from a recent Yelp party, chief executive Jeremy Stoppelman said the actions weren’t staged, and that the photographs underscore the “festivities and celebration and excitement going on in the valley” right now. The parties help to drive Yelp’s community building, he said.

Besides Citysearch and Yahoo Local, there are also new competitors like Judy’s Book and Insider Pages. Stoppelman said that the relative depth of Yelp’s community is what encouraged Benchmark to invest.

oDesk is a start-up that provides a marketplace for companies to hire developers online and then keep near unprecedented control over them remotely.

The Palo Alto company has just raised $8 million more in venture capital.

Benchmark Capital, a Silicon Valley firm known for its backing of auction site eBay, led the round. Bechmark has now invested in numerous marketplaces, including LogoWorks, eBags and Ingenio.

oDesk has some momentum, with revenues growing at 10 to 15 percent a month, says chief executive Gary Swart.

What surprised us, when Swart demonstrated the product for us, is the sheer amount of surveillance and communication tools that oDesk provides to employers. When an employer selects a developer for a project, oDesk gives the employer screen shots of the developer’s computer six times an hour, at random times. It takes camera shots of the developer at work, to verify he is at his desk. It tracks their key strokes, and provides you access to the code they’ve produced — all in an effort to make it even easier to manage workers “than if they are in the same office,” as the company puts it. Before you select a worker, the marketplace dashboard gives you all sorts of metrics about how a developer has performed in the past, tests passed, how much they cost relative to others, and so on.

Check out the tour here.

The software is significant because one of the complaints so far about outsourced work is that it can be unreliable. Companies are comfortable only negotiating small projects with workers in Asia, Eastern Europe or Africa. They set a price for the project, and hope that it works out. But for bigger projects, setting a price is difficult, because project can take innumerable turns, and both sides get unhappy. Companies don’t want to pay by the hour, because they don’t know how productive the workers are. oDesk solves that problem. If a developer doesn’t sign on to oDesk’s system and work, they don’t get paid.

This is the second round of funding for oDesk. Benchmark made an aggressive offer of funding, even before oDesk had started looking for funding, Swart said. Benchmark did quick diligence, offered a nice bump in valuation, and did not disrupt oDesk’s team in the process, which Swart said made it easy take the cash. Benchmark’s Kevin Harvey has experience in the marketplace area, having invested in Ingenio, a company which provides software customer support via a marketplace.

The market for outsourcing is growing because online tools such as oDesk give employers easy access to the cost differences of developers between nations and regions. Technology allows more people to stay at home to offer their labor through these sorts of marketplaces, and has bolstered “pay-for-performance” models.

Harvey said the product impressed him after some companies Benchmark has invested in tried out the product and liked it.

There is heavy competition out there. Big players like Infosys and Wipro dominate the market, but oDesk is trying to undercut them — targeting smaller and medium sized companies who haven’t dared to outsource yet. There are players going after smaller companies, such as Elance and Rentacoder.com, too, but they don’t provide the same level of surveillance. (We first mentioned oDesk here, when they raised $6 million last year.)

Sigma Partners and Globespan are also investors, and participated in this round. Until now, Google ads have been the main way the company has acquired users.

The workers in oDesk’s marketplace includes programmers, system administrators, web designers, technical writers and QA engineers — and they reside in more than 50 countries, the company said.