Choosing your investors wisely as a commercial open source company

I was recording a podcast episode with Akriti Dokania of Ridge Ventures recently, and she made a very good point about the tricky situation fundraising can be for founders of open source startups: there is a smaller pool of investors who feel comfortable with open source, and will be true partners in the commercial open source journey, than there are investors who invest in closed-source software, whether it is dev tools or some other vertical.

The metrics an open source startup is evaluated on, especially at the seed or series A stage, are just different from the metrics used for a closed-source company. You need an investor who is going to understand that and appreciate the company’s strengths. At the same time, open source companies approach go-to-market, sales, and product development differently, and have expenses like ‘community-building’ that just don’t appear on most enterprise software’s budget. Investors who get it are an asset; investors who don’t can ruin the dream.

The moral? When you’re fundraising, make sure that you have investors who understand the commercial open source world and have an idea of how to balance the community-led, hippy-commune side of open source with the hustle for a big Silicon Valley exit.