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What to Know About Open-Source Software: Benefits and Advantages

  • Fundraising
  • Developer-First Go-To-Market
  • GTM Strategy
  • Software as a Service (SaaS)
  • Startups
  • Community
  • Open Standards
  • Open Source
  • Launch Strategy
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Open-Source Software Benefits - What to Know
Open-Source Software Benefits for Developers
Open-Source Software Benefits for Companies
Open-Source Software Benefits for Technical Founders
What to Know: Building OSS Versus Closed Source
Important Milestones for Proprietary Software Startups
Potential OSS First Steps: Existing Foundation, Net-New, or Existing Project
1. Existing Foundation Goes Commercial
2. Creating a Net-New OSS Project
3. Building an Existing OSS Project into a Startup
Important Milestones for OSS Startups
Building a Bridge to Open-Source Business Models
Additional Considerations When Building an OSS Project
Conclusion
Additional Resources
  • Andrew Park headshot
    Andrew ParkEditorial Lead
    Heavybit
31 min

Open-Source Software Benefits - What to Know

Open-source software (OSS) advantages include lower starting costs, faster project starts, faster iteration, more-flexible software development processes, robust community-driven support, and easier license management, without being contractually locked into work with a single vendor...to name just a few.

“What is open-source software? OSS is software publicly distributed with source code anyone can use or modify within the scope of its license.”

Some of the most well-known organizations in developer circles are OSS companies, including the Linux Foundation, MySQL, and Apache, among others. Many modern developer-first startups now offer hybrid open-source elements, such as Snyk, which offers open-source software composition analysis (SCA); and Sanity, which offers an open-source CMS studio.

There are quite a few important open-source advantages over proprietary “closed-source” software solutions, depending on who’s using (or working on) them. Individually, developers can start faster on projects with no initial cost outlay, while enterprise companies can take advantage of the speed and flexibility of OSS tools to execute large-scale projects such as digital transformation and data migrations. Developers, companies considering OSS tools for their tech stack, and ambitious developers who might be considering launching an OSS project of their own can all make the most of the valuable benefits of open-source software we’ll cover in this article.

Open-Source Software Benefits for Developers

While it’s possible to make the argument that OSS projects tend to be less user-friendly than commercial experiences created by professional UX designers, there are many, many advantages for individual developers:

  • Quicker Starts: Pre-built infrastructure means you can build upon an existing framework instead of starting from scratch, without having to endure the lengthy sales cycle you would with a proprietary product. And the more mature an open-source project is, the more developed the foundation, documentation, and community will be.
  • Faster, More-Transparent Development: Closed-source software can often be a black box that neither developers nor business users (who aren’t programmers themselves) can’t meaningfully alter or enhance. As a result, when you experience challenges, you’ll need to partner with vendor support agents or just wait until the vendor builds a solution to your problem. Open-source projects give you full visibility into the code base, which means you can frequently code your solutions and directly document your issues in community spaces. And you may receive a variety of responses that provide as much or more context as you’d receive from a professional support team, as fast or faster.
  • Better, Community-Based Collaboration: Work with an entire community of other developers all using the same tools, who may have experienced similar issues and may already have solutions to share.
  • Scalability: Because different OSS projects offer different configurations for hosting and load balancing, they can offer more flexibility concerning your need to scale data usage up or down.
  • Community-Driven Security: Open-source products often offer surprisingly robust security as teams tend to test extensively before releasing new versions. Many successful open-source communities attract security experts who also make additions to the project. That said, it may be worth mentioning that unless the community designates an ongoing security team, open-source projects may lack a dedicated resource to ensure ongoing security.
  • Community-Driven Reliability: In the case of mature and popular projects, in particular, open source can offer surprisingly high reliability as many community members may have detected, and already improved upon, reliability issues.
  • Low Cost Up Front: And of course, unlike proprietary software solutions, most open-source projects are free of charge by default, though they may have specific licensing restrictions. A permissive open-source license, such as BSD, provides software as-is but lets developers do what they want with the code, so long as they acknowledge the creators. A copyleft license, such as GPL, requires developers that distribute binaries also make source code available under the same terms, and forbids putting additional restrictions on any subsequent licensees.
  • Low Cost on an Ongoing Basis: Depending on the nature of the license, continuing to use an open-source product can mean lower or no ongoing maintenance fees. In contrast to OSS, any proprietary counterparts will not only require upfront costs but will also involve subscription fees and potential follow-on costs for additional service hours.
  • More Employment Opportunities: Some of the most widely used technical tools and operating systems on the market today are open source: the Linux operating system, the Kubernetes container platform, the Django Python framework, and many others. Developers that are familiar with popular open-source tools and are passionate enough to contribute to them can find it easier to locate new job opportunities with employers that recognize such valuable skills.

