8 ms·

How we raised $3M for an open source project

158 points by illuminated 6y ago

tti 6y ago
Open source > SaaS is a hot take.
- satvikpendem 6y ago
  You can have an open source SaaS, they're not mutually exclusive.
  - brainless 6y ago
    Well it complicates the business model a bit. I am working full time on an open source data/content management product. I know my reasons to do it this way, but I also want to build a sustainable business around it. That is something I need to figure out.
d0m 6y ago
>> By hosted, we mean charging customers for the hosted version of the open source product. The risk is that a cloud provider decides to compete with your hosted version. An interesting approach is what cockroachdb did, which basically forbid this very specific use case, and is otherwise standard open-source.
- koolba 6y ago
  > An interesting approach is what cockroachdb did, which basically forbid this very specific use case, and is otherwise standard open-source. I have no qualms with what they’ve done. It’s their intellectual property and they can do as they see fit. But it’s not open source. There’s plenty of proprietary software that also provides the source code (generally without support). Maybe we need to settle on a new term like “source available”. Or “source provided”. But it’s not open source. To quote Arthur Dent, it’s almost, but not entirely unlike, closed sourced.
  - dependenttypes 6y ago
    It offers basically everything that normal open source licenses do except that they have a very specific non-commercial clause regarding offering it as a paid service. I think that calling them “source available” or “source provided” does them a disservice as it implies that you can't modify/distribute/use it.
    - californical 6y ago
      The issue that I have with this license type is: what if there's some functionality that they have built that I would find useful, unrelated to their core business. Like, imagine that they have some tool to make generating UI components easier. If I want to use a bit from their UI component generator in my commercial software, am I violating their license? This is why real open source is so important to distinguish -- I don't want to have to worry about this sort of thing, let alone bring in lawyers to help me decide. Don't get me wrong, or take this as ungrateful. I'm still glad it exists, and am really happy that this works as their business model. I think it is valuable to use as a learning tool (how did they go about solving x problem?), as well as valuable for use in other Open Source software. I hope more companies are able to use licenses like this in the future, to be totally honest. I just want it to be distinguished from true Open Source software.
      - dependenttypes 6y ago
        > If I want to use a bit from their UI component generator in my commercial software, am I violating their license? It depends on the license. Based on what I have read about the cockroachdb, SSPL (mongo) it seems that you can do that (but I am not sure about it, someone more knowledgable might be able to verify it). > This is why real open source is so important to distinguish Consider another case then. You are making a proprietary software that you might or might not be planning to sell and you get the ui generator from an open source software. Are you free to do that? Truth is that just like above the answer is "it depends on the license". GPL will not let you do it while MIT will. LGPL will let you do it if you make the ui generator a library that you dynamically link with and publish your changes to it, while MPL... I have no idea, I think it works on a per-file bases.
treelovinhippie 6y ago
>> "Going for VC means you are committing to an exit or a failure - you can't really change your mind later that you want to take things more steadily" Exactly. And that is a huge reason NOT to use VC-funded opensource.
- cercatrova 6y ago
  Not exactly, you can still back out by not raising future rounds, or buying back their shares, as Gumroad did.
  - treelovinhippie 6y ago
    It's too late. The intent has been signaled. PostHog is leveraging the goodwill of the "opensource" meme for personal profit-seeking. Their intention is literally to sell this analytics product to a Google/Amazon/Microsoft. If you're going to raise VC with the intent to sell, why even bother going opensource other than to manipulate a percentage of developers who will convert on the basis of "opensource = good".
    - satvikpendem 6y ago
      What's wrong with being open source but also for profit? I'd rather they be open source, make money and be sustainable than be closed source. At least this way I know I can continue using it if any unwanted changes are made, perhaps via someone forking it, and also continue to self host it.
      - lmeyerov 6y ago
        Early-stage VC-funded isn't the opposite of sustainable, but it's close. The intent is (generally) to overshoot by mythical-man-month'ing for ~1yr, and on failure, firesale/acquihire to a likely inherently sociopathic bigco, vs keep going. Ex: When hiring folks, you're pitching a fat VC-dependent salary and promise of IPO-or-sale, and as that pressure increases & expectation solidifies, if revenue doesn't grow artificial growth levels (2-4X YoY for 3-5 years straight), you're now facing layoffs + non-giant compensation. Morale plummets, senior staff disappears, etc. Founders will feel the same. There are additional inherent reasons why this is the default, such as a now-broken cap table. I'm for it and wish them luck, but it's asking for an internal + external disaster to delude yourself, team, and users relying on you about such a fundamental assumption. (It's a very different story if there's already a popular federated OSS project not reliant on the founders+VCs lucking into reliable recurring revenue, and hey, the startup may be the lucky 1%.)
jonluca 6y ago
Been following PostHog along for a while and am super glad to see this! Congratulations and excited to see what happens in the future. Love this model!
gavinray 6y ago
Really great to see they've raised money. I wished the founders best of luck and have been watching from the sidelines since their launch thread here, super solid product.
mrwnmonm 6y ago
Congrats
peteforde 6y ago
I hope that they can put some of this funding to work by hiring a copywriter, as it's impossible to figure out what this software does from reading the homepage.
- warent 6y ago
  It says "Open source product analytics" front and center, and then it goes on to elaborate. I grant you that there are features in the screenshot which are not clearly described in the homepage, but it's hyperbole to say it's impossible to figure out what this does from reading the homepage.
  - scollet 6y ago
    There is some value in brevity. The 'homepage' typically serves that purpose.
  - peteforde 6y ago
