Thoughtful monetization strategy

If you’re building a company, you need a strategy for acquiring revenue. If you’re building an open source startup, there are a couple standard options available: support, an enterprise edition, and a cloud-hosted edition. (I’m leaving out the option of bundling multiple OSS project and providing an orchestration layer and copyleft licenses, because both are slightly less ‘pure,’ particularly the copyleft licenses). Still, that’s three options. What should you choose?

A fair number of founders choose ‘all of the above.’ I don’t think that’s a problem if you’re a pretty mature company, but I do think it’s a problem if you’re a young company. Especially if, as I suspect is often the case, the decision to use an ‘all of the above’ approach is based less on research and reflection on the needs of your target market and more on fear of missing out. If the reason you have a cloud hosted edition is that all the other open source startups have a cloud hosted edition, that’s a red flag.

Especially in times like now, when funding markets are uncertain and startups need to be focused on getting to profitability as quickly as possible, you need to focus. Talk to your users and spend some time reflecting on what growth strategy makes the most sense given what your project does and who it serves. The decide on one monetization model and pursue it like crazy until it’s either profitable or you’ve disproven your hypothesis and need to pivot to survive.

By the way, your monetization model is tied into your positioning. Some markets are better suited to the product-led, swipe your credit card cloud hosted option. Some markets are going to be more appropriate for a sales-led, ‘let’s do a POC and then write you a $100k check’ process. Knowing which market you’re serving is a positioning issue, and one you should work out before deciding which monetization model to follow.