16 ms·

I wouldn't invest in open-source companies, even though I ran one

165 points by wolframhempel 6y ago

ThePhysicist 6y ago
For standalone software like databases or CLI tools AGPL isn't an issue, if legal departments would object against using such software those companies couldn't run Linux/GNU tools either. For libraries it's a different story of course. The other points are mostly true, I think if open-source is just a marketing strategy to you it's not worth it.
- the-dude 6y ago
  Uhh, wasn't this what the Elastic license change was all about?
  - ThePhysicist 6y ago
    No, Elastic was licensed as Apache 2.0, which is much more liberal than AGPL. Also, they changed the license because a large company basically resold their solution withtout granting them a share of the revenue. OPs point about the (A)GPL was that it would hinder the adoption of OS software by companies.
softwaredoug 6y ago
The sad thing is so few companies really invest in participating in FOSS software. That’s one reason these “open source companies” came to exist. It really should be a community of contributors, backed by a diverse set of companies. At best, employers will allow contributing bug fixes or small patches. Not the in depth dedication these projects really need. We’re heading towards a handful of giant companies that can afford to pay large teams to build and maintain FOSS, and hence own developer mindshare, for their own selfish reasons.
- monoideism 6y ago
  > We’re heading towards a handful of giant companies that can afford to pay large teams to build and maintain FOSS, and hence own developer mindshare, for their own selfish reasons. "heading towards"? I'd say we're there. And it's been a while coming. I wrongly discounted Stallman. Like many, I found the GPL onerous and annoying to deal with as a developer. But we've paid a high price.
  - Rochus 6y ago
    > But we've paid a high price. What price?
    - DaiPlusPlus 6y ago
      Everyone using BSD and Apache licenses - so any changes or improvements they make aren't contributed back to the source repo.
      - Rochus 6y ago
        Well, there are also many who want to contribute code back to GPL and LGPL projects, but can't because the companies that control these projects want them to sign contributor agreements with unacceptable terms.
        nine_k 6y ago
        According to GPL, you do not need to contribute back to the original authors, you only need to make your changes available under GPL. But maintaining a fork is not everyone's cup of tea.
        Rochus 6y ago
        > But maintaining a fork is not everyone's cup of tea. It is not in the interest or benefit of the community if everyone makes or is forced to make his/her own fork. Forces should be joined, not scattered.
cat199 6y ago
post points out that there is variation among what constitutes open source companies / potential for profitability, and yet self-contradictorily concludes a simplified blanket rule on open source being a 'better strategy' and uses this simplified rule to conclude a similarly simplified blanket rule for investing in them.. seems a bit off.
tptacek 6y ago
This is unusually insightful for a LinkedIn post. One question, though: towards the end, it suggests that GPL/AGPL products, which are more defensible against commercial competitors who simply resell the open source project, are "legally murky" and might be rejected by customer legal teams. But does that matter? Can't you just do what Sleepycat did, and offer commercial customers a clean commercial license?
- iso1210 6y ago
  Microsoft spent a lot of money and energy in the late 90s and 00s to convince the world - especially business and legal people - that the GPL was a "cancer" The GPL is one of the cleanest licenses out there. Use the code in your project, give the source of your project to anyone you give the binaries to, job done.
  - Google234 6y ago
    Then they can give the source code out to anyone...
    - iso1210 6y ago
      And?
  - tptacek 6y ago
    I mean, I agree, but isn't it a moot point? Isn't part of the reason you get all your contributors to sign CLAs so that you can put whatever license on your product you need to close a deal?
    - JoshTriplett 6y ago
      > Isn't part of the reason you get all your contributors to sign CLAs so that you can put whatever license on your product you need to close a deal? This is true if you use a CLA, but that's going to reduce external contributions. In some cases you may not care about that.
  - 6y ago
ethanpil 6y ago
We live in a fundamentally capitalist society. Venture capital, entrepreneurship, the startup culture, etc, are all fundamentally profit driven. Open source is a movement which is ultimately driven by ideology. Even open source advocates need to put food on the table. While there are business models that can support open source projects, these will always be the exception when humans are involved. There is always an entrepreneur willing to ignore ideologies (and sometimes laws and/or morals) to make a buck. I believe that there is a need and important place for open source and free software, but the fact is that this needs to be funded by philanthropy and dedication to ideology, at the exception of profit in most (almost every) case. In this context, I think the article is correct. Depending on a majority of people for good behavior, good will and altuism is naive.
marvinblum 6y ago
I'm working on an open-core product [0] right now, and an aspect I find missing in the article is that you can generate trust by showing how the internals work. This is especially beneficial if you work in an area like us. Of course, you need to make sure your license is set right and you need to think about where new features go, but it's a valid use-case. [0] https://pirsch.io/ https://pirsch.io/ open-source core: https://github.com/pirsch-analytics/pirsch https://github.com/pirsch-analytics/pirsch
- tommoor 6y ago
  Lovely landing page – there seems to be a sudden abundance of google analytics alternatives by small teams and indie hackers in the last year, any insight into why that is?
  - marvinblum 6y ago
    Hmm due to the cookie banners probably. I've started this as a side project for my personal website, without looking for existing solutions :D The landing page is... meh, a placeholder more or less right now.
    - tommoor 6y ago
      That kind of makes sense, the cookie banners have been around quite a while now though.
      - dschramm 6y ago
        They did get more annoying lately though. Nowadays you have to wrestle through a horrible click game of dark patterns to not accidentally accept anything. Things like putting a small "Accept all" in the top right corner where you expect a close button or hiding the settings with at 12px in light grey.
- moneywoes 6y ago
  What license do you use?
systemvoltage 6y ago
I always see FOSS to get super fast traction (Elastic) and userbase - hey, because its free - and then later the same people complain that their lunch got stolen. Elastic could have grown (or not) organically with closed source software but that's hard without community help and being able to hire top developers to build your product. FOSS seems like a great way to market/PR your name out there because free is popular. I compare this, perhaps not perfect analogy, to Uber. Offer cheap rides, gain popularity while burning investor cash and wipe out existing industry/competition. Then, investors complain they can't monetize it. No shit! In the case of Elastic, the rest of the world benefited from it atleast.
- tschellenbach 6y ago
  Algolia is doing just fine. Open source contributions by volunteers are typically very small compared to the work done by the corporations behind the open source projects. At least for the vast majority of projects.
  - systemvoltage 6y ago
    I actually love Algolia. They know they're good and they charge a pretty penny for it. Excellent.
- BossingAround 6y ago
  > Elastic could have grown (or not) organically with closed source software but that's hard without community help and being able to hire top developers to build your product. Yea I don't know. If I saw claims made at [1] by a startup that made proprietary SW, I'd think "yea right". [1] https://www.elastic.co/elasticsearch/service https://www.elastic.co/elasticsearch/service
moneywoes 6y ago
Very well written article. Why are VCs very interested in FOSS companies
- itronitron 6y ago
  Probably because they have market share but don't generate any revenue.
ignoramous 6y ago
Mirrors: https://outline.com/unMZCw https://outline.com/unMZCw https://archive.is/iVSvI https://archive.is/iVSvI
tommoor 6y ago
I'm working on an "open core" knowledge base [0] right now and have been for the last few years. We're definitely leaving money on the table by offering an easy docker install option and I'd largely agree with the points made in the article but it's hard to understate the value of the distribution that open source brings, particularly for product-lead teams that aren't so hot at marketing. [0] https://www.getoutline.com https://www.getoutline.com
- itronitron 6y ago
  If the software fits into the 'infrastructure' bucket then open source software seems like the best approach for selling into engineering orgs. This is likely due to the longer setup/eval time for infrastructure type software (Elastic being an example) and the higher price tag (justified or not). Contrast this with 'tools' (such as IDEs) which tend to not be FOSS and are a low enough dollar and time cost that they can easily be purchased or even trialed for a month. My very brief review of your product site leads me to think that a good approach for your company would be to offer small-team licenses for free with the hopes that they will adopt and become champions for their enterprise to buy a site license.
- alfonsodev 6y ago
  Your product looks great, I’ll give it a try! I’m curious. What was your thought process when making the decision about open sourcing? Were you open source from day one?
  - tommoor 6y ago
    Not from day one, I wrote about the decision here :) https://blog.tommoor.com/2019/01/01/you-should-open-source-your-product/ https://blog.tommoor.com/2019/01/01/you-should-open-source-y...
satvikpendem 6y ago