Learn more:

“What a lot of people want from open source is the ability to use it and the ability to produce things. Where we ended up with open source is, it is a community more than anything.” - Paul Biggar, Founder/CircleCI, Dark

Open-Source Software Benefits for Companies

Companies considering new tools can benefit from these advantages of open-source software:

  • Lower Costs: Being free is an obvious point in favor of open source, especially for companies looking for cost-effective tools. Free software means a significantly cheaper project start and, depending on the license, potentially significant cost savings for ongoing maintenance.
  • Faster Launches: Rather than having to navigate a new vendor’s onboarding experience, which may or may not expediently cover everything your organization needs, open-source projects potentially help you get up and running faster. Instead of having to navigate higher pricing tiers or wait on professional support teams to respond, your company can potentially access everything an open-source project has to offer instantly, and for mature projects, your company can also potentially access a wealth of documentation from many users who have come before you.
  • No Contract Lock-In: In addition to not being tied to a pricing tier, open-source products don’t require companies to commit to a specific vendor over the life of a contract. Your company can pivot more quickly to other tools if needed.
  • Extensibility: Proprietary products can be black boxes that don’t give your team visibility into functionality or the ability to make meaningful adjustments. For open-source products, a company’s developers can peek under the hood and often make direct changes and updates as needed.
  • Community-Based Intel: The ideal open-source products have vibrant, active communities with whom teams can actively collaborate and get fast answers to their questions.
  • Improved Hiring: While hiring developers remains as competitive as ever, companies that use open-source tools can find common ground with candidates who are passionate about contributing to open-source projects. They can also ensure their next hires are familiar with open-source tools already in use, and significantly decrease employee onboarding time.

Learn more:

“You have to be extensible, otherwise, folks won’t have an opportunity to contribute anything...These days, it's very rare...to run into libraries or SDKs that aren't in some way liberally licensed...whether it be open source or something close to an open-source license.” -Ilan Rabinovitch, SVP Product/Datadog

Open-Source Software Benefits for Technical Founders

For those who have created open-source projects, or are considering founding a new OSS startup, open source has become a popular business model. Of course, proprietary software frequently goes to market as software-as-a-service (SaaS), a paid product that requires an initial investment with ongoing subscription fees. From a business standpoint, one of the most obvious disadvantages of open-source software is that such projects typically launch as a free offering. But while OSS startups may not immediately take in revenue as soon as they acquire new users, founders can still utilize some unique and powerful benefits of open-source software:

  • Faster, Community-Driven Development: Many successful closed-source software projects rely on their in-house software development team, which usually consists of a talented but finite group. An open-source project can, in some cases, rapidly evolve as vibrant communities take your codebase and run with it.
  • Potentially Lower Development Costs: And, of course, open-source development doesn’t just come down to what a company’s internal team of devs can accomplish within a standard work week. Open-source development can mitigate longer-term costs as developer communities grow and evolve the project alongside in-house owners.
  • Community Goodwill: While not taking in revenue up-front may seem like a limiting factor for the growth of an open-source startup, it can also generate a great deal of goodwill among the community.
  • Your Own Ecosystem: By going open source, you can create your own user ecosystem around the open-source platforms you’ve created. Having a thriving community that understands your product and actively engages with it as both end-users and builders opens up new opportunities for your business.
  • Potential Hiring Pool: When it’s time to grow your open-source business, what better place to look than the community that has already been building on your software? Having a vibrant open-source user base can make it much easier to find highly qualified and enthusiastic talent.
  • Alternatives to Traditional Business Models: Building an ecosystem gives you the ability to create demand for your product and assess it much more directly. Open source sets the stage for the popular bottom-up business model, in which companies look to generate revenue via self-service, rather than building out a full sales team as part of a more-traditional top-down business model. There are also successful companies that use an open-core or commercial open-source software (COSS) model that monetizes certain features beyond core functionality but maintains an open-source license structure. There are also successful projects that use other alternative business models we’ll discuss below.
  • Alternatives to Traditional Customer Support: While it’s important to provide robust support and clear documentation for any software product, with OSS, your developer community may be able to self-service and create their own open-source solutions to share with other members.

