Should you open source your next product? Pros and cons of going open source as a startup.
Building a company and open sourcing the code has become a popular strategy over the last couple of years, lots of money has been invested in Open Source companies, some of them became Unicorns, but the big question is: is anyone making money? Is this a good strategy? What are the pros and cons of open sourcing your product and what should you take into consideration? Which licenses should you think about? How do you monetize? What are some feasible exit strategies?
5. Pros
Huge adoption
Exposure / Free marketing*
Raises profile of founders through media
Volunteer technical resources from community
Easier to get funding, but only with adoption number
* Can be good or bad
6. Cons
Users not using product properly & ranting about it: hackernews,
blog posts, etc
Engineers that join for love of open source have a hard time with
monetization
People associate product as free
Hard to monetize on support only, especially if your product “works
great, we’ve never had any problems, thank you!!”
Internal war between teams on what improvements should be
open sourced vs paid for
Bigger/smaller companies providing your product as a service and
making money from it - i.e. Open container project
7. Cons (cont’d)
Renewal churn rate very high on support-only model, as
people gain knowledge of product overtime
Balancing when offering free support to free users, so
companies are successful. i.e. an incredibly large company
is using for a customer facing project, they run into a major
issue that brings them down for hrs, they think the problem is
with your product, not the way them implemented. What do
you do? Fix issues? Let them fail and see a blog post on
hacker news the next day about how much your product
sucks?
Will likely change CEO’s & founding team as early execs are
focused on adoption & it’s not clear where to draw the line
towards monetization
Will upset some users when charging a lot for one feature
they’re interested in
8. To Take Into Consideration
License: VERY important (Apache vs AGPL).
- Commercial license that you’d be able to sell under
AGPL would allow your customer company to modify your
code & NOT have to open source it. This is important for large
enterprises. Your customer will have to pay you for that license,
otherwise they will have to open source their own changes to
your code. This is not applicable under Apache license.
How do you keep momentum within the company while
trying to achieve mass adoption
Other companies that can fork your code and compete
against you
9. How to Monetize
Make clear differentiation between free vs paid product
(i.e. Mulesoft, Pentaho)
What did RedHat do right?
10. Exits
Most have been acquired: Sourcefire $2.4B, Novell $2.1B,
MySQL $1B - all AGPL
A couple of IPO’s: Red Hat $10B, Hortonworks $1B – both
Apache
TBD: Cloudera, MongoDB, Docker, Datastax,
Elasticsearch