Open source is not a business model. Let me say this again. Open source is not, in and of itself, a business model. People conflate having an open source project with having an open source business. Open source businesses can be done, of course, but open source in and of itself won't give you that business. It is not a business model therefore but rather a distribution/governance model. The key is that being open source should not be a core value proposition in most cases (unless you're Red Hat) but rather it should be ancillary, merely incidental to your core business. For example, say you ran a task management app company. The core value driver is not whether it's open source or not (to most people). People don't buy based on whether the product itself is open source, they buy because it solves their problem, of task management in this case. Labeling oneself as "open source" is a classic engineering trap because again, people don't care about that, if a closed source solution can solve their problem more than an open source one, they'll use the former. By the way, I happen to run an open source task management app (a todo list + calendar hybrid basically, https://getartemis.app https://getartemis.app) but nowhere do I advertise it as open source, even though it is, because I know my core customers, non-engineers, don't care about that and just want to schedule their days better. --- I am reminded of OpenHunt, an open source version of Product Hunt that was made. The only value proposition was that it was open source, but it shut down precisely because users didn't care about that, they cared whether it had enough cool products (as a consumer) and enough traffic (as a submitter). Here's one post-mortem: https://news.ycombinator.com/item?id=10940729 https://news.ycombinator.com/item?id=10940729 > OpenHunt tried solving a problem for the content makers without providing any additional benefit to the content consumers. > It's a nice, heart-warming mission. But in the end of the day, content is king, that's what consumers want. > There have been many examples of people rallying around a "free and open" version of a service. They fail to realize that the end consumer barely cares. Look at voat (Reddit), app.net (Twitter), Diaspora (Facebook), even ycreject.com (Y Combinator) tried to be a thing for a while. > If someone is able to make it "free and open" while also making it a better experience than the alternative, then it'll be a big success. But so far everyone gets that wrong.
rhn_mk1 6y ago
> If you are running a commercial business on top of your open-source solution, it is paramount that you own the product's full IP. Why is it "paramount"? While I have seen that behaviour, there are also several commercial businesses in my corner of the 'net based on open source solutions that don't make an effort to own the full IP and they are doing OK. I think there's some unstated assumption here, anyone care to explain?
- yarcob 6y ago
  I think the implicit assumption is that you are doing the majority of the development, and you want to make money from licensing, and you want to be the only one making money from your product. So basically, the plan is to make money exactly like a proprietary software company would make money, except that you make the product open source for marketing. I never understood why people thought that was a good idea. People like Open Source because they don't want to depend on a single vendor, and yet these companies want to be the only vendor of their Open Source solution. It doesn't make sense.
- IncRnd 6y ago
  What is paramount is that risk needs to be reduced, mitigated, transferred, avoided, or even sometimes accepted. Risk must be managed. That is why some companies want to own the OS project, and others want to pay as employees the prime contributors.
- mooreds 6y ago
  Control. If you control your IP, then the company is more valuable because there are more options (whether selling the company, relicensing/dual licensing or something else). It's similar to developers assigning copyright when they make a contribution to an open source project--keeps control in one place, makes it easier to make long term decisions about the project (for the project's maintainers).
- temac 6y ago
  > If you are running a commercial business on top of your open-source solution, it is paramount that you own the product's full IP. That sentence is even completely absurd. Suppose you ship a product/deploy a service that includes, among other things, Linux and PostgreSQL. Is it paramount that you own the full IP of Linux and PostgreSQL?...
f430 6y ago
I mean you are essentially selling yourself short with FOSS unless you were in a very saturated industry and selling support was the bulk of your revenue.
BossingAround 6y ago
If folks at HN ventured to take a guess, what would be your bets for the next successful OSS startups/companies? Be it a great exit or an IPO.
- mooreds 6y ago
  I was at a conference a few years ago and the conversation around the lunch table was the chilling effects of the public cloud's operational expertise on venture funded open source businesses (what we saw with Elastic). Nothing I've seen since that conference has changed my mind. As a developer, I love using open source software. Easy to review/bug fix, less risky because even if the company fails, it'll be around, and usually very low cost and easy to get started with. As a prospective business owner, I think it stinks. Another view: as a consumer of software, I love free stuff. As a producer of software, I like to get paid.
ignoramous 6y ago
If engineers are the most important resource, I think being a company known for open source might act as an inbound sales for attracting top talent, too (see: Google, RedHat, Mozilla). For engineers, it makes sense to work for companies that do have FOSS projects because they can always point to their corpus of work when switching between jobs as proof of their worth. Most engineers who realise this don't ever want to go back to working full time on closed source projects. That said, folks making arguments against open source companies conveniently ignore the examples of Cloudera, Linaro, Hortonworks. They also tend to forget how much central open source is in the current climate because someone or the other will attempt to commoditize your core (Firebase vs Supabase, GitHub vs GitLab, Oracle vs Postgres, Docker vs Mesos, Windows vs Linux, Intel/AMD vs ARM, S3 vs MinIO, Symbian/iOS vs Android, Plaid vs Moov.io) and because of the Interwebs, these FOSS solutions will be found and a community will develop around it. It is almost inevitable. I'm not an investor, but one should definitely invest in FOSS companies with proven tech because they attract the most precious commodity of all, developer mindshare. I'm sure FOSS companies will discover newer ways to make their businesses work (like GitLab and HashiCorp with "buyer-based open core"), and blueprints from the past are already available (especially, in terms of what not to do; looking at you, Docker). Despite what they may say about BigTech stealing their thunder away... I think it is mostly down to FOSS companies digging themselves into a hole. Source-available licensing is a compelling alternative, but I hope the community rejects it, because such licenses don't seek to truly benefit the overall software ecosystem rather only merely appear to do so, and that's why I hate those. Required reading: http://dtrace.org/blogs/bmc/2018/12/14/open-source-confronts-its-midlife-crisis/ http://dtrace.org/blogs/bmc/2018/12/14/open-source-confronts... https://www.gwern.net/Complement https://www.gwern.net/Complement https://blogs.apache.org/foundation/entry/the-apache-way-to-sustainable https://blogs.apache.org/foundation/entry/the-apache-way-to-...
- madmax96 6y ago
  Microsoft acquired GitHub for $7.5 billion. How much is GitLab worth? How much money has Microsoft made selling Windows vs Linus off Linux? How much money does Apple make off iThings?
  - deleted 6y ago
jedberg 6y ago
Same. I've very wary of investing or getting involved with any company that has an open source strategy. I worked for one (Sendmail) and it did not go well. We talked about how it's hard to compete when your number one competitor is your own software for $0. If you look at successful public companies with open source, they are all fairly small successes compared to their public closed source peers. When I worked at reddit, we open sourced our code. It didn't gain us much. We got a few contributions, and we also got a few competitors. The biggest benefit was being able to show people the code when they suspected shenanigans. At Netflix our ethos was "if it's involved in infrastructure, open source it, if it's related to movies, keep it closed." That actually worked pretty well. But the open source code was difficult to use unless you invested in the entire ecosystem. The main benefit was recruiting. For my own company, I try to support open source by donating to the people who make it.
- joshuaengler 6y ago
  Same here. I run a small game company in San Francisco, and we constantly are donating to help fund projects like Blender and Godot because they're amazing projects that deserve funding to keep them afloat. But would I invest in an open source company? Eh, that's a different story. I love them for what they are, it's amazing they exist, but I don't see them as an investment that pays you back dividends. Rather, I see them as a useful tool you can make money with and is worthy of your donations.
- jrochkind1 6y ago
  > "if it's involved in infrastructure, open source it, if it's related to movies, keep it closed." In the first wave(s) of open source, I think most contributors were working on company time, but the open source was not the primary product of the company. It was something useful to the business of the company, without being the business of the company. So what you describe seems to fit into that model. That model seems to be less and less of open source contribution though. (I am not certain why). And I think that has a lot to do with current apparent crises in open source sustainability -- it was the model that worked, for a while, to produce and maintain lots of open source. I am not sure "open source companies" ever really have.
lifeisstillgood 6y ago
