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Funding Open Source, The Hard Way

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Funding Open Source, The Hard Way

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A systemic approach to finding funding for open source for not just 1 project, but 1000 projects.

From a Django Under the Hood in Amsterdam, November 4 2016. (Video of talk: https://www.youtube.com/watch?list=PLQdy7QUATciZ4V3g3iCTnG5fvkZkuNGyg&v=HokXBjDS_UA)

FOOTNOTES:
Slide 3: Graph is not actually real. Instagram’s estimated revenue is 16,000 times that of Django’s. Instagram estimate based on http://fortune.com/2016/01/25/instagram-3-billion-business-this-year/, Django's based on https://www.djangoproject.com/fundraising/.
Slides 5 and 6: http://david.heinemeierhansson.com/2013/the-perils-of-mixing-open-source-and-money.html
Slide 8: https://github.com/pybee/paying-the-piper/blob/master/README.md
Slide 20: https://www.youtube.com/watch?v=SAc0vQCC6UQ
Slide 23: http://www.citylab.com/cityfixer/2015/02/americas-infrastructure-crisis-is-really-a-maintenance-crisis/385452/
Slide 24: https://www.djangoproject.com/fundraising/
Slide 27: This cycle is not without precedent. Modern nonprofits in the US only came about after the Industrial Revolution. Nouveau riche criticized for spending in unfocused ways. Andrew Carnegie and others called upon their peers to embrace philanthropy, which capitalized the nonprofit sector.
Slide 30: Without clear metrics or vocabulary to talk about project needs, any response to this question is purely subjective.

Thanks to Marc Tamlyn and Russell Keith-Magee for early feedback on this talk.

A systemic approach to finding funding for open source for not just 1 project, but 1000 projects.

From a Django Under the Hood in Amsterdam, November 4 2016. (Video of talk: https://www.youtube.com/watch?list=PLQdy7QUATciZ4V3g3iCTnG5fvkZkuNGyg&v=HokXBjDS_UA)

FOOTNOTES:
Slide 3: Graph is not actually real. Instagram’s estimated revenue is 16,000 times that of Django’s. Instagram estimate based on http://fortune.com/2016/01/25/instagram-3-billion-business-this-year/, Django's based on https://www.djangoproject.com/fundraising/.
Slides 5 and 6: http://david.heinemeierhansson.com/2013/the-perils-of-mixing-open-source-and-money.html
Slide 8: https://github.com/pybee/paying-the-piper/blob/master/README.md
Slide 20: https://www.youtube.com/watch?v=SAc0vQCC6UQ
Slide 23: http://www.citylab.com/cityfixer/2015/02/americas-infrastructure-crisis-is-really-a-maintenance-crisis/385452/
Slide 24: https://www.djangoproject.com/fundraising/
Slide 27: This cycle is not without precedent. Modern nonprofits in the US only came about after the Industrial Revolution. Nouveau riche criticized for spending in unfocused ways. Andrew Carnegie and others called upon their peers to embrace philanthropy, which capitalized the nonprofit sector.
Slide 30: Without clear metrics or vocabulary to talk about project needs, any response to this question is purely subjective.

Thanks to Marc Tamlyn and Russell Keith-Magee for early feedback on this talk.

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Funding Open Source, The Hard Way

