Blueground raises $20 million for flexible apartment rentals

Blueground, the startup providing turnkey flexible rental apartments, has raised $20 million in a round led by Athens-based VentureFriends, with participation from Endeavor Catalyst, Dubai’s Jabbar Internet Group, and serial entrepreneur Kevin Ryan. Ryan – who helped found MongoDB, Gilt Groupe, Zola, and others – will also join Blueground’s Board of Directors.

It’s no secret that remote work and frequent business travel are becoming more and more commonplace. Now, as a result, a growing number of people are shying away from lengthy rental or lease commitments and are instead turning to companies like Blueground for more flexible short-term solutions.

Blueground is trying to be the go-to option for individuals moving or traveling to a city for as little as a month, or any duration longer. Similar to flexible office space providers, Blueground partners with major property owners to sign long-term leases for units it then furnishes and rents out with more flexible terms.

Users can rent listings for anywhere between one month to five years and rates are set on a monthly basis, which can often lead to more favorable prices over medium-to-long-term stays relative to the short-term pricing structures commonly used by hospitality companies.

CEO Alex Chatzieleftheriou is intimately familiar with the value flexible leasing can unlock. Before founding Blueground, Chatzieleftheriou worked as a consultant for McKinsey, where he was frequently sent off to projects in far-off cities for months at a time – living in 15 different cities over just seven years.

However, no matter how much time Alex logged in hotels, he constantly felt the frustration and mental strain of not having a stable personal living arrangement.

“I spent so much time in hotels but they never really resembled a home. They didn’t have enough space or enough privacy,” Chatzieleftheriou told TechCrunch. “But renting an apartment can be a huge pain in these cities. They can be hard to find, they usually have a minimum rental term of a year or more, and you usually have to deal with filling out paperwork and buying furniture.” 

Knowing there were thousands of people at his company alone dealing with the same frustrations, Alex launched what would become Blueground, beginning with a handful of apartments in his home city of Athens, Greece.

Chatzieleftheriou and his team structured the platform to make the rental process as seamless as possible for the needs of flexible renters like himself. Through a quick plug-and-play checkout flow – more similar to the booking process for a hotel or Airbnb – renters can lock down an apartment without having to deal with the painful, costly and time-consuming traditional rental process. Tenants are also able to switch to any other Blueground listing during their rental period if their preferences change or if they want to explore different locations during their stay.

Every Blueground listing also comes completely furnished by the company’s design team so renters don’t have to deal with buying, transporting – and eventually selling – furniture. And each apartment comes outfitted with digital and connected infrastructure so that tenants can monitor their apartment and arrange maintenance, housekeeping and other services directly through Blueground’s mobile app. 

The value proposition is also fairly straight-forward for the landlords Blueground partners with, as they avoid costs related to marketing and coordinating with fragmented brokers to fill open units, while also benefitting from steady rental payments, tenant vetting and free property management. 

The offering certainly seems to be compelling for renters – While Chatzieleftheriou initially focused on serving business travelers and those moving for work, he quickly realized the market for flexible leasing was in fact much bigger. Blueground’s sales have tripled over the past three years and after its expansion in the US last year, Blueground now hosts 1,700 listings in ten cities across three continents.

“The trend of flexible and seamless real estate is bigger and is happening everywhere,” Chatzieleftheriou said. “A lot of people throughout the real estate sector really want this seamless, turnkey, furnished solution.”

To date, Blueground has raised a total of $28 million and plans to use funds from the latest round for additional hiring and to help the company reach its goal of growing its portfolio to 50,000 units over the next five years.

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How open source software took over the world

It was just 5 years ago that there was an ample dose of skepticism from investors about the viability of open source as a business model. The common thesis was that Redhat was a snowflake and that no other open source company would be significant in the software universe.