The essential problem is gatekeeping. Any commercial business uses money as a means of getkeeping what it uses (buys). This works well to reduce and so control the purchases of chairs, desks, external consultancies and proprietary software. We all know the horrors and pain of trying to raise a PO to get a license for a really useful / necessary piece of software. I fundamentally guarantee that if React needed a 0.01 cent license for every internal and external installation it would have four users globally. FOSS short circuits this gatekeeping function - and it is only popular because it is hard to keep track of and easy to load up npm and grab 900 libraries. Imagine there was a FOSS plug-in everyone used, call it mothership that on every install (and indeed invocation) it routed back a simple packet to say "i am alive and used on this machine in this domain in this company" (let's call it a common piece of config like git email config) Immediately every legal department would soil their pants and internal software development would grind to a halt - or FOSS developers would be able to charge decent value for their work - or some ecosystem of foss-aggregators would spring up providing licensed, limited installs and support and legal protection. Personally I am in favour of the last option - for each product a series of (local) companies could club together and provide support for each other's code bases, (if you use my react-foobar I will license company X to indemnify you - sort of approved vendors schemes) I struggle to see many better ways Edit: Andressen was slightly wrong - FOSS is going to eat the world. And as such it's production will be a public good - paid for out of taxpayer money and directed as such - either as a utility through regulation or as science through funding only the brightest. And the big question remains - if we could see the whole stack easily, and if it all was priced at the minimum wage for every developer in the stack how much would it be? Would anyone pay it? Or worse, would they realise they did not need all those in-house developers anymore as they are all running "libBusiness.py" and it all kind of fits together. Or as is more likely - will we see lots of companies like redhat, that produce a "bank/airline/retailer in a box" - and the internal teams are focused on that 5% of USP? I am not sure I understand that world - but I also do not think I currently could select correctly all the FOSS packages needed to build that stack that can just run a business. Trust me it does not look like the openERP style stacks. at all.
- mooreds 6y ago
  >FOSS short circuits this gatekeeping function There are other ways past gatekeeping: * free trials * money back guarantees * free as in beer solutions Open source goes one step further than those and says "you don't just get to use this, you get to own it" where "own" means change as you like.
flaburgan 6y ago
Wow. It looks like this man has no idea what the free software spirit is. I mean, he definitely hasn't, as he's talking about "exit value“. Still, he's writing that with HTML, using SSL and TCP, on a PHP website probably running on Nginx or Apache on a Linux server with a postgresql database... Opensource is what allows him to talk to people or even create his business he is so proud of that he gives advices to everybody, yet he encourages everyone to not join the game. If open source has some problem, it's certainly because of people like him.
- tppiotrowski 6y ago
  The author only shares his personal opinion on whether he would invest money in FOSS. He is not advocating that FOSS serves no purpose.
- pchap10k 6y ago
  Do engineers working full time in a FOSS core team need someone to pay their salaries? Nothing the author said was against FOSS on a volunteer basis. What he said was it’s a challenging business model, unless you can reach escape velocity, and the window for that success is much narrower than simply selling a commercial product from day one. There are real differences between FOSS that provides foundational capability (network layer, drivers, OS) and application layer projects. Firstly, they largely were built at a different time, secondly they were pure FOSS and not backed by a founding company that relied on it to keep core development going (Redhat’s business backed into Linux, so they benefitted from an existing core). TLDR a founder who struggled to establish a business based on FOSS is saying don’t do it as a business because it’s harder than you think and can feel like a thankless endeavor.
EGreg 6y ago
The ratio of failed OS businesses to successful ones is worse than in prop-tech; revenue kicks in much later, business model pivots are hampered by community resistance, and licensing issues leave OS businesses vulnerable throughout their lifetime. Instead, why not do what traditional businesses are doing, sell a product, and simply charge for the value it provides? Why not? Because when your project gets so big that lots of people rely on it, it would be better for the world to remove the private property restrictions, allowing fixes and innovations to come from anywhere and be distributed as widely as possible. The question should be asked the other way: why not make it open source? You see, all the objections here come from a capitalist mindset, which is based on private ownership and competition. “I built it so I own it.” That is how we ended up with a feudal society online, where conservatives are complaining they’re being silenced, where bulk collection of everyone’s info is possible in one place, where rents are being extracted from the ecosystem. The alternative is collaboration with no private ownership of the platform. (Note that this is NOT socialism.) Linus Torvalds launched Linux, Tim Berners launched the Web, Vitalik launched Ethereum, but they don’t “own it”. And it is precisely because there is no private ownership of the whole platform, that they have led to an explosion of wealth and utility for the entire world. “Business models are incompatible with open source”. Well, sure. Rentseeking behavior gets harder when the platform is permissionless. But what has led to more value for the world: AOL or the Web? Internet Explorer or Chromium? Britannica or Wikipedia? Windows or Linux, BSD (including MacOS and Android) Alchemy or Science? This is a mindset issue in our culture. In current society the vast majority of people are living paycheck to paycheck, so they would love to escape this precarious situation. They take jobs because they pay, not so much because they like the project. When they do get financially independent, they keep going and going, trying to make more money and become a capitalist. And we all support these few people who “escaped and made it” by ensuring that their intellectual private property rights are enforced and their business models are enabled in our society (RIAA, MPAA, etc). In a society where everyone has UBI, people would work 20% of their time on stuff they like - science, open source, religion, hobbies, raising children etc. And projects would attract people because they are awesome and useful to many people, and because they can contribute something that others need. Each small contribution to the gift economy costs very little, and there is no limit on the remixing and reusing of effective solutions. Private property is all about adding more friction to this permissionless model and excluding the rest of the world from using a resource and building on others’ discoveries. When Isaac Newton said “if I saw further, it’s because I stood on the shoulders of giants” he didn’t rent those shoulders. He wasn’t sued an a SWAT team didn’t break down his door. Isaac Newton wasn’t in pharma. If I sound like some kind of communist, liste to the venture CAPITALISTS who fund the future and see where things are doing. For example read https://worldaftercapital.org https://worldaftercapital.org by venture capitalist Albert Wenger general partner of Union Square Ventures to understand where we are headed as a society. And read their latest 3.0 thesis.
gregwebs 6y ago
The main business proposition of open source is that you can create a larger market. This is hinted at in the article by saying "easy distribution", but it isn't really discussed. The goal of open source is to create a market for the product that is 10x or 100x bigger than a proprietary product would have. You won't ever capture 100% of the market. But if you capture a fraction of that larger market you still come out far ahead of the proprietary product in which you capture close to 100% of the market. Probably there are some products for which the market is finite or open source won't make it bigger, and for those the scarcity based viewpoint of this article makes sense. It is also worth noting that Red Hat has shown that open source doesn't require distributing your product for free. Another note is that many companies today take an open core approach to try to gain some of the advantages of open source without all of the downsides.
- alfonsodev 6y ago
  This is a good point, any examples that come to mind to illustrate it? I’m genuinely interested.
  - deleted 6y ago
    [deleted]
  - gregwebs 6y ago
    Many successful databases are open source. MongoDB (at least before the recent license change!) is a good example of a huge company where I doubt anyone would have made a noticeable business out of a proprietary version of the product.
    - Closi 6y ago
      I actually think MongoDB highlights the challenges in this article. Namely: - Tremendously popular database, a huge success by open source standards! - Their open-source API has been used by Amazon to create their biggest competitor (DocumentDB). Or alternatively any cloud provider will help you spin up pre-built images with MongoDB installed (no path to monetisation). - Have not (yet) been able to turn it into a profitable business, with large (and widening) losses recorded the last 3 years (at what appears to be the height of it's popularity). - To create revenue they need a huge sales team (I've heard the pitch and seen the cost!). They not only have to bid against competing technologies, but also their own free tier! - This resulting in... Mongo having to change their licence to create a profitable business. 23.15B market cap though - but they have had to ultimately change their licensing plan to find a profitable way forwards.
habitue 6y ago
I think "Commoditize your complement" comes into play here. Yeah, if your core offering is free, you're going to be fighting to make money. But you can get huge value if you open source otherwise proprietary parts of your stack.
- mooreds 6y ago