  1. 1. Funding open source, the hard way @nayafia for Django Under the Hood
  2. 2. @nayafia You don’t do open source for the money
  3. 3. @nayafia Django’s projected revenue: $200,000 (2016) Instagram’s projected revenue: $3.2B (2016)
  4. 4. @nayafia On one hand:
  5. 5. @nayafia “Open source [is] an incredible force for quality and community exactly because it's not been defined in market terms….
  6. 6. @nayafia ...in market terms, most open source projects should never have had a chance.” - David Heinemeier Hansson
  7. 7. @nayafia On the other hand:
  8. 8. @nayafia ”As an industry, it's frightening how much of the infrastructure on which we rely on on a daily basis is maintained by complete volunteers.” - Russell Keith-Magee
  9. 9. What’s wrong with today’s open source funding options?
  10. 10. @nayafia Not just about money but access to money
  11. 11. @nayafia Banks and other lending institutions Venture capital Foundations Endowments ??? Homebuyer, business owner Startups Nonprofits Academia (U.S.) Open source
  12. 12. @nayafia Right now, too much open source funding is ad hoc:
  13. 13. @nayafia Crowdfunding
  14. 14. @nayafia Bounties
  15. 15. @nayafia Tipping
  16. 16. @nayafia Access to institutional capital is important necessary
  17. 17. @nayafia What could we do with all that money in open source?
  18. 18. @nayafia [1] Taking risks with new projects
  19. 19. @nayafia Venture capital allows startup founders to take risks
  20. 20. @nayafia Joyent hired Ryan Dahl to build out Node.js prototype
  21. 21. @nayafia Many major open source projects were started by employees (including Django!)
  22. 22. @nayafia [2] Investing back into existing projects
  23. 23. @nayafia Nearly half of U.S. state spending on roads goes towards maintenance, not construction
  24. 24. @nayafia Thanks to the Django Fellowship, “for the first time in Django's history, we had releases according to schedule (Django 1.8 and 1.9).”
  25. 25. How do we get money into the open source ecosystem?
  26. 26. @nayafia The open source production cycle Open source project Software Producers Users Resources
  27. 27. @nayafia The open source production cycle Open source project Software Producers Users Resources
  28. 28. @nayafia Money is everywhere. Directing it to the right place is hard
  29. 29. @nayafia Best worst question that I get:
  30. 30. @nayafia I have a bunch of money, which projects should I give it to?
  31. 31. @nayafia First, we need to figure out:
  32. 32. [1] Who needs money [2] What do they need money for [3] How to fund them [4] Who should fund them
  33. 33. [1] Who needs money [2] What do they need money for [3] How to fund them [4] Who should fund them
  34. 34. @nayafia Need to define and track two types of metrics:
  35. 35. @nayafia 1. Ecosystem-level metrics (dependency mapping)
  36. 36. @nayafia 2. Project-level metrics (usage, activity, health)
  37. 37. @nayafia Project metrics, by project stage Project Stage Description Example Metrics Incubation Validating concept ● Total pageviews on project ● # of downloads ● Referring sites Growth Users + contributors growing ● Total contributor count ● # of non-author contributors ● # of opened PRs, issues Maturity Large community of users and/or contributors, formalized roles ● # of first time contributors ● Average response time to PRs, issues ● Month-over-month user growth
  38. 38. [1] Who needs money [2] What do they need money for [3] How to fund them [4] Who should fund them
  39. 39. @nayafia Project Stage Description Funding Needs Incubation Validating concept ● Dedicated time to write code Growth Users + contributors growing ● Infrastructure costs ● Code review ● Design Maturity Large community of users and/or contributors, formalized roles ● Dedicated sprints ● Release management ● Community management ● Code review ● Biz dev Funding needs, by project stage
  40. 40. [1] Who needs money [2] What do they need money for [3] How to fund them [4] Who should fund them
  41. 41. @nayafia Should funders give to people, or to projects?
  42. 42. @nayafia Pros and cons of various funding methods Funding Method Pros Cons Projects ● Transparent governance ● Build institutional resilience ● Need legal entity ● Funding restrictions based on legal entity People ● Respects decentralized structure ● Good for one-off work ● Don’t need legal entity ● Can lead to favoritism ● Funding doesn’t transfer if person leaves project
  43. 43. @nayafia If funding projects, centralize efforts (Ruby Together, JavaScript Foundation, Software Freedom Conservancy, OpenCollective, Linux Foundation)
  44. 44. @nayafia If funding people, build up opportunities for individual grants (Mozilla Open Source Support, Linux Core Infrastructure Initiative, Open Technology Fund, Stripe Open-Source Retreat)
  45. 45. @nayafia Still need to figure out: how do projects become financially sustainable?
  46. 46. [1] Who needs money [2] What do they need money for [3] How to fund them [4] Who should fund them
  47. 47. @nayafia Who cares the most about protecting the open source commons?
  48. 48. @nayafia Companies: Need commons for cheap resources + protect against competition, but also beholden to business goals
  49. 49. @nayafia Government: Natural steward of public goods, but risk averse, and many projects are transnational
  50. 50. @nayafia Academia: Sustainable model for R&D work, but don’t innovate at pace of modern software
  51. 51. @nayafia Finding the right funder will probably be the last piece of the puzzle
  52. 52. We’re at the beginning of exciting times
  53. 53. @nayafia Open source project Software Producers Users Resources 1970s-1980s: getting producers to care about open source software
  54. 54. @nayafia Open source project Software Producers Users Resources 1990s-2000s: getting users to consume open source software
  55. 55. @nayafia Open source project Software Producers Users Resources Mid-2000s: startups create outsized returns
  56. 56. @nayafia Open source project Software Producers Users Resources Today’s challenge: getting resources back to producers
  57. 57. @nayafia FIN

Editor's Notes

  • Graph is not actually accurate. Instagram’s annual revenue is 16,000 times that of Django’s

    Instagram $3.2B revenue estimate: http://fortune.com/2016/01/25/instagram-3-billion-business-this-year/ Disney, NASA, WashPo, Pinterest
  • http://david.heinemeierhansson.com/2013/the-perils-of-mixing-open-source-and-money.html
  • http://david.heinemeierhansson.com/2013/the-perils-of-mixing-open-source-and-money.html
  • https://github.com/pybee/paying-the-piper/blob/master/README.md
  • Talking about it as an industry
  • Problem is how we’re defining the problem
  • You don’t expect a homebuyer to crowdfund their house on the spot. They get a mortgage
  • Not about “getting lucky”, but repeatable access to capital
  • So people can future plan. Ongoing funding is necessary, not just one-time campaigns
  • How can institutional capital transform an industry? How would things be different? Consider lost opportunities that we aren’t seeing right now. Not just sustaining what we have today
  • Currently, only ppl who can take on risk are able to contribute to open source. This excludes many potential contributors (older, ppl with family, debts, caretakers)
  • Best example we have of how this has worked institutionally. Venture capital didn’t become a serious thing until legislative changes + software started succeeding (1979-1990s).
  • https://www.youtube.com/watch?v=SAc0vQCC6UQ 30:00ish