    It's not hyperbole in the slightest. "Understand your users." So like, translation? People with accessibility issues? "Build a better product." But you don't know what my product is, and I still don't know if you can help me achieve that goal because a service for everyone is a service for nobody. "Join 1000 companies" Is 1000 a lot? It is if they are fortune 5000 companies, but not a lot if it's Shopify dropshippers or people selling Amway. If you name names, I can quickly decide if I belong in this group. "Try hosted or self-managed" I still don't know what you're trying to pitch me, so how can I possibly know what to click on? "Open source product analytics" - wait, are you an open source analytics tools, or an analytics tool for my open source product? "Understand users and events" So it can tell me how my churn will be impacted by COVID-19 and who is in need of special attention during the Black Lives Matter protests? I could go on and on, and no - I'm not being difficult or contrarian... they have one opportunity to convince me that I'm in the right place and they have what I need. They don't make any kind of attempt to compare or contrast what they are offering to current products I'm likely already using or existing behaviours that I'll be able to change. The whole thing basically screams "if you're here, you already know what this is". That's a missed opportunity and it's what inspired me to post.
malisper 6y ago
For those not familiar with Posthog, it's open an open source product analytics tool. That means you install some javascript on your website. It then collects information on what features people are using on your website and let's people run charts and graphs to ask questions about feature engagement and product usage. Product analytics is a pretty large space. The three main existing product analytics tools are Mixpanel[0], Amplitude[1], and Heap[2] (I used to work at Heap). Notably, Mixpanel was valued at $865MM as of 2014 and Amplitude was valued at $1B as of two weeks ago. Posthog is an open source competitor to these tools that you are able to self host. This is interesting for several reasons. If you don't feel comfortable sending data to third party tools, you control the data yourself. In addition, existing product analytics tools can get expensive. After you get off the public pricing, you will likely find yourself paying >$12k/year for one of these tools. There are also challenges I see for them going forward. In my experience, the person who makes the decision to buy a product analytics tool isn't in engineering. It's usually a product manager or sometimes a marketer. I imagine the fact that it's open source is less interesting to one of the traditional product analytics purchasers. Compare this to a company like Gitlab where the end users are engineers. Scaling these tools is also a huge challenge. My job at Heap was to basically scale Heap. If you want to self-host a product analytics tool, you will basically be responsible for scaling the system. On top of that, because each Posthog instance is isolated from each other, Posthog won't be able to take advantage of the shared compute power. Imagine a product analytics tool that has 100 customers and 100 servers. If the compute power was shared, each query would make use of all 100 servers. If the servers were isolated from each other, each query would only be able to make use of 1 server. That's basically a 100x slow down in performance. Posthog does sell a managed version which in theory shouldn't have this problem. It will be interesting to see long term whether that's a big driver of revenue for them. [0] https://mixpanel.com/ https://mixpanel.com/ [1] https://amplitude.com/ https://amplitude.com/ [2] https://heap.io/ https://heap.io/
- smithmayowa 6y ago
  Analysis like this is why I love hackernews, thank you.
- fergie 6y ago
  Stupid question: Can't you do all of this in Google Analytics? What are the advantages of Posthog/Mixpanel/Amplitude/Heap over GA?
soumyadeb 6y ago
Congrats guys. Great progress in a very short time!! We @RudderStack also raised a round recently. Glad to see investors putting money in Open-Source projects.
brainless 6y ago
First of all congratulations on this. It is nice to see Open Source being on the table for VCs. I am not sure how it pans out from a business point of view though. If you truly want a product built with the community then you might lose some control - or give control to the community, at least voting. Unless you want a* "source available" type of thing. Open Source is ideology and tool. The less control might mean that you prioritize what is good for the community, not necessarily for your VCs. I started working full time on an open source product, which like PostHog, I feel is going to be core infrastructure to any business that runs on data/software. I want to build a sustainable business around it. I have enough money in bank to sustain product building and marketing with my cheap living costs and get traction. Once there, I will have to think of next steps, but I do not feel I want to get into accelerated growth that comes with VC money. Mentors are highly appreciated though. *Edited typos.
cosmodisk 6y ago
Others covered a lot of aspects already,so I'll just add this: We are seeing the same story again and again.A few Europeans go to the US,pitch, and get funded. I can't imagine raising $3M+ on this side of the pond after only a few months of starting and without having some very good connections.
- billme 6y ago
  Raising VC funds outside of greater Bay Area is not only harder, but generally per equity traded, you get less in return. Generally, these cluster investors cluster around an asset-type, industry, jurisdiction, and proximity. Bay Area startups raised roughly $46 billion in 2019, compared to Europe in sum raising $36 billion; if you’re raising more than $10 million, not attempting to raise funds in the Bay Area is likely poor choice.
nednar 6y ago
regarding this "you want to seem like you're having your * together": My experience is this is bad advise. There are people who care a lot about this appearance stuff and people with skills, in any role, even as pure investors. You don't want to work with the appearance people because even the you-can-trust-them part often is just appearance. And the people with actual skills don't give a shit if you sit there with a 4k camera and a straight shirt or in your undergarments and a 3-day beard. They care about if you can deliver something useful, if you can stick to your goals+principles in tough times, and if your goals align with them well enough that they can believe you stay on board until they made their profit. So not being well prepared for the video call part is actually not a minus point. It might even be a plus. Kudos for the fundraiser. Keep posting, you guys are interesting!
gorkemcetin 6y ago
Congrats guys. It is always great to see other players bringing open source approach to product analytics. This will only bring more competition hence better products. (PS: I am one of the cofounders of Countly).