  We've done this at my current company. We have a closed source, commercial offering. But our client libraries, our documentation, sample deployment scripts, and other supporting libraries are open source. We get some contributions.
vmception 6y ago
Cryptocurrency issuing entertainment companies have monetized this pretty well. They don't have recurring revenue but they don't need venture capital investors either so it doesn't matter. Open source, campaign, sell, book revenue from sell. If market has formed, book more revenue in the future from selling into liquidity. If market hasn’t formed, hire some entertainers to babysit a chat room and move on. Some parent companies are monetizing repeat issuances, those are worth investing into because all the shareholders make money. The companies dont need capital and would only offer shares to provide some exposure to the market. I’m not aware of any broadly offered dealflow of a token issuing factory, which is probably why people don't understand or notice this business model.
hapless 6y ago
The author makes a good case against open source businesses, but he indulges himself in a false dichotomy between a traditional proprietary model and open source. Increasingly often, there is no market for your proprietary software. It is then not a choice between open source and proprietary models, but rather between doing open source or doing nothing. A lot of markets are just gone, and they're not coming back. Odds are, you're never going to sell another proprietary UNIX clone, or a proprietary database, or a proprietary application server. There are no punters. Those niches have been extinguished.
- mooreds 6y ago
  This is a really good point. However, there are still successes that I'd never have expected. Jetbrains is a good example. Who would have thought that an IDE could be sold when there are adequate ones for free? There are also many many smaller niches where software can be sold because there isn't adequate developer interest to create OSS. One example is this: https://querix.com/products/lycia https://querix.com/products/lycia (not a customer, just ran across their product).
  - hapless 6y ago
    It's worth noting that Querix was founded back in 1994 -- when Informix and proprietary databases were more popular than today.
  - InvOfSmallC 6y ago
    I personally have been being using Intellij for everything for the last five years. I tried to migrate to VSCode for golang. I mean, don't get me wrong, the situation is not the worst possible, but the only reason you would want to use that is because you never tried refactoring with Goland. Are you kidding me? I had to go look for what is the current needed extensions for go that are still maintained, configure them etc...vs just download and use Goland. If you can't or don't want to spend money OK, but otherwise is a non sense to use anything else.
    - linkdd 6y ago
ahepp 6y ago
When I was a broke college student, I cared a lot more about open source. Now that I have more resources, more experience, less time, and a personal interest in getting paid for software, I have stronger feelings about the interface. Whether or not the box is black isn't really on my mind these days. I rarely have the skill or time to fix them when they break, or don't do what I want. I'd rather the box be easier to swap out or build around when requirements change. I'd rather have a richer ecosystem of blacker boxes, than a bunch of broken transparent boxes laying around. A problem, of course, is that businesses don't want their boxes to be interchangable. Transparent boxes do tend to help.
dragonwriter 6y ago
> giving your product away for free is just as bad a business strategy as it sounds. Has anyone, anywhere, argued the opposite? Because this seems like beating a strawman. > Copyleft licenses such as AGPL force adopters to publish changes back to the source repo or offer them via network protocols. The AGPL specifically does this, other copyleft licenses (like the GPL do not for “adopters”, only for people redistributing executables) > This is meant to deter third parties from offering competing hosted services No, copyleft in general is about prohibiting downstream proprietary distributions (and also, in the AGPL case, proprietary hosted versions) it is not supposed to prevent competing software/services. > Instead, why not do what traditional businesses are doing, sell a product, and simply charge for the value it provides? That's what “open source” companies do. The thing they sell is the product (whether it's support and consultancy, the value-add of the enterprise version of an open-core product, or hosted SaaS.) The problem with “prop-tech” is often, as this piece itself points out, but entirely fails to address in recommending “prop-tech”: “the world of FOSS is full of strong and established offerings with a zero-dollar price tag.” And making your tech proprietary doesn't stop you from having to compete with the open-source competition.
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XCSme 6y ago
Great post, I completely agree! I have debated over this for years while building a self-hosted analytics platform (userTrack.net) and I have always reached the same conclusions: if I open-source it, not only I affect its sustainability but also the business goals would become complete opposite to the product goals (eg. as you mentioned, making it easier to install improves product but affects the business). I now think that the best way to go is "paid-source": make the product as good as you can, make it as easy to install as possible and the customers who want to use it can pay a reasonable amount for it. I recently changed the pricing model, as the one-time payment was not sustainable, so the product has now an upfront cost + optional yearly maintenance fee (you can use it forever, but if you want new features and support you should support it). I have used many amazing open-source projects that got abandoned over the years, I would have gladly paid for many of them if that meant sustaining the future development of the project. And, before anyone mentions it, donations are not the answer. (I left the same comment on the article)
- yjftsjthsd-h 6y ago
  > I now think that the best way to go is "paid-source" Is that just source-available software[0] (sometimes also called shared-source)? I ask not because I object, but because it's easier if we all use the same words for the same things. [0] https://en.wikipedia.org/wiki/Source-available_software https://en.wikipedia.org/wiki/Source-available_software
  - XCSme 6y ago
    Thanks for letting me know, yes it's the same thing. Source-available sounds accurate, the term is a bit long though and I think it is a more generic term that also covers open-source and paid-source?
- apple4ever 6y ago
  I think the pricing you mentioned is also part of the issue. Companies that are open source but paid something have a crazy high price for that something. I know they are going after the Enterprise market but they still price themselves out.
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dade_ 6y ago
If you give away your secret sauce recipe, no one will pay for your recipe (though some will donate), but people will still buy your fried chicken. I think open source works best when it isn't your product, but your capability. An e-commerce site open sources it's product inventory management software. If I spin up a docker container with your software, I will be closer to building an e-commerce business, but I won't have one without a lot more work. More examples: A blogger makes her own open source blogging software. A 3D games developer - open sources their AI engine or 3D engine. You get community adoption, goodwill & hopefully contribution, ability to hire employees that already know your software. Possibly it identifies new markets to pursue.
jojo2000 6y ago
If you got a lot of money you should give back to what propelled you there. You may call it investing with a loss but that'd be just the right thing to do. Everything is not about the money, making money and more money.
hnarn 6y ago
The fundamental difference between buying or not buying OSS products is that if you’re buying OSS, at least there’s a potential your product will be fixed and live on through the community if your original vendor disappears. The only thing the vendor can really deny you is the service. In the case of closed source, you can not only be denied the service offered, you also end up with a useless, unpatchable black box if the vendor disappears. In my mind, this makes OSS more resilient, in more ways than one. This doesn’t contradict the point made: of course from an investors point of view I’m sure closed source is often more profitable. But from a consumer perspective, I doubt the same benefits are true.
LukeEF 6y ago
Interesting post - I'm coming from a COSS database perspective (TerminusDB), so talking my book. The point of COSS imho is to create broad value and monetize a percentage of that value. A few points: 1. In database land, there is no other available venture scale business model. If you look at the top 10 databases on DB-Engines (https://db-engines.com/en/ranking https://db-engines.com/en/ranking), the most recent proprietary db is SQL Server which launched in 1989. Yes, databases are sticky (we see you Oracle), but unless you believe there are no further investable plays in databases, then open source is the only way to invest. (Snowflake is an exception to the rule, but in this case, it is just that). 2. Useful recognition that offering hosted versions of the product is a viable business model that can deliver SaaS type margins. Mongo's Atlas is the obvious leader here - a huge and fast-growing revenue stream. I would also mention the companies that have built successful SaaS/marketplace offering on OSS. Informative list of all the COSS companies above 100m in revenue: https://docs.google.com/spreadsheets/d/17nKMpi_Dh5slCqzLSFBoWMxNvWiwt2R-t4e_l7LPLhU/edit#gid=0 https://docs.google.com/spreadsheets/d/17nKMpi_Dh5slCqzLSFBo... 3. I find this conclusion difficult to swallow: 'The ratio of failed OS businesses to successful ones is worse than in prop-tech; revenue kicks in much later'. I can't find any evidence for the first point - it needs substantiation. For revenue, lots of the most successful venture backed businesses (facebook) have revenue kicking in later so they can maximise growth potential – that’s seems ideal for venture!