Learn more:

“In releasing open-source projects, you're getting people to use it, you're going to standards bodies, you're going to conferences...The first thing that you've got to do as an entrepreneur...if you're doing category creation...you've got to get them to think about your thing. Then the second thing that you have to do, which is just as much work, is...attach a value to that thing.” -Martin Casado, Partner/Andreesen-Horowitz

What to Know: Building OSS Versus Closed Source

Founding any kind of startup isn’t for the faint of heart, but both proprietary software startups and OSS startups have different challenges and important milestones along the way.

Important Milestones for Proprietary Software Startups

Founders of traditional proprietary software startups often aspire to go through the following steps in more or less this approximate order:

  • MVP: First, the startup develops a minimum viable product (MVP).
  • Early-Stage Funding: Some closed-source startups will look for extremely early funding in the form of pre-seed funding, which is essentially funding at the “idea stage,” often from friends and family. To afford hiring a larger team that can build out a GTM function, as well as to manage other initial expenses, closed-source startups that aren’t bootstrapping will need to raise early-stage funding, such as from angel investors or from venture capital (VC) firms that support early-stage startups.
  • Foundational Messaging and Positioning: One of the most important steps any startup can take is to create a foundational messaging framework that will inform more or less every way that a company talks about itself, and eventually sells itself.
  • Early Sales and User Base Development: Next, the startup looks for early product referrals through friends, family, and investors.
  • Early-Stage GTM: Then, once it discovers early product-market fit, the startup begins to build its GTM organization with early sales and early marketing hires.
  • Series A Funding: Post-seed funding, once the startup has its initial product in place, some early sales, and the core of a GTM team, startups will often look to raise more funding to support increased hiring.
  • Scaling GTM: After Series A, many early-stage startups seek to scale their GTM teams with marketers and sellers to increase their customer base with net-new logos. Startups will usually also look to start scaling a customer success function to improve retention.

Launching an OSS startup can be a less-conventional process for a variety of reasons.

Potential OSS First Steps: Existing Foundation, Net-New, or Existing Project

Founders of OSS startups might begin from a variety of different circumstances. Here are three of the most common:

1. Existing Foundation Goes Commercial

Some OSS startups are born from an open-source project that an existing institution, such as a university program or existing business, created. Some examples are Apache Spark, a multi-language engine for single-node data engineering, which originated from a project at UC Berkeley AMPLab, and Kubernetes, which started as an OSS project at Google Cloud.

Pros:

  • Build on an existing codebase
  • Start with an existing developer community
  • “Halo effect” of celebrity and publicity from a larger, well-known institution

Cons:

  • No ownership of the original open-source code
  • Potentially more-restrictive licensing
  • Potential conflicts with founding institutions that may put restrictions on startup business growth
2. Creating a Net-New OSS Project

A significantly more-challenging origin for OSS startups is a net-new creation from a group of technical founders. A net-new project requires a significantly higher outlay of resources and additional work to launch successfully (effectively from zero) but can yield much greater rewards if successful. Some examples of OSS startups that started from scratch include the document database MongoDB and the configuration management platform Chef.

Pros:

  • Retain ownership of your codebase
  • Ability to set licensing models
  • Greater freedom to determine the startup’s business model

Cons:

  • Founders must start “from zero” and build from the ground up
  • Founders must build a community from scratch
  • No built-in publicity from a more well-known institution
3. Building an Existing OSS Project into a Startup

In recent years, we’ve seen founders create OSS startups using the codebase of an existing open-source project. By co-opting an existing OSS project, founders can realize some of the benefits of working with a more-established codebase, but will still need to build a new and recognizable brand. Some examples of startups built on an existing OSS codebase are the deployment management platform Spinnaker, which was originally an OSS project from Netflix, and later Google, and the NoSQL database Cassandra, which was originally an OSS project from Facebook.