158 points by illuminated 6y ago

tti 6y ago

Open source > SaaS is a hot take.

satvikpendem 6y ago
You can have an open source SaaS, they're not mutually exclusive.
- brainless 6y ago
  Well it complicates the business model a bit. I am working full time on an open source data/content management product. I know my reasons to do it this way, but I also want to build a sustainable business around it. That is something I need to figure out.

d0m 6y ago

>> By hosted, we mean charging customers for the hosted version of the open source product. The risk is that a cloud provider decides to compete with your hosted version. An interesting approach is what cockroachdb did, which basically forbid this very specific use case, and is otherwise standard open-source.

koolba 6y ago
> An interesting approach is what cockroachdb did, which basically forbid this very specific use case, and is otherwise standard open-source. I have no qualms with what they’ve done. It’s their intellectual property and they can do as they see fit. But it’s not open source. There’s plenty of proprietary software that also provides the source code (generally without support). Maybe we need to settle on a new term like “source available”. Or “source provided”. But it’s not open source. To quote Arthur Dent, it’s almost, but not entirely unlike, closed sourced.
- dependenttypes 6y ago
  It offers basically everything that normal open source licenses do except that they have a very specific non-commercial clause regarding offering it as a paid service. I think that calling them “source available” or “source provided” does them a disservice as it implies that you can't modify/distribute/use it.
  - californical 6y ago
    The issue that I have with this license type is: what if there's some functionality that they have built that I would find useful, unrelated to their core business. Like, imagine that they have some tool to make generating UI components easier. If I want to use a bit from their UI component generator in my commercial software, am I violating their license? This is why real open source is so important to distinguish -- I don't want to have to worry about this sort of thing, let alone bring in lawyers to help me decide. Don't get me wrong, or take this as ungrateful. I'm still glad it exists, and am really happy that this works as their business model. I think it is valuable to use as a learning tool (how did they go about solving x problem?), as well as valuable for use in other Open Source software. I hope more companies are able to use licenses like this in the future, to be totally honest. I just want it to be distinguished from true Open Source software.
    - dependenttypes 6y ago
      > If I want to use a bit from their UI component generator in my commercial software, am I violating their license? It depends on the license. Based on what I have read about the cockroachdb, SSPL (mongo) it seems that you can do that (but I am not sure about it, someone more knowledgable might be able to verify it). > This is why real open source is so important to distinguish Consider another case then. You are making a proprietary software that you might or might not be planning to sell and you get the ui generator from an open source software. Are you free to do that? Truth is that just like above the answer is "it depends on the license". GPL will not let you do it while MIT will. LGPL will let you do it if you make the ui generator a library that you dynamically link with and publish your changes to it, while MPL... I have no idea, I think it works on a per-file bases.