Fast forward to today and we’ve witnessed the growing excitement in the space: Redhat is being acquired by IBM for $32 billion (3x times its market cap from 2014); Mulesoft was acquired after going public for $6.5 billion; MongoDB is now worth north of $4 billion; Elastic’s IPO now values the company at $6 billion; and, through the merger of Cloudera and Hortonworks, a new company with a market cap north of $4 billion will emerge. In addition, there’s a growing cohort of impressive OSS companies working their way through the growth stages of their evolution: Confluent, HashiCorp, DataBricks, Kong, Cockroach Labs and many others. Given the relative multiples that Wall Street and private investors are assigning to these open source companies, it seems pretty clear that something special is happening.

So, why did this movement that once represented the bleeding edge of software become the hot place to be? There are a number of fundamental changes that have advanced open source businesses and their prospects in the market.

David Paul Morris/Bloomberg via Getty Images

From Open Source to Open Core to SaaS

The original open source projects were not really businesses, they were revolutions against the unfair profits that closed-source software companies were reaping. Microsoft, Oracle, SAP and others were extracting monopoly-like “rents” for software, which the top developers of the time didn’t believe was world class. So, beginning with the most broadly used components of software – operating systems and databases – progressive developers collaborated, often asynchronously, to author great pieces of software. Everyone could not only see the software in the open, but through a loosely-knit governance model, they added, improved and enhanced it.

The software was originally created by and for developers, which meant that at first it wasn’t the most user-friendly. But it was performant, robust and flexible. These merits gradually percolated across the software world and, over a decade, Linux became the second most popular OS for servers (next to Windows); MySQL mirrored that feat by eating away at Oracle’s dominance.

The first entrepreneurial ventures attempted to capitalize on this adoption by offering “enterprise-grade” support subscriptions for these software distributions. Redhat emerged the winner in the Linux race and MySQL (thecompany) for databases. These businesses had some obvious limitations – it was harder to monetize software with just support services, but the market size for OS’s and databases was so large that, in spite of more challenged business models, sizeable companies could be built.

The successful adoption of Linux and MySQL laid the foundation for the second generation of Open Source companies – the poster children of this generation were Cloudera and Hortonworks. These open source projects and businesses were fundamentally different from the first generation on two dimensions. First, the software was principally developed within an existing company and not by a broad, unaffiliated community (in the case of Hadoop, the software took shape within Yahoo!) . Second, these businesses were based on the model that only parts of software in the project were licensed for free, so they could charge customers for use of some of the software under a commercial license. The commercial aspects were specifically built for enterprise production use and thus easier to monetize. These companies, therefore, had the ability to capture more revenue even if the market for their product didn’t have quite as much appeal as operating systems and databases.

However, there were downsides to this second generation model of open source business. The first was that no company singularly held ‘moral authority’ over the software – and therefore the contenders competed for profits by offering increasing parts of their software for free. Second, these companies often balkanized the evolution of the software in an attempt to differentiate themselves. To make matters more difficult, these businesses were not built with a cloud service in mind. Therefore, cloud providers were able to use the open source software to create SaaS businesses of the same software base. Amazon’s EMR is a great example of this.

The latest evolution came when entrepreneurial developers grasped the business model challenges existent in the first two generations – Gen 1 and Gen 2 – of open source companies, and evolved the projects with two important elements. The first is that the open source software is now developed largely within the confines of businesses. Often, more than 90% of the lines of code in these projects are written by the employees of the company that commercialized the software. Second, these businesses offer their own software as a cloud service from very early on. In a sense, these are Open Core / Cloud service hybrid businesses with multiple pathways to monetize their product. By offering the products as SaaS, these businesses can interweave open source software with commercial software so customers no longer have to worry about which license they should be taking. Companies like Elastic, Mongo, and Confluent with services like Elastic Cloud, Confluent Cloud, and MongoDB Atlas are examples of this Gen 3.  The implications of this evolution are that open source software companies now have the opportunity to become the dominant business model for software infrastructure.

The Role of the Community

While the products of these Gen 3 companies are definitely more tightly controlled by the host companies, the open source community still plays a pivotal role in the creation and development of the open source projects. For one, the community still discovers the most innovative and relevant projects. They star the projects on Github, download the software in order to try it, and evangelize what they perceive to be the better project so that others can benefit from great software. Much like how a good blog post or a tweet spreads virally, great open source software leverages network effects. It is the community that is the source of promotion for that virality.