Pros:

  • Ability to build on an existing codebase
  • Start with an existing developer community

Cons:

  • Founders don’t own the original code and may be subject to licensing restrictions
  • No halo effect from the original founding body

Important Milestones for OSS Startups

OSS founders will also likely need to ensure they complete these important milestones:

  • Scope Roadmap, Landscape, and Value Prop: The most successful OSS startups understand the problem they’re solving, understand what they bring to market that is different from competing or related projects, and can make a clear case to a clearly-defined target audience. They also create an overall roadmap with timeframes, deliverables, and owners.
  • Messaging, Positioning, and Branding: As with a closed-source startup, OSS startups need foundational messaging and branding to help them communicate their value proposition and differentiate themselves from other projects.
  • Determine Licensing and Legal Requirements: It’s critical to review your OSS startup’s licensing situation and have a clear understanding of what restrictions or obligations your company will carry, your startup’s privacy policy, and whether you may need to trademark some or all of your projects.
  • Determine Community and Governance Roles: It’s important to have a plan around which roles and responsibilities your co-founders and early team members will hold, and which roles you’ll look to your community members to fill. It’s also a good idea to establish community conduct policies to ensure you can build a healthy community and can respond properly to disruptions.
  • Scope and Build Infrastructure: Depending on the nature of your OSS startup, you may need to establish, at minimum, tools that cover such functions as code repositories, testing, documentation/knowledge base, and community collaboration (potentially including forums, chat, and video conferencing).
  • Set Roadmap, Metrics, and Goals: It’s vital to determine early metrics for factors such as community growth, product engagement, onboarding new members, and general awareness and publicity.
  • Raise Funding: Funding for OSS startups can come from many sources, including traditional angel or VC investors, crowdfunding, or even from the founding institutions that built the original codebase. Even though OSS startups are becoming more popular with more investors who are new to open source, it’s usually a good idea to seek fundraising from experienced investors with a proven track record of funding successful OSS startups.

Learn more:

“When we started the company, the first few years were really just almost exclusively focused on open-source product development and evangelism, and getting the tools out there...This kicked us into this next phase of the company. ‘Okay, all the open source we wanted to build, we've built.’ We know they have their independent roadmaps and things we need to do, but the company's next phase was to figure out, what does the company look like?” - Armon Dadgar, Co-Founder/HashiCorp

Building a Bridge to Open-Source Business Models

Depending on your goals as a founder, and your OSS licensing situation, you may have different options regarding how your company will “cross the chasm” from being a purely free-for-commercial-use open-source project to a commercial project that generates revenue. Here are four examples of open-source business models successful OSS startups have used:

1. Professional Services (ProServ): One established method of turning a project into a business is offering for-pay ProServ alongside your OSS offering. Some examples of OSS + ProServ organizations are Red Hat, which offers a full consulting service, and SUSE, which has multi-stage consulting offerings.

Pros:

  • Potential to Generate Substantial Recurring Revenue: Successfully selling ProServ plans, particularly to larger enterprise-level firms, can generate substantial annual recurring revenue (ARR).

Cons:

  • Potential Inefficiencies: ProServ tends to require firms to provide bespoke, white-glove service that isn’t always repeatable and can therefore be extremely time-consuming. For many OSS firms that offer ProServ, only a small portion of overall users will enroll, requiring substantial GTM efforts to pursue a limited pool of users.

2. Open Core: There are also open-source organizations that utilize an open-core model, which offers a core, feature-limited OSS product but also offers a for-pay “commercial” version with additional features as an add-on. Some examples of open core firms are GitLab, which adds larger storage options, enhanced security, and enhanced incident management in its commercial packages, and Docker, which adds additional team support, audit logs, and traditional enterprise features such as SSO (single sign-on) in its commercial tiers.

Pros:

  • Core License Flexibility: In many cases, separating core and commercial offerings lets OSS firms offer generous licenses on the core offering, so long as they draw clear lines around where core ends and for-pay commercial features begin.
  • Potentially Easier to Separate Paid and Free Users: By maintaining separate codebases, it can be easier to ensure users who want commercial features do upgrade.

Cons:

  • Maintaining Separate Codebases: Keeping core and commercial codebases segregated ensures that core users can’t “accidentally” access commercial features, but adds additional maintenance overhead. Your startup will need to deploy new features universal to all versions multiple times while avoiding version control issues.
  • Balancing Core vs. Commercial Offerings: It can be challenging to ensure that the core offering remains valuable and attractive to your larger developer community while ensuring your commercial offering continues to be worth paying for. 

