Problem :

Understanding FOSS technologies and investing in open-source tech.

Commerical platforms put you at the mercy of closed-source companies. You are subject to vendor lock-in and rent-seeking behavior.

No way to combat prices, raise features and get community support.

Solution

Monetized open-source projects give some or all of the code away for free.

With the ability to change it.Projects are monetized via services, premium features, hosting and more. Contributors are users themselves.

Freemium plans for user-acquisition, lower CAC, better retention

Key Players

Projects

  • WordPress • The most popular website builder
  • Plausible • Google Analytics alternative
  • Elastic • Search, analyze and visualize data
  • Medusa • Shopify alternative
  • Builder • Visual website builder
  • Posthog • Alternative to Mixpanel and Amplitude
  • Supabase • Firebase alternative
  • Semgrep • Static analysis tool
  • AnonAddy • Anonymous email forwarding
  • Penpot • Figma alternative
  • Canonical • Linux OS

India:

  • Appsmith: Raised from Accel India
  • Tooljet: Raised from Nexus Venture Partners

Predictions

  • Monetized open source projects will become more ambitious.
    • NocoDB and Baserow are Airtable alternatives.
    • n8n is an alternative to Zapier and Integromat.
    • Medusa is a Shopify alternative.
    • Supabase is a Firebase alternative.
    • Appsmith is a Retool alternative.
  • Networks will become public goods. Centralized networks have been one of the most effective ways to generate wealth.
  • The Global Open Source Services Market size is expected to reach $60 billion by 2027, rising at a market growth of 17% CAGR during the forecast period. The term ‘open source’ refers to a kind of licensing agreement, which enables users to independently alter a work, combine work with big projects, use a work in different ways or develop a new workout based on the authentic.
  • The rising number of skilled developers is solving for India for the world. More developers have contributed to Open Source from India than any other country.

Growth

  • Self-service selling dramatically reduces the cost of selling and servicing transactional, lower-revenue deals. The product becomes a vehicle for allowing customers to expand their spending through executing upsells, particularly in usage-based pricing models. Chargebee offers 2 self-service plans in addition to a free offering, which enables SMB and mid-market customers to grow with the platform without needing to talk to sales.
  • Data-driven targeting uses product data in sales targeting and upsells motion; for instance, providing your sales team with a list of customers who are above their usage limits and ready to pay. Nearpod collects data around which teachers are actively using its platform and then leverages this to encourage school districts to become customers.
  • New or premium feature adoption can be improved by guiding users to that feature with product popups and callouts based on their usage patterns and use-case. MURAL surfaces new features in-app with contextual triggers, while also providing an in-depth changelog to demonstrate all of the value they are continuously adding to their product.
  • Community development involves fostering a community of users who can help each other understand the product and develop new innovations in usage. This community will form a key source of product advocacy and evangelism, with paying customers advocating to free users, and free users evangelizing the product to prospective users. You should support and foster the community by providing forums and events (user conferences and smaller gatherings) where they can interact, uplifting the most active users of the community, and ensuring company employees interact and become members of the community themselves. Postman has fostered an active community of developers using the product and continues to invest in it.

Opportunities

  • The counter position to compete with incumbents. Make it hard for them to mimic your strategy. Copying should lead to cannibalizing their existing business. Medusa is a Shopify alternative. It’s unlikely that Shopify will open source. Even if Medusa becomes a formidable competitor.
  • Permissionless contribute to open-source projects. Use open-source contributions to build a portfolio and find jobs. Laszlo Block, former VP of People Operations at Google, says the number of Google employees without a college education is rising.
  • Open-source alternatives avoid platform risk, vendor lock-in and rent-seeking behavior. Use code that you can fork and self-host. Platforms can raise prices without providing more value because switching costs are high.
  • Turn complaints into contributions. Accept pull requests. Along with feature requests. Augment your dev team with open-source contributions.

Security

  • securing serverless in the public cloud, perhaps by isolating serverless workloads in the public cloud with granular account-level segmentation, and limiting exposure through the use of blast-radius architecture
  • rethinking authentication for transient serverless workloads by using ephemeral credentials and short-lived tokens, which are key risk mitigators for credential exposure
  • protecting your availability in a serverless landscape with robust perimeter security that deploys public and internal functions at discrete gateways
  • upgrading risk assessment, governance, and awareness by, for example, adopting policy as code for the codification of organizational policies; using regulatory frameworks in automated governance pipelines for cloud-service provisioning; and deploying all serverless workloads using an embedded DevSecOps pipeline

Risks

  • Consulting: Services are less scalable than hosting and dual-license models. Consider marginal costs before you choose this strategy.
  • Community Backlash • Moving free features to paid tiers may lead to a backlash.

Key Lessons

  • Users are the real winners of monetized open source. Public goods have less lock-in.
  • Value creation does not automatically lead to value capture. Two-way rating systems, proof of stake protocols, and airdrops are uncornered innovations.

Issues

  • IP rights will be hard to enforce in the new world. CryptoPunks creators are under fire for an inconsistent approach to derivatives. Bored Apes are slightly more lenient. NFTs gave us digital scarcity. Legitimacy and social consensus will rule the day.
  • Wealthy benefactors will use open-source projects to prop up closed ecosystems and attract talent. See Apple with Swift and Meta with React.

Links

<
Previous Post
Venture Capital Memos
>
Next Post
How to write a good cold email?