Many of you may have heard that Matthew Aslett is over at The 451 Group now.

Matthew has been tracking VC funding to OSS vendors for quite some time now. Matthew reports that VC funding to OSS vendors in 3Q07 decreased 42% to $78M from $133M in 3Q06. To the end of 3Q, $267M has been invested vs. $339M last year. However, 2006 was a banner year for OSS firms receiving VC funding. As the OSS market matures, we’ll surely see VC funding decline as the VCs find the next new thing. Matthew explains that while the total investments may be declining, Series A investments in OSS are up and mature OSS vendors are getting acquired:

“The level of investment via seed and Series A funding rounds actually increased for the second quarter in succession, while the big money for established vendors went on M&A activity rather than venture funding.”

Few could argue that we seem to be moving into the OSS vendor consolidation stage of the lifecycle (for most oss markets). I wonder how many OSS vendors will remain ‘oss vendors’ by October 2009. At the end of the day, the large OSS vendors that can acquire smaller OSS vendors number in the handful. And, Oracle could buy all the large OSS vendors in an afternoon….sigh.

It’ll be interesting to see how much Citrix or Yahoo! have to write off (a la Skype) in a few years to account for the premiums they paid for XenSource & Zimbra respectively. I’m thinking that Citrix won’t as they’ll be acquired by Microsoft. Yahoo! on the other hand…