165 points by wolframhempel 6y ago

For standalone software like databases or CLI tools AGPL isn't an issue, if legal departments would object against using such software those companies couldn't run Linux/GNU tools either. For libraries it's a different story of course. The other points are mostly true, I think if open-source is just a marketing strategy to you it's not worth it.

the-dude 6y ago
Uhh, wasn't this what the Elastic license change was all about?
- ThePhysicist 6y ago
  No, Elastic was licensed as Apache 2.0, which is much more liberal than AGPL. Also, they changed the license because a large company basically resold their solution withtout granting them a share of the revenue. OPs point about the (A)GPL was that it would hinder the adoption of OS software by companies.

softwaredoug 6y ago

The sad thing is so few companies really invest in participating in FOSS software. That’s one reason these “open source companies” came to exist. It really should be a community of contributors, backed by a diverse set of companies. At best, employers will allow contributing bug fixes or small patches. Not the in depth dedication these projects really need. We’re heading towards a handful of giant companies that can afford to pay large teams to build and maintain FOSS, and hence own developer mindshare, for their own selfish reasons.

monoideism 6y ago
> We’re heading towards a handful of giant companies that can afford to pay large teams to build and maintain FOSS, and hence own developer mindshare, for their own selfish reasons. "heading towards"? I'd say we're there. And it's been a while coming. I wrongly discounted Stallman. Like many, I found the GPL onerous and annoying to deal with as a developer. But we've paid a high price.
- Rochus 6y ago
  > But we've paid a high price. What price?
  - DaiPlusPlus 6y ago
    Everyone using BSD and Apache licenses - so any changes or improvements they make aren't contributed back to the source repo.
    - Rochus 6y ago
      Well, there are also many who want to contribute code back to GPL and LGPL projects, but can't because the companies that control these projects want them to sign contributor agreements with unacceptable terms.
      - nine_k 6y ago
        According to GPL, you do not need to contribute back to the original authors, you only need to make your changes available under GPL. But maintaining a fork is not everyone's cup of tea.
        Rochus 6y ago
        > But maintaining a fork is not everyone's cup of tea. It is not in the interest or benefit of the community if everyone makes or is forced to make his/her own fork. Forces should be joined, not scattered.

cat199 6y ago

post points out that there is variation among what constitutes open source companies / potential for profitability, and yet self-contradictorily concludes a simplified blanket rule on open source being a 'better strategy' and uses this simplified rule to conclude a similarly simplified blanket rule for investing in them.. seems a bit off.

tptacek 6y ago

This is unusually insightful for a LinkedIn post. One question, though: towards the end, it suggests that GPL/AGPL products, which are more defensible against commercial competitors who simply resell the open source project, are "legally murky" and might be rejected by customer legal teams. But does that matter? Can't you just do what Sleepycat did, and offer commercial customers a clean commercial license?

iso1210 6y ago
Microsoft spent a lot of money and energy in the late 90s and 00s to convince the world - especially business and legal people - that the GPL was a "cancer" The GPL is one of the cleanest licenses out there. Use the code in your project, give the source of your project to anyone you give the binaries to, job done.
- Google234 6y ago
  Then they can give the source code out to anyone...
  - iso1210 6y ago
    And?
- tptacek 6y ago
  I mean, I agree, but isn't it a moot point? Isn't part of the reason you get all your contributors to sign CLAs so that you can put whatever license on your product you need to close a deal?
  - JoshTriplett 6y ago
    > Isn't part of the reason you get all your contributors to sign CLAs so that you can put whatever license on your product you need to close a deal? This is true if you use a CLA, but that's going to reduce external contributions. In some cases you may not care about that.
- 6y ago

ethanpil 6y ago

We live in a fundamentally capitalist society. Venture capital, entrepreneurship, the startup culture, etc, are all fundamentally profit driven. Open source is a movement which is ultimately driven by ideology. Even open source advocates need to put food on the table. While there are business models that can support open source projects, these will always be the exception when humans are involved. There is always an entrepreneur willing to ignore ideologies (and sometimes laws and/or morals) to make a buck. I believe that there is a need and important place for open source and free software, but the fact is that this needs to be funded by philanthropy and dedication to ideology, at the exception of profit in most (almost every) case. In this context, I think the article is correct. Depending on a majority of people for good behavior, good will and altuism is naive.

marvinblum 6y ago

I'm working on an open-core product [0] right now, and an aspect I find missing in the article is that you can generate trust by showing how the internals work. This is especially beneficial if you work in an area like us. Of course, you need to make sure your license is set right and you need to think about where new features go, but it's a valid use-case. [0] https://pirsch.io/ https://pirsch.io/ open-source core: https://github.com/pirsch-analytics/pirsch https://github.com/pirsch-analytics/pirsch

tommoor 6y ago
Lovely landing page – there seems to be a sudden abundance of google analytics alternatives by small teams and indie hackers in the last year, any insight into why that is?
- marvinblum 6y ago
  Hmm due to the cookie banners probably. I've started this as a side project for my personal website, without looking for existing solutions :D The landing page is... meh, a placeholder more or less right now.
  - tommoor 6y ago
    That kind of makes sense, the cookie banners have been around quite a while now though.
    - dschramm 6y ago
      They did get more annoying lately though. Nowadays you have to wrestle through a horrible click game of dark patterns to not accidentally accept anything. Things like putting a small "Accept all" in the top right corner where you expect a close button or hiding the settings with at 12px in light grey.
moneywoes 6y ago
What license do you use?

systemvoltage 6y ago

I always see FOSS to get super fast traction (Elastic) and userbase - hey, because its free - and then later the same people complain that their lunch got stolen. Elastic could have grown (or not) organically with closed source software but that's hard without community help and being able to hire top developers to build your product. FOSS seems like a great way to market/PR your name out there because free is popular. I compare this, perhaps not perfect analogy, to Uber. Offer cheap rides, gain popularity while burning investor cash and wipe out existing industry/competition. Then, investors complain they can't monetize it. No shit! In the case of Elastic, the rest of the world benefited from it atleast.

tschellenbach 6y ago
Algolia is doing just fine. Open source contributions by volunteers are typically very small compared to the work done by the corporations behind the open source projects. At least for the vast majority of projects.
- systemvoltage 6y ago
  I actually love Algolia. They know they're good and they charge a pretty penny for it. Excellent.
BossingAround 6y ago
> Elastic could have grown (or not) organically with closed source software but that's hard without community help and being able to hire top developers to build your product. Yea I don't know. If I saw claims made at [1] by a startup that made proprietary SW, I'd think "yea right". [1] https://www.elastic.co/elasticsearch/service https://www.elastic.co/elasticsearch/service

moneywoes 6y ago

Very well written article. Why are VCs very interested in FOSS companies

itronitron 6y ago
Probably because they have market share but don't generate any revenue.

ignoramous 6y ago

Mirrors: https://outline.com/unMZCw https://outline.com/unMZCw https://archive.is/iVSvI https://archive.is/iVSvI

tommoor 6y ago

I'm working on an "open core" knowledge base [0] right now and have been for the last few years. We're definitely leaving money on the table by offering an easy docker install option and I'd largely agree with the points made in the article but it's hard to understate the value of the distribution that open source brings, particularly for product-lead teams that aren't so hot at marketing. [0] https://www.getoutline.com https://www.getoutline.com

itronitron 6y ago
If the software fits into the 'infrastructure' bucket then open source software seems like the best approach for selling into engineering orgs. This is likely due to the longer setup/eval time for infrastructure type software (Elastic being an example) and the higher price tag (justified or not). Contrast this with 'tools' (such as IDEs) which tend to not be FOSS and are a low enough dollar and time cost that they can easily be purchased or even trialed for a month. My very brief review of your product site leads me to think that a good approach for your company would be to offer small-team licenses for free with the hopes that they will adopt and become champions for their enterprise to buy a site license.
alfonsodev 6y ago
Your product looks great, I’ll give it a try! I’m curious. What was your thought process when making the decision about open sourcing? Were you open source from day one?
- tommoor 6y ago
  Not from day one, I wrote about the decision here :) https://blog.tommoor.com/2019/01/01/you-should-open-source-your-product/ https://blog.tommoor.com/2019/01/01/you-should-open-source-y...

