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Building an Open Source Software-Centric Company at RailsConf 2014

By Steph Skardal
April 25, 2014

It’s RailsConf 2014 in Chicago and Day 4 (the last day)! Today I attended many good talks. One of them was Building an OSS-Centric Company (and Why You Want To) by Leah Silber. Leah is super passionate and knowledgeable and has good perspective from being involved in many successful open source software companies and projects through the years, including her current work at Tilde on Skylight and Ember.js.

Why Open Source?

First, Leah covered the justification for building a company with a focus on open source (ie how to convince the people that pay you to focus on open source). Here are the bullet points for why open source?:

• Expertise: When you have a company with a focus on open source, you are building the expertise on your own open source tools and you have the available resources as opposed to outsourcing to other companies for expertise. Of course, in my mind, this shouldn’t be a justification for creating an unneeded open source tool, but it’s more of a long-term benefit after your open source projects gain traction.
• Influence and Access: Building a OSS-centric company allows you to sit at the table as stakeholders when it comes to making big decisions about focus, priorities, and direction on those open source projects that will directly influence your revenue stream.
• Recruiting: When you have an OSS-centric company, you have access to top talent and the ability to grow a fantastic team with that access.
• Good Will: This can demonstrate that you are a company about adding to the knowledge-base, and contributing to the greater good.

Funding Tactics

Next, Leah covered some of the funding/revenue tactics of building an open source company. Again, I’m regurgitating what she discussed in list form:

What Works

• Symbiosis: This wasn’t one of Leah’s bullet points, but she touched a few times on the importance of having a symbiotic arrangement between funding and your open source tools. You want the funding and revenue to drive the open source development, and your open source goals to help drive revenue. This seems like an obvious point, but really important that goals align.
• Consulting: Consulting is a great revenue stream for an OSS-centric company. The one piece of advice Leah offered is to focus on consulting for those using your open source tools, as it will allow you to see real use cases of your open source project to gain perspective. The disadvantage to consulting could be that your attention is diverted from development or maintenance of the project, but Leah touched on how to mitigate this later in the talk.
• Training: Training can provide expected, scheduled bursts of income, and can be on the spectrum of very focused content, small, high cost per attendee, to more general, large, low cost per attendee. Leah has a preference for being on the “very focused content, small, high cost per attendee” approach because it may be more amenable to growing a passionate, involved community.
• Events: Events are a great way to build a community around an open source tool, generate leads for the other revenue streams, and perpetuate the addiction to the good will & exposure that comes with open source. In terms of events, sponsorship, affiliate training opportunities, and admissions are all potential sources of revenue here.

What Doesn’t Work

• Venture Capital funding: VC funding may result in influencing your priorities and deliverables to focus on the sprint rather than the marathon, which ultimately means that your product and/or team may not be around in 3 or 5 years.
• Donations: While donations won’t hurt, simple donation options on your website may not return much money (and is unreliable), and the cost-benefit analysis of things like donation drives may prove to be more costly than they are worth.

Challenges

Building an OSS-centric company does not come without challenges. A few common challenges one might experience in building an open source company that Leah covered were:

• Emotional ups & downs: Leah suggests to set expectations, delegate work, track successes, don’t feed the trolls, and take a break from your work to get a perspective and recharge.
• Understand the Distinction between Frugal vs. Cheap: There are small opportunities to build good will and contribute growing to the community, such as small sponsorships, knowing how to funnel resources to “swag” effectively, and sponsoring user groups.
• Avoid Being a Corporate Overlord: What I took away from Leah’s discussion here is to let sincerity guide your decisions.
• Delegate: It’s really important to build an open source community that will survive when you are gone. Delegating means not only building a community, but also leaders as well. Leah later added that important roles for a successful open source project might include coders, website maintainers, infrastructure folks, speakers/evangelists, and logistics/organization folks.
• Don’t put too much You Into it: Make sure there isn’t too tight of coupling between your open source product and your company, so that your open source product is general purpose enough to be adopted and isn’t misguided by your company product decisions.
• Symbiosis: Again, make sure your revenue stream is not at odds to your product goals.

It’s all about Sustainability

Leah focused a lot on sustainability. From a revenue and personnel perspective, your approach needs to be sustainable. It’s not a sprint, it’s a marathon. Many of the challenges Leah covered seem pretty obvious, but when organized collectively, it’s a great resource for understanding how your own company and/or projects might benefit from these ideas.

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