Database startup Cockroach Labs raises $55 million as it prepares to add a 'no Amazon clause' to its software and get ahead of the cloud giant
- On Tuesday, the database startup Cockroach Labs announced it raised $55 million in series C funding.
- In June, Cockroach Labs announced that it would change its business model so that new versions of its previously open source database project will be under a new license.
- This license prohibits users from running Cockroach Labs' database as a service without a commercial license until three years after the release.
- In the past year, companies like Redis Labs and Confluent have changed their software licenses in response to Amazon Web Services taking their free software to sell on its cloud.
- Cockroach Labs CEO and co-founder Spencer Kimball says his company decided to relicense its software because otherwise, "Amazon will simply take it."
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The database startup Cockroach Labs wants to get ahead of Amazon.
Cockroach Labs maintains a database project that is available as open source, meaning it's free for anyone to use, download, or modify. To make money, it also sells an enterprise version with additional features. Many companies like MongoDB, Redis Labs, and Confluent follow this model, known as the "open core" model.
But as of late, these companies have been changing their business model because cloud vendors like Amazon Web Services have been taking the free version of the software to sell on its cloud.
Cockroach Labs is working on doing the same. And on Tuesday, it announced it raised $55 million in a series C round led by Altimeter Capital, Tiger Global, and existing investor GV. This brings Cockroach Labs' total funding to $108.5 million.
With the funding, Cockroach Labs plans to focus its product, sales and scaling the team as it competes with other database-selling companies like Oracle and AWS.
"The goal is how do we compete with this behemoth incumbent AWS when they'll stop at nothing," Cockroach Labs CEO and co-founder Spencer Kimball told Business Insider. "The belief with open core model previously is a company as big as Amazon would be relatively careful about destroying smaller companies' business models, but that's just not true."
"Amazon will simply take it"
In June, Cockroach Labs announced it would relicense its open source database software. Starting with its new release in October, Cockroach Labs will now put the new versions of its database under the Business Source License (BSL).
Essentially, this license does not allow users to run the commercial version of Cockroach Labs' database as a service without buying a license. Three years after each release, the license will convert to a standard open source license.
Therefore, after three years, a cloud company like AWS or anyone else can sell Cockroach Labs' database as a service, but it will be a three-year-old product.
"If Cockroach Labs makes the tech too open, Amazon will simply take it," Kimball said. "From our perspective, it would be naive and dangerous to assume that Amazon is competitive and will never use our product directly against us."
Cockroach Labs made this change in the midst of other companies changing their licenses in response to Amazon Web Services. The startups Redis Labs and Confluent both changed their licenses to add restrictions after AWS started selling their open source software on its cloud.
And when AWS started its own distribution of Elastic's search software, Elastic CEO Shay Banon responded with a blog post accusing AWS of misusing Elastic's brand and masking its actions "with fake altruism or benevolence."
Kimball says this trend has helped his company as well, so that when it changed its license, the news wasn't a shocker.
"We had the benefit of coming after Elastic," Kimball said. "We had the benefit of coming after Confluent. They helped prepare the general audience for changes and because of the realities of competing with Amazon right now. With our customers, we never lost a sale because of it."
Critics of these licenses have said they could undermine the foundations of open source. However, Kimball says these new licenses are attempts to square the best parts of open source with business reality.
"The question is, is it open source or the principles behind it that made it as powerful as it was? That's sometimes where purists get a little bit lost in the debate," he says.
A "no Amazon clause"
Essentially, Kimball says, this new license is a "no Amazon clause." Currently, AWS isn't selling Cockroach Labs' software, but there's a possibility that it can happen in the future, Kimball says. He wanted to take steps to protect Cockroach Labs' business before AWS gets in the way.
Kimball said some customers were concerned about whether the license prohibits them from contributing back, but he said that it doesn't. The only thing users can't do, he says, is run it as a service without a commercial license.
Others didn't know what BSL was, but Kimball says that the confusion can be quickly dispelled by explaining it at a customer meeting.
Kimball acknowledged that changing licenses is "not a good thing for open source, but that's the world we live in right now." He added that although its database is no longer an open source license, Cockroach Labs still "strongly" believes in open source.
"Our core will always be pure open source, it just takes a little bit longer," Kimball said. "This is not something we ever wanted to do. It's purely a response to the market. Fundamentally we are building a business. As a business we have to make sure everything we built from the last 5 years isn't plucked up by Amazon."
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