satvikpendem 6y ago

Open source is not a business model. Let me say this again. Open source is not, in and of itself, a business model. People conflate having an open source project with having an open source business. Open source businesses can be done, of course, but open source in and of itself won't give you that business. It is not a business model therefore but rather a distribution/governance model. The key is that being open source should not be a core value proposition in most cases (unless you're Red Hat) but rather it should be ancillary, merely incidental to your core business. For example, say you ran a task management app company. The core value driver is not whether it's open source or not (to most people). People don't buy based on whether the product itself is open source, they buy because it solves their problem, of task management in this case. Labeling oneself as "open source" is a classic engineering trap because again, people don't care about that, if a closed source solution can solve their problem more than an open source one, they'll use the former. By the way, I happen to run an open source task management app (a todo list + calendar hybrid basically, https://getartemis.app https://getartemis.app) but nowhere do I advertise it as open source, even though it is, because I know my core customers, non-engineers, don't care about that and just want to schedule their days better. --- I am reminded of OpenHunt, an open source version of Product Hunt that was made. The only value proposition was that it was open source, but it shut down precisely because users didn't care about that, they cared whether it had enough cool products (as a consumer) and enough traffic (as a submitter). Here's one post-mortem: https://news.ycombinator.com/item?id=10940729 https://news.ycombinator.com/item?id=10940729 > OpenHunt tried solving a problem for the content makers without providing any additional benefit to the content consumers. > It's a nice, heart-warming mission. But in the end of the day, content is king, that's what consumers want. > There have been many examples of people rallying around a "free and open" version of a service. They fail to realize that the end consumer barely cares. Look at voat (Reddit), app.net (Twitter), Diaspora (Facebook), even ycreject.com (Y Combinator) tried to be a thing for a while. > If someone is able to make it "free and open" while also making it a better experience than the alternative, then it'll be a big success. But so far everyone gets that wrong.

rhn_mk1 6y ago

> If you are running a commercial business on top of your open-source solution, it is paramount that you own the product's full IP. Why is it "paramount"? While I have seen that behaviour, there are also several commercial businesses in my corner of the 'net based on open source solutions that don't make an effort to own the full IP and they are doing OK. I think there's some unstated assumption here, anyone care to explain?

yarcob 6y ago
I think the implicit assumption is that you are doing the majority of the development, and you want to make money from licensing, and you want to be the only one making money from your product. So basically, the plan is to make money exactly like a proprietary software company would make money, except that you make the product open source for marketing. I never understood why people thought that was a good idea. People like Open Source because they don't want to depend on a single vendor, and yet these companies want to be the only vendor of their Open Source solution. It doesn't make sense.
IncRnd 6y ago
What is paramount is that risk needs to be reduced, mitigated, transferred, avoided, or even sometimes accepted. Risk must be managed. That is why some companies want to own the OS project, and others want to pay as employees the prime contributors.
mooreds 6y ago
Control. If you control your IP, then the company is more valuable because there are more options (whether selling the company, relicensing/dual licensing or something else). It's similar to developers assigning copyright when they make a contribution to an open source project--keeps control in one place, makes it easier to make long term decisions about the project (for the project's maintainers).
temac 6y ago
> If you are running a commercial business on top of your open-source solution, it is paramount that you own the product's full IP. That sentence is even completely absurd. Suppose you ship a product/deploy a service that includes, among other things, Linux and PostgreSQL. Is it paramount that you own the full IP of Linux and PostgreSQL?...

f430 6y ago

I mean you are essentially selling yourself short with FOSS unless you were in a very saturated industry and selling support was the bulk of your revenue.

BossingAround 6y ago

If folks at HN ventured to take a guess, what would be your bets for the next successful OSS startups/companies? Be it a great exit or an IPO.

mooreds 6y ago
I was at a conference a few years ago and the conversation around the lunch table was the chilling effects of the public cloud's operational expertise on venture funded open source businesses (what we saw with Elastic). Nothing I've seen since that conference has changed my mind. As a developer, I love using open source software. Easy to review/bug fix, less risky because even if the company fails, it'll be around, and usually very low cost and easy to get started with. As a prospective business owner, I think it stinks. Another view: as a consumer of software, I love free stuff. As a producer of software, I like to get paid.

ignoramous 6y ago

If engineers are the most important resource, I think being a company known for open source might act as an inbound sales for attracting top talent, too (see: Google, RedHat, Mozilla). For engineers, it makes sense to work for companies that do have FOSS projects because they can always point to their corpus of work when switching between jobs as proof of their worth. Most engineers who realise this don't ever want to go back to working full time on closed source projects. That said, folks making arguments against open source companies conveniently ignore the examples of Cloudera, Linaro, Hortonworks. They also tend to forget how much central open source is in the current climate because someone or the other will attempt to commoditize your core (Firebase vs Supabase, GitHub vs GitLab, Oracle vs Postgres, Docker vs Mesos, Windows vs Linux, Intel/AMD vs ARM, S3 vs MinIO, Symbian/iOS vs Android, Plaid vs Moov.io) and because of the Interwebs, these FOSS solutions will be found and a community will develop around it. It is almost inevitable. I'm not an investor, but one should definitely invest in FOSS companies with proven tech because they attract the most precious commodity of all, developer mindshare. I'm sure FOSS companies will discover newer ways to make their businesses work (like GitLab and HashiCorp with "buyer-based open core"), and blueprints from the past are already available (especially, in terms of what not to do; looking at you, Docker). Despite what they may say about BigTech stealing their thunder away... I think it is mostly down to FOSS companies digging themselves into a hole. Source-available licensing is a compelling alternative, but I hope the community rejects it, because such licenses don't seek to truly benefit the overall software ecosystem rather only merely appear to do so, and that's why I hate those. Required reading: http://dtrace.org/blogs/bmc/2018/12/14/open-source-confronts-its-midlife-crisis/ http://dtrace.org/blogs/bmc/2018/12/14/open-source-confronts... https://www.gwern.net/Complement https://www.gwern.net/Complement https://blogs.apache.org/foundation/entry/the-apache-way-to-sustainable https://blogs.apache.org/foundation/entry/the-apache-way-to-...

madmax96 6y ago
Microsoft acquired GitHub for $7.5 billion. How much is GitLab worth? How much money has Microsoft made selling Windows vs Linus off Linux? How much money does Apple make off iThings?
- deleted 6y ago

jedberg 6y ago

Same. I've very wary of investing or getting involved with any company that has an open source strategy. I worked for one (Sendmail) and it did not go well. We talked about how it's hard to compete when your number one competitor is your own software for $0. If you look at successful public companies with open source, they are all fairly small successes compared to their public closed source peers. When I worked at reddit, we open sourced our code. It didn't gain us much. We got a few contributions, and we also got a few competitors. The biggest benefit was being able to show people the code when they suspected shenanigans. At Netflix our ethos was "if it's involved in infrastructure, open source it, if it's related to movies, keep it closed." That actually worked pretty well. But the open source code was difficult to use unless you invested in the entire ecosystem. The main benefit was recruiting. For my own company, I try to support open source by donating to the people who make it.

joshuaengler 6y ago
Same here. I run a small game company in San Francisco, and we constantly are donating to help fund projects like Blender and Godot because they're amazing projects that deserve funding to keep them afloat. But would I invest in an open source company? Eh, that's a different story. I love them for what they are, it's amazing they exist, but I don't see them as an investment that pays you back dividends. Rather, I see them as a useful tool you can make money with and is worthy of your donations.
jrochkind1 6y ago
> "if it's involved in infrastructure, open source it, if it's related to movies, keep it closed." In the first wave(s) of open source, I think most contributors were working on company time, but the open source was not the primary product of the company. It was something useful to the business of the company, without being the business of the company. So what you describe seems to fit into that model. That model seems to be less and less of open source contribution though. (I am not certain why). And I think that has a lot to do with current apparent crises in open source sustainability -- it was the model that worked, for a while, to produce and maintain lots of open source. I am not sure "open source companies" ever really have.