treelovinhippie 6y ago

>> "Going for VC means you are committing to an exit or a failure - you can't really change your mind later that you want to take things more steadily" Exactly. And that is a huge reason NOT to use VC-funded opensource.

cercatrova 6y ago
Not exactly, you can still back out by not raising future rounds, or buying back their shares, as Gumroad did.
- treelovinhippie 6y ago
  It's too late. The intent has been signaled. PostHog is leveraging the goodwill of the "opensource" meme for personal profit-seeking. Their intention is literally to sell this analytics product to a Google/Amazon/Microsoft. If you're going to raise VC with the intent to sell, why even bother going opensource other than to manipulate a percentage of developers who will convert on the basis of "opensource = good".
  - satvikpendem 6y ago
    What's wrong with being open source but also for profit? I'd rather they be open source, make money and be sustainable than be closed source. At least this way I know I can continue using it if any unwanted changes are made, perhaps via someone forking it, and also continue to self host it.
    - lmeyerov 6y ago
      Early-stage VC-funded isn't the opposite of sustainable, but it's close. The intent is (generally) to overshoot by mythical-man-month'ing for ~1yr, and on failure, firesale/acquihire to a likely inherently sociopathic bigco, vs keep going. Ex: When hiring folks, you're pitching a fat VC-dependent salary and promise of IPO-or-sale, and as that pressure increases & expectation solidifies, if revenue doesn't grow artificial growth levels (2-4X YoY for 3-5 years straight), you're now facing layoffs + non-giant compensation. Morale plummets, senior staff disappears, etc. Founders will feel the same. There are additional inherent reasons why this is the default, such as a now-broken cap table. I'm for it and wish them luck, but it's asking for an internal + external disaster to delude yourself, team, and users relying on you about such a fundamental assumption. (It's a very different story if there's already a popular federated OSS project not reliant on the founders+VCs lucking into reliable recurring revenue, and hey, the startup may be the lucky 1%.)

jonluca 6y ago

Been following PostHog along for a while and am super glad to see this! Congratulations and excited to see what happens in the future. Love this model!

gavinray 6y ago

Really great to see they've raised money. I wished the founders best of luck and have been watching from the sidelines since their launch thread here, super solid product.

mrwnmonm 6y ago

Congrats

peteforde 6y ago

I hope that they can put some of this funding to work by hiring a copywriter, as it's impossible to figure out what this software does from reading the homepage.

warent 6y ago
It says "Open source product analytics" front and center, and then it goes on to elaborate. I grant you that there are features in the screenshot which are not clearly described in the homepage, but it's hyperbole to say it's impossible to figure out what this does from reading the homepage.
- scollet 6y ago
  There is some value in brevity. The 'homepage' typically serves that purpose.
- peteforde 6y ago
  It's not hyperbole in the slightest. "Understand your users." So like, translation? People with accessibility issues? "Build a better product." But you don't know what my product is, and I still don't know if you can help me achieve that goal because a service for everyone is a service for nobody. "Join 1000 companies" Is 1000 a lot? It is if they are fortune 5000 companies, but not a lot if it's Shopify dropshippers or people selling Amway. If you name names, I can quickly decide if I belong in this group. "Try hosted or self-managed" I still don't know what you're trying to pitch me, so how can I possibly know what to click on? "Open source product analytics" - wait, are you an open source analytics tools, or an analytics tool for my open source product? "Understand users and events" So it can tell me how my churn will be impacted by COVID-19 and who is in need of special attention during the Black Lives Matter protests? I could go on and on, and no - I'm not being difficult or contrarian... they have one opportunity to convince me that I'm in the right place and they have what I need. They don't make any kind of attempt to compare or contrast what they are offering to current products I'm likely already using or existing behaviours that I'll be able to change. The whole thing basically screams "if you're here, you already know what this is". That's a missed opportunity and it's what inspired me to post.