3. SaaS: Some OSS companies opt to go the traditional SaaS route, which admittedly saddles customers with vendor lock-in by way of contract, but carries other advantages, such as delivering a fully-managed offering and potentially more in-depth customer support. Some examples of OSS firms that have gone the SaaS route include the long-lived CMS WordPress and the code repository GitHub.

Pros:

  • Infrastructure Control: Since your OSS SaaS startup can offer full management of setup, management, and upgrade processes, you potentially have more control over new user onboarding and ongoing uptime and maintenance.
  • Strong Traditional ARR Potential: Provided you can offer contract terms your customers find valuable, your SaaS startup can lock customers in for multi-month or multi-year contracts that generate regular monthly revenue, with the potential to upsell or cross-sell to higher tiers or across different product lines.

Cons:

  • Infrastructure Burden: Many SaaS startups own infrastructure for their services and are the first to blame (and lose business) during outages.
  • Potential Community Issues: We’re starting to see instances of larger firms taking advantage of open-source solutions in for-profit ventures, such as the many open-source components in Amazon’s AWS portfolio (to the dismay of other developers who believe such practices to be in opposition to the spirit of open source). OSS continues to be a dynamic and constantly-evolving field with many participants, both small and extremely large. OSS startup founders would do well to keep tabs on such developments, particularly among the larger players.

4. Charitable Donations: There are even some OSS firms that sustain themselves through charitable donations, using fundraising drives, selling merchandise, or both. Some examples of donation-funded OSS companies include Mozilla Firefox and the educational foundation Wikimedia.

Pros:

  • Community Goodwill: If companies must charge money for OSS projects, a voluntary donation basis is probably the most palatable.

Cons:

  • Community Dependency: An OSS startup that is primarily dependent on voluntary donations will likely need to run multiple fundraising drives and may experience financial hardships, particularly during difficult economic times.

Learn more:

“‘Here’s our library. It’s open source. Check it out.’ Engineers are like, ‘Oh, man, two thumbs up. This is great.’ All of a sudden you get this buy-in at this really important layer in the company and it really accelerates growth.” - Peter Reinhardt, Co-Founder/Segment

Additional Considerations When Building an OSS Project

For OSS projects to succeed, they must generally achieve these goals with specific, actionable plans:

  • Vibrant Community with High Adoption: An OSS project lives or dies by its community. And in most cases, OSS startups generate revenue by converting only a portion of their total active user base from free or core users to paying users. As the user base shrinks, so do opportunities to monetize them.
  • Can You Be the Primary Source?: Being the most credible party in your field is a critical advantage for OSS startups. If you can be the primary source in your field - that is, the most believable party to whom people come with questions first - you’ll have an enormous edge. If you can’t, you will need to compete for mindshare and credibility against competitors who also lay claim to your throne, compete for members of your community, and ultimately compete for paying users that will sustain your business.
  • Building a Secure Product: Depending on how you have built your OSS startup, and what stage it’s currently in, you will likely find yourself depending on your community to put in a significant amount of legwork to ensure your project is secure. To ensure security for OSS projects, you must have a clear and robust reporting process, open channels of communication for reporting issues, the bandwidth to expediently address security issues, and the ability to properly ship your fixes with proper documentation of common vulnerabilities and exposures (CVE).
  • Working With Open Standards: Open standards are the written standards established by governing organizations such as the W3C, IETF, and the IAB, intended to enforce a level of uniformity across OSS projects to make them as accessible and “open” as possible. Examples of open standards include the markup languages XML and HTML. While conventional wisdom is that it’s generally a good thing to have open standards so that all users can equitably onboard new OSS tools and ensure the highest levels of compatibility, OSS developers can find themselves at odds with open standards, which may not seem to evolve quickly enough to keep pace with the innovation of rapid community development.

Learn more:

“Open standards are critical for adoption and to ensure you do the right thing...We have to remember that the hackers are always in front of us and will hack systems.” -Stina Ehrensvärd, Founder/Yubico

Conclusion

As you can see, there are quite a few nuances involved in creating an OSS project and launching an OSS startup. See additional resources below or visit the Heavybit library for more informative articles, podcasts, videos, and on-demand meetups.

Ready to launch your open-source software startup, or just looking for OSS startup advice from experienced investors who have worked in open source for years? Please contact us.

Additional Resources