The community also ends up effectively being the “product manager” for these projects. It asks for enhancements and improvements; it points out the shortcomings of the software. The feature requests are not in a product requirements document, but on Github, comments threads and Hacker News. And, if an open source project diligently responds to the community, it will shape itself to the features and capabilities that developers want.

The community also acts as the QA department for open source software. It will identify bugs and shortcomings in the software; test 0.x versions diligently; and give the companies feedback on what is working or what is not.  The community will also reward great software with positive feedback, which will encourage broader use.

What has changed though, is that the community is not as involved as it used to be in the actual coding of the software projects. While that is a drawback relative to Gen 1 and Gen 2 companies, it is also one of the inevitable realities of the evolving business model.

Linus Torvalds was the designer of the open-source operating system Linux.

Rise of the Developer

It is also important to realize the increasing importance of the developer for these open source projects. The traditional go-to-market model of closed source software targeted IT as the purchasing center of software. While IT still plays a role, the real customers of open source are the developers who often discover the software, and then download and integrate it into the prototype versions of the projects that they are working on. Once “infected”by open source software, these projects work their way through the development cycles of organizations from design, to prototyping, to development, to integration and testing, to staging, and finally to production. By the time the open source software gets to production it is rarely, if ever, displaced. Fundamentally, the software is never “sold”; it is adopted by the developers who appreciate the software more because they can see it and use it themselves rather than being subject to it based on executive decisions.

In other words, open source software permeates itself through the true experts, and makes the selection process much more grassroots than it has ever been historically. The developers basically vote with their feet. This is in stark contrast to how software has traditionally been sold.

Virtues of the Open Source Business Model

The resulting business model of an open source company looks quite different than a traditional software business. First of all, the revenue line is different. Side-by-side, a closed source software company will generally be able to charge more per unit than an open source company. Even today, customers do have some level of resistance to paying a high price per unit for software that is theoretically “free.” But, even though open source software is lower cost per unit, it makes up the total market size by leveraging the elasticity in the market. When something is cheaper, more people buy it. That’s why open source companies have such massive and rapid adoption when they achieve product-market fit.

Another great advantage of open source companies is their far more efficient and viral go-to-market motion. The first and most obvious benefit is that a user is already a “customer” before she even pays for it. Because so much of the initial adoption of open source software comes from developers organically downloading and using the software, the companies themselves can often bypass both the marketing pitch and the proof-of-concept stage of the sales cycle. The sales pitch is more along the lines of, “you already use 500 instances of our software in your environment, wouldn’t you like to upgrade to the enterprise edition and get these additional features?”  This translates to much shorter sales cycles, the need for far fewer sales engineers per account executive, and much quicker payback periods of the cost of selling. In fact, in an ideal situation, open source companies can operate with favorable Account Executives to Systems Engineer ratios and can go from sales qualified lead (SQL) to closed sales within one quarter.

This virality allows for open source software businesses to be far more efficient than traditional software businesses from a cash consumption basis. Some of the best open source companies have been able to grow their business at triple-digit growth rates well into their life while  maintaining moderate of burn rates of cash. This is hard to imagine in a traditional software company. Needless to say, less cash consumption equals less dilution for the founders.

Photo courtesy of Getty Images

Open Source to Freemium

One last aspect of the changing open source business that is worth elaborating on is the gradual movement from true open source to community-assisted freemium. As mentioned above, the early open source projects leveraged the community as key contributors to the software base. In addition, even for slight elements of commercially-licensed software, there was significant pushback from the community. These days the community and the customer base are much more knowledgeable about the open source business model, and there is an appreciation for the fact that open source companies deserve to have a “paywall” so that they can continue to build and innovate.

In fact, from a customer perspective the two value propositions of open source software are that you a) read the code; b) treat it as freemium. The notion of freemium is that you can basically use it for free until it’s deployed in production or in some degree of scale. Companies like Elastic and Cockroach Labs have gone as far as actually open sourcing all their software but applying a commercial license to parts of the software base. The rationale being that real enterprise customers would pay whether the software is open or closed, and they are more incentivized to use commercial software if they can actually read the code. Indeed, there is a risk that someone could read the code, modify it slightly, and fork the distribution. But in developed economies – where much of the rents exist anyway, it’s unlikely that enterprise companies will elect the copycat as a supplier.

