We don't talk about revenue enough

Yesterday I saw a great post on LinkedIn about how frequently entrepreneurs neglect to think about unit economics. I recommend reading it.

It’s an interesting thought experiment to consider how you’d think about unit economics in an open source business setting, because you have to account for all of the (significant) costs of maintainer and promoting your OSS.

But really what the post made me think is… forget about unit economics, that business 201. Business 101 is revenue, and we don’t talk about it enough in the open source business world. Because you can raise hundreds of millions of dollars and have an IPO and make your investors even richer and yourself rich too, all without unit economics that make sense, without revenue that covers your expenses.

Perhaps this is changing with the change in venture climate. But recently I’ve been looking into revenue numbers of some open source companies who’ve raised huge amounts of money, and in many cases I’m absolutely astounded by how small they are. I know, I know, you’re probably thinking I must have been extremely naive to expect otherwise. I suppose I was.

I’m also astounded at how many people seem to think that a large open source community will be fast and easy to monetize. Even some investors think this. This can happen, but a strong community / open source project does not guarantee hockey-stick revenue growth.

As an entrepreneur, ask yourself: What are you building? Are you building a sustainable, profitable company that needs some capital to get started? Or are you banking on going public and getting out before the hens come home?

Revenue: It’s what business is all about, even open source businesses.