Magento, the popular open source ecommerce platform, has seemingly retooled for growth with a fresh equity investment, a new corporate structure, and the promise of a software-as-a-service (SaaS) offering.
A growing and flourishing Magento also creates many opportunities for ecommerce developers, particularly those who work with Magento's Community Edition.
Funding Announced
On Monday, Magento Inc. announced that it had received $22.5 million in private equity investment. The company stated that the investment would allow Magento, "to further enable the ecommerce ecosystem, by which we mean building Magento into a company that supports and facilitates the growth and vision of our passionate ecommerce users, developers, partners, and merchants around the world."
New Structure, New Goals
While most coverage has focused on the $22.5 million in funding, reports have overlooked the company's new corporate structure.
Prior to February 24, 2010, Magento was a Varien product. In fact, at the time of this writing, the Magento website still gives this impression. The "About" section on the Magento site says, "Magento is at the core of Varien's business model." And until recently, the copyright notices on the Magento website read, "Copyright 2010 Varien. Magento is a trademark of Irubin Consulting Inc. DBA Varien."
But last month, a new corporate entity, Magento Inc., was formed in Delaware. The new Magento Inc. may be a way of positioning the company to seek additional partnerships or investors.
Magento Inc. has also secured the services of Bob Schwartz and his strategic advisory firm, Schwartz Group. Schwartz has been helping Magento Inc. fill several key management positions as well as consulting about how to position the company ("gear for takeoff," as Schwartz reportedly puts it) to become the leader in ecommerce. Interestingly, Schwartz is also serving as Magento/Varien's interim president.
Speculation About the Source of Investment
TechCruch's Robin Wauters said Monday, "if I were to venture a guess, I would say PayPal plays a part in this story – from what I can gather the least you can say is that the digital payment company has a deep partnership with Magento that spans both co-marketing of their respective services as well as a collaboration on a product development level."
But there may be other likely partners, including Rackspace Hosting, Zend, or even Varien itself. It is also noteworthy that the SEC filing lists two investors.
Rackspace Hosting may partner with Magento on its SaaS offering, which was first reported here on Ecommerce Developer in December 2009.
This sort of strategic relationship would make an investment from Rackspace possible and implies that Magento is probably not going to build a payment card industry (PCI) compliant data center in support of a new product SaaS offering in the next few months.
Magento is also closely tied to the Zend PHP Framework and Zend Server. And Zend offers extensive PHP training and certification, while Magento seeks to add developer training and certification to its offerings this year, according to an audio interview with Yoav Kutner, CTO of Varien. A Zend investment in Magento is somewhat less likely than Rackspace, but still a possibility.
A third option is that the investment was an additional equity purchase from Varien itself. In one scenario, Magento Inc. may have been formed to help the company seek venture capital. After Magento Inc.'s formation, potential investors might have suggested that Varien need "more skin in the game," meaning that the company needed to have more of its own funds involved in the retooled Magento Inc., thus meriting additional investment.
Finally, the investment may have come from Schwartz and his group, since he has taken a leadership position with the company.
Speculation Aside, This is Good News for Developers
Regardless of where the funding came from or exactly how Magento seeks to use that funding, it is clear that the company intends to grow, and savvy web developers can use this growth as an opportunity to earn more money.
For example, a Magento certification, when it becomes available, would almost certainly represent a boost in revenue for developers that took the time to earn this distinction.
Magento is also expanding its Magento Connect service so that developers can sell extensions directly to the Magento community. A functional and useful extension, or even theme, could represent thousands of dollars in revenue.
Finally, even a SaaS version of Magento is likely to require some development and design work.