A key enabler to this movement has been the more modern software licenses that companies have either originally embraced or migrated to over time. Mongo’s new license, as well as those of Elastic and Cockroach are good examples of these. Unlike the Apache incubated license – which was often the starting point for open source projects a decade ago, these licenses are far more business-friendly and most model open source businesses are adopting them.

The Future

When we originally penned this article on open source four years ago, we aspirationally hoped that we would see the birth of iconic open source companies. At a time where there was only one model – Redhat – we believed that there would be many more. Today, we see a healthy cohort of open source businesses, which is quite exciting. I believe we are just scratching the surface of the kind of iconic companies that we will see emerge from the open source gene pool. From one perspective, these companies valued in the billions are a testament to the power of the model. What is clear is that open source is no longer a fringe approach to software. When top companies around the world are polled, few of them intend to have their core software systems be anything but open source. And if the Fortune 5000 migrate their spend on closed source software to open source, we will see the emergence of a whole new landscape of software companies, with the leaders of this new cohort valued in the tens of billions of dollars.

Clearly, that day is not tomorrow. These open source companies will need to grow and mature and develop their products and organization in the coming decade. But the trend is undeniable and here at Index we’re honored to have been here for the early days of this journey.

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An unsecured database exposed the personal details of 202M job seekers in China

The personal details belonging to more than 202 million job seekers in China, including information like phone numbers, email addresses, driver licenses and salary expectations, were freely available to anyone who knew where to look for as long as three years due to an insecure database.

That’s according to findings published by security researcher Bob Diachenko who located an open and unprotected MongoDB instance in late December which contained 202,730,434 “very detailed” records. The database was indexed in data search engines Binary Edge and Shodan, and was freely visible without a password or login. It was only made private after Diachenko released information about its existence on Twitter.

Diachenko, who is director of cyber risk research at Hacken, wasn’t able to match the database with a specific service, but he did locate a three-year-old GitHub repository for an app that included “identical structural patterns as those used in the exposed resumes.” Again, ownership is not clear at this point although the records do seem to contain data that was scraped from Chinese classifieds, including the Craigslist-like 58.com.

A 58.com spokesperson denied that the records were its creation. They instead claimed that their service had been the victim of scraping from a third-party.

“We have searched all over the database of us and investigated all the other storage, turned out that the sample data is not leaked from us. It seems that the data is leaked from a third party who scrape[d] data from many CV websites,” a spokesperson told Diachenko.

TechCrunch contacted 58.com but we have not yet received a response.

While the database has now been secured, it was potentially vulnerable for up to three years and there’s already evidence that it had been regularly accessed. Although, again, it isn’t clear who by.

“It’s worth noting that MongoDB log showed at least a dozen IPs who might have accessed the data before it was taken offline,” Diachenko wrote.

There’s plenty of mystery here — it isn’t clear whether 58.com was behind the hole, or if it is a rival service or a scraper — but what is more certain is that the vulnerability is one of the largest of its kind to be found in China.

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AWS gives open source the middle finger

AWS launched DocumentDB today, a new database offering that is compatible with the MongoDB API. The company describes DocumentDB as a “fast, scalable, and highly available document database that is designed to be compatible with your existing MongoDB applications and tools.” In effect, it’s a hosted drop-in replacement for MongoDB that doesn’t use any MongoDB code.

AWS argues that while MongoDB is great at what it does, its customers have found it hard to build fast and highly available applications on the open-source platform that can scale to multiple terabytes and hundreds of thousands of reads and writes per second. So what the company did was build its own document database, but made it compatible with the Apache 2.0 open source MongoDB 3.6 API.

If you’ve been following the politics of open source over the last few months, you’ll understand that the optics of this aren’t great. It’s also no secret that AWS has long been accused of taking the best open-source projects and re-using and re-branding them without always giving back to those communities.