malisper 6y ago

For those not familiar with Posthog, it's open an open source product analytics tool. That means you install some javascript on your website. It then collects information on what features people are using on your website and let's people run charts and graphs to ask questions about feature engagement and product usage. Product analytics is a pretty large space. The three main existing product analytics tools are Mixpanel[0], Amplitude[1], and Heap[2] (I used to work at Heap). Notably, Mixpanel was valued at $865MM as of 2014 and Amplitude was valued at $1B as of two weeks ago. Posthog is an open source competitor to these tools that you are able to self host. This is interesting for several reasons. If you don't feel comfortable sending data to third party tools, you control the data yourself. In addition, existing product analytics tools can get expensive. After you get off the public pricing, you will likely find yourself paying >$12k/year for one of these tools. There are also challenges I see for them going forward. In my experience, the person who makes the decision to buy a product analytics tool isn't in engineering. It's usually a product manager or sometimes a marketer. I imagine the fact that it's open source is less interesting to one of the traditional product analytics purchasers. Compare this to a company like Gitlab where the end users are engineers. Scaling these tools is also a huge challenge. My job at Heap was to basically scale Heap. If you want to self-host a product analytics tool, you will basically be responsible for scaling the system. On top of that, because each Posthog instance is isolated from each other, Posthog won't be able to take advantage of the shared compute power. Imagine a product analytics tool that has 100 customers and 100 servers. If the compute power was shared, each query would make use of all 100 servers. If the servers were isolated from each other, each query would only be able to make use of 1 server. That's basically a 100x slow down in performance. Posthog does sell a managed version which in theory shouldn't have this problem. It will be interesting to see long term whether that's a big driver of revenue for them. [0] https://mixpanel.com/ https://mixpanel.com/ [1] https://amplitude.com/ https://amplitude.com/ [2] https://heap.io/ https://heap.io/

smithmayowa 6y ago
Analysis like this is why I love hackernews, thank you.
fergie 6y ago
Stupid question: Can't you do all of this in Google Analytics? What are the advantages of Posthog/Mixpanel/Amplitude/Heap over GA?

soumyadeb 6y ago

Congrats guys. Great progress in a very short time!! We @RudderStack also raised a round recently. Glad to see investors putting money in Open-Source projects.

brainless 6y ago

First of all congratulations on this. It is nice to see Open Source being on the table for VCs. I am not sure how it pans out from a business point of view though. If you truly want a product built with the community then you might lose some control - or give control to the community, at least voting. Unless you want a* "source available" type of thing. Open Source is ideology and tool. The less control might mean that you prioritize what is good for the community, not necessarily for your VCs. I started working full time on an open source product, which like PostHog, I feel is going to be core infrastructure to any business that runs on data/software. I want to build a sustainable business around it. I have enough money in bank to sustain product building and marketing with my cheap living costs and get traction. Once there, I will have to think of next steps, but I do not feel I want to get into accelerated growth that comes with VC money. Mentors are highly appreciated though. *Edited typos.

cosmodisk 6y ago

Others covered a lot of aspects already,so I'll just add this: We are seeing the same story again and again.A few Europeans go to the US,pitch, and get funded. I can't imagine raising $3M+ on this side of the pond after only a few months of starting and without having some very good connections.

billme 6y ago
Raising VC funds outside of greater Bay Area is not only harder, but generally per equity traded, you get less in return. Generally, these cluster investors cluster around an asset-type, industry, jurisdiction, and proximity. Bay Area startups raised roughly $46 billion in 2019, compared to Europe in sum raising $36 billion; if you’re raising more than $10 million, not attempting to raise funds in the Bay Area is likely poor choice.

nednar 6y ago

regarding this "you want to seem like you're having your * together": My experience is this is bad advise. There are people who care a lot about this appearance stuff and people with skills, in any role, even as pure investors. You don't want to work with the appearance people because even the you-can-trust-them part often is just appearance. And the people with actual skills don't give a shit if you sit there with a 4k camera and a straight shirt or in your undergarments and a 3-day beard. They care about if you can deliver something useful, if you can stick to your goals+principles in tough times, and if your goals align with them well enough that they can believe you stay on board until they made their profit. So not being well prepared for the video call part is actually not a minus point. It might even be a plus. Kudos for the fundraiser. Keep posting, you guys are interesting!

gorkemcetin 6y ago

Congrats guys. It is always great to see other players bringing open source approach to product analytics. This will only bring more competition hence better products. (PS: I am one of the cofounders of Countly).