Funding Open Source, The Hard Way

Funding open source,
the hard way
@nayafia for Django Under the Hood
@nayafia
You don’t do open source
for the money
@nayafia
Django’s
projected
revenue:
$200,000
(2016)
Instagram’s
projected revenue:
$3.2B (2016)
@nayafia
On one hand:
@nayafia
“Open source [is] an incredible force for
quality and community exactly because
it's not been defined in market terms….
@nayafia
...in market terms, most open source
projects should never have had a chance.”
- David Heinemeier Hansson
@nayafia
On the other hand:
@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
What’s wrong with
today’s open source
funding options?
@nayafia
Not just about money but
access to money
@nayafia
Banks and other
lending
institutions
Venture capital
Foundations
Endowments
???
Homebuyer,
business owner
Startups
Nonprofits
Academia (U.S.)
Open source
@nayafia
Right now, too much open
source funding is ad hoc:
@nayafia
Crowdfunding
@nayafia
Bounties
@nayafia
Tipping
@nayafia
Access to institutional capital is
important necessary
@nayafia
What could we do
with all that money
in open source?
@nayafia
[1] Taking risks with new
projects
@nayafia
Venture capital allows startup
founders to take risks
@nayafia
Joyent hired Ryan Dahl to build
out Node.js prototype
@nayafia
Many major open source projects were
started by employees (including
Django!)
@nayafia
[2] Investing back into
existing projects
@nayafia
Nearly half of U.S. state spending on
roads goes towards maintenance, not
construction
@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).”
How do we get money
into the open source
ecosystem?
@nayafia
The open source
production cycle
Open source
project
Software
Producers
Users
Resources
@nayafia
The open source
production cycle
Open source
project
Software
Producers
Users
Resources
@nayafia
Money is everywhere. Directing it to
the right place is hard
@nayafia
Best worst question that I get:
@nayafia
I have a bunch of money, which
projects should I give it to?
@nayafia
First, we need to figure out:
[1] Who needs money
[2] What do they need money for
[3] How to fund them
[4] Who should fund them
[1] Who needs money
[2] What do they need money for
[3] How to fund them
[4] Who should fund them
@nayafia
Need to define and track
two types of metrics:
@nayafia
1. Ecosystem-level metrics
(dependency mapping)
@nayafia
2. Project-level metrics
(usage, activity, health)
@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
[1] Who needs money
[2] What do they need money for
[3] How to fund them
[4] Who should fund them
@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
[1] Who needs money
[2] What do they need money for
[3] How to fund them
[4] Who should fund them
@nayafia
Should funders give to people,
or to projects?
@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
@nayafia
If funding projects, centralize efforts
(Ruby Together, JavaScript Foundation, Software
Freedom Conservancy, OpenCollective, Linux
Foundation)
@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)
@nayafia
Still need to figure out: how do
projects become financially
sustainable?
[1] Who needs money
[2] What do they need money for
[3] How to fund them
[4] Who should fund them
@nayafia
Who cares the most about
protecting the open source
commons?
@nayafia
Companies: Need commons for cheap
resources + protect against competition, but also
beholden to business goals
@nayafia
Government: Natural steward of public
goods, but risk averse, and many projects are
transnational
@nayafia
Academia: Sustainable model for R&D
work, but don’t innovate at pace of modern
software
@nayafia
Finding the right funder will
probably be the last piece of the
puzzle
We’re at the beginning
of exciting times
@nayafia
Open source
project
Software
Producers
Users
Resources
1970s-1980s: getting producers
to care about open source
software
@nayafia
Open source
project
Software
Producers
Users
Resources
1990s-2000s: getting users to
consume open source software
@nayafia
Open source
project
Software
Producers
Users
Resources
Mid-2000s: startups create
outsized returns
@nayafia
Open source
project
Software
Producers
Users
Resources
Today’s challenge: getting
resources back to producers
@nayafia
FIN
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Funding Open Source, The Hard Way

Editor's Notes

  1. 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
  2. http://david.heinemeierhansson.com/2013/the-perils-of-mixing-open-source-and-money.html
  3. http://david.heinemeierhansson.com/2013/the-perils-of-mixing-open-source-and-money.html
  4. https://github.com/pybee/paying-the-piper/blob/master/README.md
  5. Talking about it as an industry
  6. Problem is how we’re defining the problem
  7. You don’t expect a homebuyer to crowdfund their house on the spot. They get a mortgage
  8. Not about “getting lucky”, but repeatable access to capital
  9. So people can future plan. Ongoing funding is necessary, not just one-time campaigns
  10. 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
  11. 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)
  12. 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).
  13. 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
  14. 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
  15. Doing more of this means less fragmentation of the whole OSS system
  16. 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
  17. https://www.djangoproject.com/fundraising/
  18. What I mean by the open source ecosystem
  19. 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.
  20. -- 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
  21. How would you answer this question? Without clear metrics or vocabulary to talk about project needs, any response to this question introduces bias
  22. We tend to start with #4, but #1-3 are critical first
  23. 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
  24. Ex. OpenSSL used by two-thirds of the Web (bc Apache and nginx use them) Mention Libraries.io here
  25. We can’t currently measure a lot of this - need better tools
  26. 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
  27. 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
  28. Transnational concerns. How do we actually fund projects?
  29. Different types of funders are excluded depending on this answer. Delaware C Corp for startups, or 501c3 for nonprofits, makes giving really easy
  30. 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
  31. -- 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
  32. 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
  33. Important to be able to convey this to funders. Bc this is unknown, it’s another point in favor of individual grants for now
  34. Who should fund these projects?
  35. Community, not corporate built
  36. -- 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.
  37. 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
  38. 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
  39. Like an open source project - need to clearly document how people can contribute, or else you’ll lose them
  40. 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.