What's different about open source companies?
There are some —actually, many — things about building a company that are not fundamentally different in an open source startup than in a closed source startup. For example:
Hiring / people ops. Yes, you might hire from your project’s users, but the fundamental problem of building a group of humans, defining culture, being a leader, etc — these are not much different
Fundraising. Again, there are some differences on the margins — investors, especially those who specialize in open source, will be interested in project metrics, not just bottom lines. But again, investors want a return, no matter what kind of company you are.
But there are actually quite a lot of things that are completely different in an open source startup. You can’t just take advice from a generic startup book and apply it uncritically in an open source startup context, or expect someone with closed-source startup experience to be able to immediately apply their experiences in a way that makes sense. For example:
Product roadmaps. Open source startups have way more complicated product situations. The standard advice for startups is “launch with one product, stick with one product until a certain revenue number” You can immediately discard that advice, because your first “product” is your open source project, and it will generate $0 ARR. Also, once you add a ‘product,’ it’s very different from adding a product in a multi-product company: you’re not trying to get people to use both your open source and your paid at the same time, for example. You have this tension between making the open source project not suck, but also not be so awesome that there’s never a reason to pay.
Sales. 1) You’re open source community should not be treated like a pool of leads 2) How do you have top-down sales conversations when you have ‘product’ that’s free 3) We haven’t talked about revenue models yet
Revenue models: You need to choose something that makes sense given your projects focus. And again, you’ll have serious tension between open source project growth and the need for revenue growth and finding the right balance between the two.
Positioning: You have to position your project and your commercial offerings separately, and also have an umbrella positioning for your entire company.
Legal (something I have zero experience with). Open source licenses matter a great deal, and you definitely are going to need specialized legal advice from someone who knows open source startups, not just software startups in general.
Marketing. This actually shouldn’t be too hard if you’ve taken the time to get your positioning right, but if haven’t, a lot of open source startups really struggle with how to figure out market to the different audiences that their project and commercial offerings have and also how to tell a coherent story about the entire company — both of which are really critical for open source startups.
Then there’s stuff that you just don’t have to think about in a closed-source startup: community development, for example.
I’m probably missing some things, too. The bottom line is that open source startups are more complex than closed-source ones, and you can’t just apply the lessons from Salesforce or Snyk without really considering how the open source model changes things.
This is why I work with open source companies. I think they are more interesting, there are more points of tension and more opportunities for the kind of work I do around understanding use cases, positioning projects and products and streamlining revenue models to really make a difference.
Do you know any founders of open source startups who are struggling with building sustainable revenue models, differentiating their products from competitors and their own project, or figuring out a sales model? I’d love to talk to them.