Is open source a good business strategy?

In case you missed it, HashiCorp went public last week, and the company’s valuation at the time of IPO was about $14 billion. Given those events, I wanted to ask a potentially fraught question: Is open source a good business strategy?

Yes, yes, yes! You might say. Didn’t you just talk about HashiCorp’s IPO? What about MongoDB?

I’m not asking if it’s possible to ‘win’ in business, or built a solid business, based on open source technology. I think that answer is a fairly clear yes. But is it easier or harder for a business based on open source to IPO at an 11-figure valuation?

Just as importantly, looking at just a few unicorns doesn’t actually tell us much. Just because some companies had fabulous success doesn’t mean that most will, or, most importantly, that open source is the easiest route to success.

There could be a whole book written about open source businesses, but here I want to explore a couple ways that open source could be essential to a company’s development. 

Open source as table stakes

One of the best arguments for open source isn’t that having an open source project or an open source strategy will somehow supercharge your business, but rather that not having one will hurt you. Open source is core to what HashiCorp’s corporate identity, so it’s hard to imagine a HashiCorp without open source. But given the very technical, infrastructure-level nature of most of HashiCorp’s products, does the audience just expect open source? I’ve spoken to founders and would-be founders who think this is true — that if you want to play the cloud native game, you have to be an open source company. 

Open source first

Another way that open source makes total sense is when the open source project pre-dates the company. This isn’t uncommon — often a side project starts getting so much attention that either investors come calling and encourage the maintainers to start a company or the maintainers decide to do so without a push. 

In this case, it’s fairly clear how important open source is — without it, the company would not exist. 

This second example is the only situation where open source is completely critical. Here’s the thing: Open source takes work. It involves double everything, or at least almost — two product roadmaps, two marketing efforts, engineer teams working on a product and a project. This can work out extremely well, but founders should be aware of the extra work it entails and make sure they’re doing it for the right reasons. Are you convinced that open source is the best way to meet your business goals? Do you really consider open source table stakes? Is there any other way to do it? 

In business, many, but not all, decisions can be reversed. Adopting an open source strategy and become an open source startup is one of the decisions that is hard to take back down the road (looking at you, Elastic). Most founders of open source startups I talk to, including those who are very successful, say it’s a hard road. That doesn’t mean it’s not the right road, just that you shouldn’t take it just because everyone else it, but rather for reasons that are fundamental to your company’s success.