VentureBeat

Sun said today it will acquire open source database company MySQL for about $1 billion, a deal that would keep Sun at the center of the thriving open source software industry (see the announcement here).

The deal is for $800 million cash and $200 million in stock.

Simultaneously, in big news for the corporate “enterprise” industry, database software giant Oracle said it had reached an agreement to acquire middleware giant BEA for $8.5 billion, a few months after its original offer offer of $6.7 bilion was rejected by BEA.

Both deals are significant for the Internet industry, but the first is most important for the start-up industry VentureBeat covers.

MySQL has become increasingly popular as a low-cost database (its basic version is free) for Web applications. The database is the core of a Web company’s information system, a sort of container of software. VentureBeat itself, for example, uses MySQL, for its database. VentureBeat uses the Wordpress blogging software, to manage the content of articles, which works hand in hand with MySQL. MySQL claims 10o million copies have been downloaded, though some users are bound to have downloaded several versions, and the active number is likely smaller. Still, 50,000 copies are being downloaded each day, the company says.

The flip side of this, though, is that MySQL has never been a major generator of revenue. The database market is huge, with Sun estimating it as worth $15 billion. However MySQL has gotten only a sliver of that. We use MySQL, but we aren’t required to pay for it, and so we can’t be considered a “customer.” Its ubiquity has served it well, however, and it has tried to make money from offering support services. While some questioned whether it had the muscle to do well in the public market, insiders said it had the chops to do so. Last year, it signaled it planned to go public.

“MySQL clearly could have gone public,” Kevin Harvey, partner at Benchmark Capital and chairman of MySQL told VentureBeat this morning in a call. “Everyone felt that this [Sun acquisition] was a better outcome for the MySQL community, and better financially as well.”

With his investment in MySQL, Harvey (pictured left) has solidified himself as the venture industry’s leading investor in open source. He also previously backed Zimbra and RedHat, two big wins.

With MySQL part of the modern infrastructure software being standardized in company data centers, Sun’s reach into large corporations with its server products makes it the best partner to help push MySQL’s adoption, Harvey said.

This also keeps Sun in the heart of the thriving open source movement, and the growing Web application business centered around MySQL. MySQL has become the dominant database within the most popular “stacks” of open source services. It is the “M” in the LAMP, MAMP, and WAMP platforms (Linux/Mac/Windows-Apache-MySQL-PHP/Perl/Python). That’s where most of the growth is. Modern companies are designing their servers with this Web 2.0 stack from the beginning. MySQL, for example, counts Facebook, Google and Yahoo as its customers.

Oracle’s database products, meanwhile, are becoming more and more the domain of large companies that require extremely robust service. In the late 1990’s, you weren’t taken seriously as a company if you didn’t have an Oracle database. Now, if you’re a new company, its not worth spending resources on Oracle. For 90 percent of new “quick and dirty” applications, MySQL is the way to go. “Oracle has the innovator’s dilemma,” Harvey said. “They have a business model that doesn’t fit the new web economy. They’re a prisoner of their business model.”

Will Oracle buy Sun? “They’re so acquisitive, I wouldn’t rule anything out,” Harvey added.

BEA, Oracle’s latest target in a string of 30 companies acquired over the last three years, is one of the market’s leading application servers, and is popular mainly within large companies. But still, it isn’t part of the fast-emerging, low-cost open source movement. JBoss (bought by RedHat) is a major player there, and there are others, such as Interface21.

Sun, meanwhile, has a range of open source products, from the office application suite OpenOffice, to the server product OpenSolaris and application language open Java.

One question is how Sun will deal with MySQL’s licensing. MySQL is owned by the for-profit company MySQL AB, headquartered in Sweden and Silicon Valley (Cupertino, Calif.) which is owns the copyright to the codebase. However, the MySQL project’s source code is freely available under terms of the GNU General Public License.

Sun said MySQL will be integrated into Sun’s software, sales and service organizations, and will be distributed through all of Sun’s channels including its OEM deals with IBM and Dell. MySQL’s CEO, Marten Mickos (pictured here), is expected to join Sun’s senior executive team. The deal is expected to be finalized in the third quarter.

MySQL was backed with about $40 million in venture capital since 2001, led by Benchmark Capital, which should earn a smart return from the acquisition. Other investors included Intel, Red Hat Ventures, SAP, Scope Venture Capital, Index Ventures, and Eficor Oyi.