The wrinkle here is that MongoDB was one of the first companies that aimed to put a stop to this by re-licensing its open-source tools under a new license that explicitly stated that companies that wanted to do this had to buy a commercial license. Since then, others have followed.

“Imitation is the sincerest form of flattery, so it’s not surprising that Amazon would try to capitalize on the popularity and momentum of MongoDB’s document model,” MongoDB CEO and president Dev Ittycheria told us. “However, developers are technically savvy enough to distinguish between the real thing and a poor imitation. MongoDB will continue to outperform any impersonations in the market.”

That’s a pretty feisty comment. Last November, Ittycheria told my colleague Ron Miller that he believed that AWS loved MongoDB because it drives a lot of consumption. In that interview, he also noted that “customers have spent the last five years trying to extricate themselves from another large vendor. The last thing they want to do is replay the same movie.”

MongoDB co-founder and CTO Eliot Horowitz echoed this. “In order to give developers what they want, AWS has been pushed to offer an imitation MongoDB service that is based on the MongoDB code from two years ago,” he said. “Our entire company is focused on one thing — giving developers the best way to work with data with the freedom to run anywhere. Our commitment to that single mission will continue to differentiate the real MongoDB from any imitation products that come along.”

A company spokesperson for MongoDB also highlighted that the 3.6 API that DocumentDB is compatible with is now two years old and misses most of the newest features, including ACID transactions, global clusters and mobile sync.

To be fair, AWS has become more active in open source lately and, in a way, it’s giving developers what they want (and not all developers are happy with MongoDB’s own hosted service). Bypassing MongoDB’s licensing by going for API comparability, given that AWS knows exactly why MongoDB did that, was always going to be a controversial move and won’t endear the company to the open-source community.

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MongoDB switches up its open source license

MongoDB is a bit miffed that some cloud providers — especially in Asia — are taking its open source code and are offering a hosted commercial version of its database to their users without playing by the open source rules. To combat this, MongoDB today announced that it has issued a new software license, the Server Side Public License (SSPL), that will apply to all new releases of its MongoDB Community Server, as well as all patch fixes for prior versions.

Previously, MongoDB used the GNU APGLv3 license, but it has now submitted the SSPL for approval from the Open Source Initiative.

For virtually all regular users who are currently using the community server, nothing changes because the changes to the license don’t apply to them. Instead, this is about what MongoDB sees as the misuse of the APGLv3 license. “MongoDB was previously licensed under the GNU AGPLv3, which meant companies who wanted to run MongoDB as a publicly available service had to open source their software or obtain a commercial license from MongoDB,” the company explains. “However, MongoDB’s popularity has led some organizations to test the boundaries of the GNU AGPLv3.”

So while the SSPL isn’t all that different from the GNU GPLv3, with all the usual freedoms to use, modify and redistribute the code (and virtually the same language), the SSPL explicitly states that anybody who wants to offer MongoDB as a service — or really any other software that uses this license — needs to either get a commercial license or open source the service to give back the community.

“The market is increasingly consuming software as a service, creating an incredible opportunity to foster a new wave of great open source server-side software. Unfortunately, once an open source project becomes interesting, it is too easy for cloud vendors who have not developed the software to capture all of the value but contribute nothing back to the community,” said Eliot Horowitz, the CTO and co-founder of MongoDB, in a statement. “We have greatly contributed to — and benefited from — open source and we are in a unique position to lead on an issue impacting many organizations. We hope this will help inspire more projects and protect open source innovation.”

I’m sure this move will ruffle some feathers. It’s hard to discuss open source licenses without getting religious about what this movement is all about. And since MongoDB is the commercial entity behind the software and manages outside contributions to the code, it does have a stronger grip on the actual code than other projects that are managed by a large open source foundation, for example. For some, that alone is anathema to everything they think open source should stand for. For others, it’s simply a pragmatic way to develop software. Either way, though, this will kick off a discussion about how companies like MongoDB manage their open source projects and how much control they can exert over how their code is used. I, for one, can’t wait to read the discussions on Hacker News today.

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