lifeisstillgood 6y ago

The essential problem is gatekeeping. Any commercial business uses money as a means of getkeeping what it uses (buys). This works well to reduce and so control the purchases of chairs, desks, external consultancies and proprietary software. We all know the horrors and pain of trying to raise a PO to get a license for a really useful / necessary piece of software. I fundamentally guarantee that if React needed a 0.01 cent license for every internal and external installation it would have four users globally. FOSS short circuits this gatekeeping function - and it is only popular because it is hard to keep track of and easy to load up npm and grab 900 libraries. Imagine there was a FOSS plug-in everyone used, call it mothership that on every install (and indeed invocation) it routed back a simple packet to say "i am alive and used on this machine in this domain in this company" (let's call it a common piece of config like git email config) Immediately every legal department would soil their pants and internal software development would grind to a halt - or FOSS developers would be able to charge decent value for their work - or some ecosystem of foss-aggregators would spring up providing licensed, limited installs and support and legal protection. Personally I am in favour of the last option - for each product a series of (local) companies could club together and provide support for each other's code bases, (if you use my react-foobar I will license company X to indemnify you - sort of approved vendors schemes) I struggle to see many better ways Edit: Andressen was slightly wrong - FOSS is going to eat the world. And as such it's production will be a public good - paid for out of taxpayer money and directed as such - either as a utility through regulation or as science through funding only the brightest. And the big question remains - if we could see the whole stack easily, and if it all was priced at the minimum wage for every developer in the stack how much would it be? Would anyone pay it? Or worse, would they realise they did not need all those in-house developers anymore as they are all running "libBusiness.py" and it all kind of fits together. Or as is more likely - will we see lots of companies like redhat, that produce a "bank/airline/retailer in a box" - and the internal teams are focused on that 5% of USP? I am not sure I understand that world - but I also do not think I currently could select correctly all the FOSS packages needed to build that stack that can just run a business. Trust me it does not look like the openERP style stacks. at all.

mooreds 6y ago
>FOSS short circuits this gatekeeping function There are other ways past gatekeeping: * free trials * money back guarantees * free as in beer solutions Open source goes one step further than those and says "you don't just get to use this, you get to own it" where "own" means change as you like.

flaburgan 6y ago

Wow. It looks like this man has no idea what the free software spirit is. I mean, he definitely hasn't, as he's talking about "exit value“. Still, he's writing that with HTML, using SSL and TCP, on a PHP website probably running on Nginx or Apache on a Linux server with a postgresql database... Opensource is what allows him to talk to people or even create his business he is so proud of that he gives advices to everybody, yet he encourages everyone to not join the game. If open source has some problem, it's certainly because of people like him.

tppiotrowski 6y ago
The author only shares his personal opinion on whether he would invest money in FOSS. He is not advocating that FOSS serves no purpose.
pchap10k 6y ago
Do engineers working full time in a FOSS core team need someone to pay their salaries? Nothing the author said was against FOSS on a volunteer basis. What he said was it’s a challenging business model, unless you can reach escape velocity, and the window for that success is much narrower than simply selling a commercial product from day one. There are real differences between FOSS that provides foundational capability (network layer, drivers, OS) and application layer projects. Firstly, they largely were built at a different time, secondly they were pure FOSS and not backed by a founding company that relied on it to keep core development going (Redhat’s business backed into Linux, so they benefitted from an existing core). TLDR a founder who struggled to establish a business based on FOSS is saying don’t do it as a business because it’s harder than you think and can feel like a thankless endeavor.

EGreg 6y ago

The ratio of failed OS businesses to successful ones is worse than in prop-tech; revenue kicks in much later, business model pivots are hampered by community resistance, and licensing issues leave OS businesses vulnerable throughout their lifetime. Instead, why not do what traditional businesses are doing, sell a product, and simply charge for the value it provides? Why not? Because when your project gets so big that lots of people rely on it, it would be better for the world to remove the private property restrictions, allowing fixes and innovations to come from anywhere and be distributed as widely as possible. The question should be asked the other way: why not make it open source? You see, all the objections here come from a capitalist mindset, which is based on private ownership and competition. “I built it so I own it.” That is how we ended up with a feudal society online, where conservatives are complaining they’re being silenced, where bulk collection of everyone’s info is possible in one place, where rents are being extracted from the ecosystem. The alternative is collaboration with no private ownership of the platform. (Note that this is NOT socialism.) Linus Torvalds launched Linux, Tim Berners launched the Web, Vitalik launched Ethereum, but they don’t “own it”. And it is precisely because there is no private ownership of the whole platform, that they have led to an explosion of wealth and utility for the entire world. “Business models are incompatible with open source”. Well, sure. Rentseeking behavior gets harder when the platform is permissionless. But what has led to more value for the world: AOL or the Web? Internet Explorer or Chromium? Britannica or Wikipedia? Windows or Linux, BSD (including MacOS and Android) Alchemy or Science? This is a mindset issue in our culture. In current society the vast majority of people are living paycheck to paycheck, so they would love to escape this precarious situation. They take jobs because they pay, not so much because they like the project. When they do get financially independent, they keep going and going, trying to make more money and become a capitalist. And we all support these few people who “escaped and made it” by ensuring that their intellectual private property rights are enforced and their business models are enabled in our society (RIAA, MPAA, etc). In a society where everyone has UBI, people would work 20% of their time on stuff they like - science, open source, religion, hobbies, raising children etc. And projects would attract people because they are awesome and useful to many people, and because they can contribute something that others need. Each small contribution to the gift economy costs very little, and there is no limit on the remixing and reusing of effective solutions. Private property is all about adding more friction to this permissionless model and excluding the rest of the world from using a resource and building on others’ discoveries. When Isaac Newton said “if I saw further, it’s because I stood on the shoulders of giants” he didn’t rent those shoulders. He wasn’t sued an a SWAT team didn’t break down his door. Isaac Newton wasn’t in pharma. If I sound like some kind of communist, liste to the venture CAPITALISTS who fund the future and see where things are doing. For example read https://worldaftercapital.org https://worldaftercapital.org by venture capitalist Albert Wenger general partner of Union Square Ventures to understand where we are headed as a society. And read their latest 3.0 thesis.

gregwebs 6y ago

The main business proposition of open source is that you can create a larger market. This is hinted at in the article by saying "easy distribution", but it isn't really discussed. The goal of open source is to create a market for the product that is 10x or 100x bigger than a proprietary product would have. You won't ever capture 100% of the market. But if you capture a fraction of that larger market you still come out far ahead of the proprietary product in which you capture close to 100% of the market. Probably there are some products for which the market is finite or open source won't make it bigger, and for those the scarcity based viewpoint of this article makes sense. It is also worth noting that Red Hat has shown that open source doesn't require distributing your product for free. Another note is that many companies today take an open core approach to try to gain some of the advantages of open source without all of the downsides.

alfonsodev 6y ago
This is a good point, any examples that come to mind to illustrate it? I’m genuinely interested.
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- gregwebs 6y ago
  Many successful databases are open source. MongoDB (at least before the recent license change!) is a good example of a huge company where I doubt anyone would have made a noticeable business out of a proprietary version of the product.
  - Closi 6y ago
    I actually think MongoDB highlights the challenges in this article. Namely: - Tremendously popular database, a huge success by open source standards! - Their open-source API has been used by Amazon to create their biggest competitor (DocumentDB). Or alternatively any cloud provider will help you spin up pre-built images with MongoDB installed (no path to monetisation). - Have not (yet) been able to turn it into a profitable business, with large (and widening) losses recorded the last 3 years (at what appears to be the height of it's popularity). - To create revenue they need a huge sales team (I've heard the pitch and seen the cost!). They not only have to bid against competing technologies, but also their own free tier! - This resulting in... Mongo having to change their licence to create a profitable business. 23.15B market cap though - but they have had to ultimately change their licensing plan to find a profitable way forwards.

habitue 6y ago

I think "Commoditize your complement" comes into play here. Yeah, if your core offering is free, you're going to be fighting to make money. But you can get huge value if you open source otherwise proprietary parts of your stack.