    Ryan quit his job and worked on the idea for 6 months, presented it at JS Conf, talked to a bunch of ppl but they all wanted him to do it as 20% time or sell it in their product. “It didn’t seem right, it’s this open source project”. Joyent let him do it full-time. And that’s why we have Node.js today
  • This is not an accident. It’s because employees have job security so the risk of failing is lower when they try something new. Ex. Rust, Django, Go, Rails
  • Doing more of this means less fragmentation of the whole OSS system
  • http://www.citylab.com/cityfixer/2015/02/americas-infrastructure-crisis-is-really-a-maintenance-crisis/385452/ And this figure is actually low, roads need 3x this amount to be properly maintained
  • https://www.djangoproject.com/fundraising/
  • What I mean by the open source ecosystem
  • This cycle is not without precedent. Modern nonprofits as we know them today didn’t exist until after the Industrial Revolution. Newly rich ppl criticized for spending in unfocused ways. Andrew Carnegie and others drove the creation of philanthropic, which gave room for nonprofits to succeed. But it took 30-40 years before this happened.
  • -- Both making the business case for it (the pitch), and also figure out how to distribute systemically (the distribution)
    -- All the best financing mechanisms exist, they just haven’t been brought to the right markets yet
  • How would you answer this question? Without clear metrics or vocabulary to talk about project needs, any response to this question introduces bias
  • We tend to start with #4, but #1-3 are critical first
  • How do we know which projects need money? Projects need these metrics to fundraise and build a business case for themselves. Nearly every funder has asked for a list like this. Ex. Yorba Foundation + IRS
  • Ex. OpenSSL used by two-thirds of the Web (bc Apache and nginx use them)

    Mention Libraries.io here
  • We can’t currently measure a lot of this - need better tools
  • Answer to this might be obvious within open source, but it’s not obvious to funders, so we have to better communicate what these needs are
  • Start by defining which stages projects are at. Notice what’s not on this list: paying for community contributions. Elevate the maintainer role. Funding probably most needed at incubation and maturity (ends of the spectrum). Like VC stages: seed, series A, etc which have totally diff funders for diff stages

    Maturity section: funding “major new features”. Python Core Sprint. Big projects that can’t be done in spare time, get multiple people together at the right place at the right time. Right now, happens at conferences bc they can fund it with sponsorships
  • Transnational concerns. How do we actually fund projects?
  • Different types of funders are excluded depending on this answer.

    Delaware C Corp for startups, or 501c3 for nonprofits, makes giving really easy
  • Can also be stage-based (fund people earlier on, projects at more mature stage)
    People funding problems: people have to become responsible for their own marketing, funding individuals can also promote burnout (ppl feel more responsible for the project), companies can have a hard time funding contractors vs giving to orgs. Ex. Donald Stufft + PyPI and HPE
  • -- How centralized should we get? One big umbrella org, or several ecosystem orgs? SFC, OpenCollective are more fiscal sponsors than ecosystem-oriented
    -- In a limited funding space, centrality is more important. One initiative can suck the air out of the room (companies don’t want to sponsor multiple similar foundations)
    -- JavaScript Foundation is new org formed in response to this issue
  • Might be easier to start here, for open source, bc less paperwork, can prove out concept. Then move towards umbrella org funding. Avoid the need for individuals to market themselves, avoids complications from so much legal diversity associated with the project org side
  • Important to be able to convey this to funders. Bc this is unknown, it’s another point in favor of individual grants for now
  • Who should fund these projects?
  • Community, not corporate built
  • -- Can work for funding incubation, or if project has had a long history with the company. Less likely to work for funding maintenance (ex. PyPI/HPE). Need to distribute risk across companies, not just one company, in case that company changes its mind (a la Ruby Together)
    -- Distinguish here between pros/cons for established companies vs. startups. FOSS is free (of cost)! So that startups don’t have to spend their resources.
  • Not just bureaucracy to get grants, but gov’ts are naturally more cautious/conservative bc of greater accountability. Decision making processes at odds with innovation
  • Answer might be a mix: gov’t/academia for maintenance, companies for innovation. Since companies are perhaps the most avid/familiar users, makes most sense that they would close the loophole of the production cycle
  • Like an open source project - need to clearly document how people can contribute, or else you’ll lose them
  • This is a totally solvable problem. But the machine needs to work properly before we feed resources into it. Need to understand what success looks like, and be able to replicate it.

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