Why an amazing open source project doesn't always equal a company

To go back to some of the themes explored in the infoworld piece about Docker, I wanted to add some more thoughts about why technicaly innovative, extremely useful open source projects are not always successfully turned into successful businesses. First and most obvious of all, I suppose, not all projects are developed with any kind of commercial aim. One might this argument about Kubernetes — Google was not looking to monetize Kubernetes because it was already doing so many other things.

But even for a company like Docker, one run by founders who built an open source project independent of a major corporate backer, it’s clear that a massively popular open source project doesn’t always lead to a massively profitable company.

The reasons are complex, but I wanted to pull about a couple of them, some related to positioning and some slightly less so.

Building communities

Building an open source community of people who use and contribute back to a project — and where no money exchanges hands — is fundamentally different from building a community of people who pay for a product. Open source startups have to do both, but they often find that their success with the open source community isn’t nearly as transferable as they expect it to be.

Different audiences

Many people assume that the open source project is going to be a sales pipeline for their commercial project. That can be the case, but often isn’t. In fact, the core target audience for the open source project and the commercial project is usually different — people will choose one or the other to meet specific goals or fit within the constraints that their organizations put on them. The open source project might serve as a sort of ‘free trial’ for the paid version, but longtime users of the open source project aren’t likely to suddenly decide to pay for the thing they’ve been happy to use for free for some time.

Assuming that the audiences are the same can make life miserable for open source startups, and also further confuse both founders and the target market about what the advantages of the paid product are. It can also alienate the open source community — open source users, especially those who are very involved, do not like feeling sold to.

Spreading too thin

All startups need to worry about spreading themselves too thin, but open source startups are especially prone to this. That’s because there are more than one way to monetize an open source project, but each one is a different business model, has a different target audience and a different revenue / cost structure. While your friends with an HR SaaS startup are focused on promoting their single product, an open source startup can easily end up with their open source project plus two additional paid offerings. That’s a lot to handle for a small, nimble startup team.

In short: A technically sound, popular open source project is a fabulous starting point for any company, but it does not guarantee success with a commercial product.