mooreds 6y ago
We've done this at my current company. We have a closed source, commercial offering. But our client libraries, our documentation, sample deployment scripts, and other supporting libraries are open source. We get some contributions.

vmception 6y ago

Cryptocurrency issuing entertainment companies have monetized this pretty well. They don't have recurring revenue but they don't need venture capital investors either so it doesn't matter. Open source, campaign, sell, book revenue from sell. If market has formed, book more revenue in the future from selling into liquidity. If market hasn’t formed, hire some entertainers to babysit a chat room and move on. Some parent companies are monetizing repeat issuances, those are worth investing into because all the shareholders make money. The companies dont need capital and would only offer shares to provide some exposure to the market. I’m not aware of any broadly offered dealflow of a token issuing factory, which is probably why people don't understand or notice this business model.

hapless 6y ago

The author makes a good case against open source businesses, but he indulges himself in a false dichotomy between a traditional proprietary model and open source. Increasingly often, there is no market for your proprietary software. It is then not a choice between open source and proprietary models, but rather between doing open source or doing nothing. A lot of markets are just gone, and they're not coming back. Odds are, you're never going to sell another proprietary UNIX clone, or a proprietary database, or a proprietary application server. There are no punters. Those niches have been extinguished.

mooreds 6y ago
This is a really good point. However, there are still successes that I'd never have expected. Jetbrains is a good example. Who would have thought that an IDE could be sold when there are adequate ones for free? There are also many many smaller niches where software can be sold because there isn't adequate developer interest to create OSS. One example is this: https://querix.com/products/lycia https://querix.com/products/lycia (not a customer, just ran across their product).
- hapless 6y ago
  It's worth noting that Querix was founded back in 1994 -- when Informix and proprietary databases were more popular than today.
- InvOfSmallC 6y ago
  I personally have been being using Intellij for everything for the last five years. I tried to migrate to VSCode for golang. I mean, don't get me wrong, the situation is not the worst possible, but the only reason you would want to use that is because you never tried refactoring with Goland. Are you kidding me? I had to go look for what is the current needed extensions for go that are still maintained, configure them etc...vs just download and use Goland. If you can't or don't want to spend money OK, but otherwise is a non sense to use anything else.
  - linkdd 6y ago

ahepp 6y ago

When I was a broke college student, I cared a lot more about open source. Now that I have more resources, more experience, less time, and a personal interest in getting paid for software, I have stronger feelings about the interface. Whether or not the box is black isn't really on my mind these days. I rarely have the skill or time to fix them when they break, or don't do what I want. I'd rather the box be easier to swap out or build around when requirements change. I'd rather have a richer ecosystem of blacker boxes, than a bunch of broken transparent boxes laying around. A problem, of course, is that businesses don't want their boxes to be interchangable. Transparent boxes do tend to help.

dragonwriter 6y ago

> giving your product away for free is just as bad a business strategy as it sounds. Has anyone, anywhere, argued the opposite? Because this seems like beating a strawman. > Copyleft licenses such as AGPL force adopters to publish changes back to the source repo or offer them via network protocols. The AGPL specifically does this, other copyleft licenses (like the GPL do not for “adopters”, only for people redistributing executables) > This is meant to deter third parties from offering competing hosted services No, copyleft in general is about prohibiting downstream proprietary distributions (and also, in the AGPL case, proprietary hosted versions) it is not supposed to prevent competing software/services. > Instead, why not do what traditional businesses are doing, sell a product, and simply charge for the value it provides? That's what “open source” companies do. The thing they sell is the product (whether it's support and consultancy, the value-add of the enterprise version of an open-core product, or hosted SaaS.) The problem with “prop-tech” is often, as this piece itself points out, but entirely fails to address in recommending “prop-tech”: “the world of FOSS is full of strong and established offerings with a zero-dollar price tag.” And making your tech proprietary doesn't stop you from having to compete with the open-source competition.

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XCSme 6y ago

Great post, I completely agree! I have debated over this for years while building a self-hosted analytics platform (userTrack.net) and I have always reached the same conclusions: if I open-source it, not only I affect its sustainability but also the business goals would become complete opposite to the product goals (eg. as you mentioned, making it easier to install improves product but affects the business). I now think that the best way to go is "paid-source": make the product as good as you can, make it as easy to install as possible and the customers who want to use it can pay a reasonable amount for it. I recently changed the pricing model, as the one-time payment was not sustainable, so the product has now an upfront cost + optional yearly maintenance fee (you can use it forever, but if you want new features and support you should support it). I have used many amazing open-source projects that got abandoned over the years, I would have gladly paid for many of them if that meant sustaining the future development of the project. And, before anyone mentions it, donations are not the answer. (I left the same comment on the article)

yjftsjthsd-h 6y ago
> I now think that the best way to go is "paid-source" Is that just source-available software[0] (sometimes also called shared-source)? I ask not because I object, but because it's easier if we all use the same words for the same things. [0] https://en.wikipedia.org/wiki/Source-available_software https://en.wikipedia.org/wiki/Source-available_software
- XCSme 6y ago
  Thanks for letting me know, yes it's the same thing. Source-available sounds accurate, the term is a bit long though and I think it is a more generic term that also covers open-source and paid-source?
apple4ever 6y ago
I think the pricing you mentioned is also part of the issue. Companies that are open source but paid something have a crazy high price for that something. I know they are going after the Enterprise market but they still price themselves out.

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dade_ 6y ago

If you give away your secret sauce recipe, no one will pay for your recipe (though some will donate), but people will still buy your fried chicken. I think open source works best when it isn't your product, but your capability. An e-commerce site open sources it's product inventory management software. If I spin up a docker container with your software, I will be closer to building an e-commerce business, but I won't have one without a lot more work. More examples: A blogger makes her own open source blogging software. A 3D games developer - open sources their AI engine or 3D engine. You get community adoption, goodwill & hopefully contribution, ability to hire employees that already know your software. Possibly it identifies new markets to pursue.

jojo2000 6y ago

If you got a lot of money you should give back to what propelled you there. You may call it investing with a loss but that'd be just the right thing to do. Everything is not about the money, making money and more money.

hnarn 6y ago

The fundamental difference between buying or not buying OSS products is that if you’re buying OSS, at least there’s a potential your product will be fixed and live on through the community if your original vendor disappears. The only thing the vendor can really deny you is the service. In the case of closed source, you can not only be denied the service offered, you also end up with a useless, unpatchable black box if the vendor disappears. In my mind, this makes OSS more resilient, in more ways than one. This doesn’t contradict the point made: of course from an investors point of view I’m sure closed source is often more profitable. But from a consumer perspective, I doubt the same benefits are true.

LukeEF 6y ago

Interesting post - I'm coming from a COSS database perspective (TerminusDB), so talking my book. The point of COSS imho is to create broad value and monetize a percentage of that value. A few points: 1. In database land, there is no other available venture scale business model. If you look at the top 10 databases on DB-Engines (https://db-engines.com/en/ranking https://db-engines.com/en/ranking), the most recent proprietary db is SQL Server which launched in 1989. Yes, databases are sticky (we see you Oracle), but unless you believe there are no further investable plays in databases, then open source is the only way to invest. (Snowflake is an exception to the rule, but in this case, it is just that). 2. Useful recognition that offering hosted versions of the product is a viable business model that can deliver SaaS type margins. Mongo's Atlas is the obvious leader here - a huge and fast-growing revenue stream. I would also mention the companies that have built successful SaaS/marketplace offering on OSS. Informative list of all the COSS companies above 100m in revenue: https://docs.google.com/spreadsheets/d/17nKMpi_Dh5slCqzLSFBoWMxNvWiwt2R-t4e_l7LPLhU/edit#gid=0 https://docs.google.com/spreadsheets/d/17nKMpi_Dh5slCqzLSFBo... 3. I find this conclusion difficult to swallow: 'The ratio of failed OS businesses to successful ones is worse than in prop-tech; revenue kicks in much later'. I can't find any evidence for the first point - it needs substantiation. For revenue, lots of the most successful venture backed businesses (facebook) have revenue kicking in later so they can maximise growth potential – that’s seems ideal for venture!