What the deal also removes doubt that open source is great area for venture investing. Benchmark, in particular, has benefited from the trend, having invested, as mentioned, in Redhat and Zimbra. Benchmark partner Peter Fenton also backed JBoss, but did so while he was at Accel.

updated
AT&T has agreed to acquire privately held Ingenio, a provider of so-called “pay-per-call” technology, for an undisclosed amount.

Ingenio lets businesses bill clients when they call for information, instruction or other educational purposes. It also gives businesses a way to advertise online, letting them provide their phone numbers within online ads.

When customers call the number in the ad, Ingenio tracks the frequency with which the numbers being called (it can do so, because it provides unique phone numbers for this), and charges a fee accordingly.

San Francisco’s Ingenio biggest backer was Benchmark Capital. While the amount of the transaction wasn’t disclosed, Benchmark’s partner Kevin Harvey (pictured here) said the firm made good money on the deal. Harvey has already had two big hits this year. He was the lead partner on Tellme, another voice company, bought by Microsoft, for about $800 million and Zimbra, the open source messaging company bought by Yahoo for $350 million.

A fourth company of his, MySQL, had been talking about going public, possibly by the end of this year. If it does, this would make it one of the most prolific years on record, among Silicon Valley VCs.

The Ingenio transaction is expected to close in early January 2008.

AT&T said it plans to integrate Ingenio’s features into its directory service and local search advertising portfolio, including the YELLOWPAGES.COM Network, AT&T Real Yellow Pages and 1-800-Yellow Pages.

Ingenio had its ups and downs. At first known as Keen, the company raised about $109 million in 1999 and 2000, at the height of the Internet bubble. In 2002, chief executive Karl Jacob was ousted by the board, a new executive came in and changed the name to Ingenio.

Other investors include Amerindo Investment Advisors, Criterion, Impact Venture Partners, Integral Capital Partners and Vulcan Ventures.

Update: Vinny Lingham provides a sinister interpretation of the acquisition, i.e, that AT&T wanted Ingenio’s patents to help it muscle out other players.

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.

Jonathan Abrams, the founder of path-breaking social networking company Friendster, has launched a test version of his new site, Socializr.

The site says it is “a free web service for sharing event and party information with your friends. Use Socializr to plan the ultimate social life!” It calls itself a “Web 3.1″ company, and says its motto is “Don’t be boring.”

It is a closed test, so you won’t see much when you go there now. But Steve Poland, an Internet consultant in Austin, Tex. somehow got access to the wide-open public-side of the site, and gives a tepid initial review. He got in, he told us just now, by playing with the profiles (he added a “/1″, and got here, which, it turns out, is Abrams’ own profile — which we too got into to see). Steve was first to screen shots and everything, so it is worth going to his site and looking at his description of Socializr’s full monty.

It’s a very clean and simple design — looks like what MySpace looked like when it originally launched (before the mass customization by their users). The typical social networking features are included - friends list, comments on friends/events, event invites w/RSVPs, photo posting/sharing for users and events, and forums. Organizations can have their own webpage for posting events. (As of this writing I did not see any e-commerce capabilities for buying tickets to an event). There is a link to “IM this event”, but it doesn’t work (or possibly only works for logged in users) - so possibility of an IM system within this website. Events appear a bit customizable — I stumbled across one that had a Flash-based MP3 player streaming a Madonna song, and another event had a custom background image.

I must say that I’m not too impressed as of now, I would have thought that $1.5 million in 2 rounds of funding and many months of development would have produced something better upon any kind of launch. This is basically Evite with social networking (I still don’t understand how IAC doesn’t have a distributed social networking play to integrate within their network of websites).

Steve mentions, correctly, that MySpace and Friendster already have this sort of event functionality (in terms of the essential “Evite meets social networking” stuff). He says there’s nothing new. However, Socializr does seem to be taking it one-level deeper, to better adjust to the way we do things off-line. “Maybe there’s stuff we’re just not seeing,” he agreed. In this way, it reminds us of Renkoo, another Web 2.0-age event site.

Abrams & friends

Steve doesn’t mention Renkoo, which was co-founded by former Friendster engineer, Joyce Park — who was “fired” from Friendster for blogging about some of that site’s scaling problems. Now these two ex-Friendster folks may be going head to head in their latest ventures. Meanwhile, we’ve reached out to Socializr to get some information, and will update if/when we hear back. There are other sites, such as Mingle Now, which briefed us a few months ago, and is about to launch soon.

We’ve written Socializr before, and how it has $1.5 million in backing. Renkoo got $3 million in backing from Matrix Partners in March (scroll down)