Inside Open Source #9
All things Open Source: Interesting reads, startup news, trivia and views from Europe and beyond
Welcome to #9 of Inside Open Source
Every now and then I write about interesting developments in the Open Source ecosystem and related topics that I come across. Check out this issue below and subscribe if you like what you read :)
Topics:
💵What every open-source company needs before it can consider making money
📶Measuring the engagement of an open source software community
“What every open-source company needs before it can consider making money”
According to an interesting piece of content marketing from Timescale, there are 2 main prerequisites for COSS startups before they can really take off commercially. Here is a summary of their points:
Prerequisite #1: Broad adoption
The first prerequisite for success with an open-source project is broad adoption. If the project has a large user base and community, it is more likely to be commercially successful. This is because most open-source companies have very low conversion rates from “free” users to paying customers (usually around 1-10%). So it is necessary to have a broad user base to actually capture significant commercial value.
This need for a large up-front investment in adoption is also why most successful open-source companies today start off as projects in a large company (e.g., Hadoop/HDFS at Yahoo!, Kafka at LinkedIn, Kubernetes at Google), as research areas in academia (e.g., Spark at Berkeley), or as VC-backed startups.
Prerequisite #2: Primary credibility
The second prerequisite is primary credibility within the community. Having “primary credibility” means that you become the single most important point of contact for anyone who needs help or assistance with the software. Given the low monetization rates, this is extremely important because it leads to efficient sales and marketing processes. Having this primary credibility means not having to fight for user attention. This is especially important given the low monetization rates outlined above.
Most of the time, primary credibility is achieved by being the main contributors to a certain open-source project. The value of having that kind of status can be analyzed by comparing the fundamentals of different COSS players (market cap, annualized revenue, and multiple):
Elastic ($4.59 billion market cap, $160 million revenue, 29x)
MongoDB ($3.97 billion market cap, $155 million revenue, 26x)
Hortonworks ($1.23 billion market cap, $262 million revenue, 5x)
Cloudera ($1.73 billion market cap, $367 million revenue, 5x)
Elastic and MongoDB had primary credibility in their communities and were able to capitalize on their status by capturing far more value with less revenue than either Hortonworks or Cloudera, who had to fight over the Hadoop market.
Interestingly enough, Hortonworks and Cloudera eventually merged.
Once an open-source company has broad adoption and primary credibility, it can build a pipeline of companies who need assistance, and start layering in a variety of business models to build a sustainable business.
📶Measuring the engagement of an open source software community
Bessemer Ventures published a very interesting piece on what they learned by analyzing the top 10,000 open source projects on GitHub in an effort to better understand what drives and underpins the best open source projects of the past decade. Here is a summary of the lessons they learned when it comes to Community, one of the six criteria in their open source assessment framework:
Which open source software metrics matter
It is quite hard to assess the quality of an open-source community because you have lots of different stakeholders and associated metrics.
For Bessemer, Github Stars and other “vanity metrics” are not really important because they “tend to spike in correlation with big press releases, and can be gamed since they are not as reflective of continual engagement”. They pay the most attention to Users and Contributors because they represent actual engagement with the technology community. For most open-source projects Users are quite hard to measure, that’s why Bessemer focuses mainly on Contributors - not as an indicator for development capacity but rather on project adoption. This subset of users tends to demonstrate deeper engagement with the project by devoting time to providing feedback in the form of issue comments or occasionally contributing code to the project.
Because Contributor can be an ambiguous term, Bessemer defines it as “any user that has created a Github Issue or Issue Comment, or logged a Pull Request or Commit in a given month”.
Consequently, their north star metric is a project’s unique monthly contributor activity.
What best-in-class engagement looks like
Key takeaways:
Having between 200 and 600 average monthly contributors is absolutely best-in-class
Out of the top 10,000 projects that they analyzed, less than 5% of those have ever exceeded 250 monthly contributors in a single month, and only 2% of projects ever exceeded 250 contributors consistently (in 6 or more months)
Variance by Maturity - Most projects experience strong growth in their early years, before hitting a peak in community activity as the project reaches full maturity, then engagement tends to plateau off
Variance by Type - Certain types of projects, such as databases, attract far fewer contributors than other types of projects, like frontend frameworks, which have much larger groups of developers capable of contributing to them. So in order to compare projects apples-to-apples, it is important to segment them by software category to adjust for these variables
Skew - Contributor activity is skewed tremendously towards the largest projects. While the very largest projects routinely exceed 1,000 contributors per month, very few projects ever reach 100 contributors per month, which is a substantial milestone