“GitHub stars don’t pay the rent.”
💎 Why It Matters
Open-source projects give creators and companies flexibility and lowers platform risk.
Monetization makes these efforts sustainable.
Platform risk puts you at the mercy of closed-source companies. You are subject to vendor lock-in and rent-seeking behavior.
Using an Oracle database? They just raised prices? And won’t listen to request features?Too bad. You can’t touch the code. And switching costs are high.
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.
- 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
- Monetized open source projects will become more ambitious.
- Networks will become public goods. Centralized networks have been one of the most effective ways to generate wealth. For a few. As NFX states, “70% of value in tech is driven by network effects.” See Facebook and Amazon. Value from user-owned networks accrues to network principals and participants. LooksRare is an OpenSea alternative. Network effects will remain powerful. Where value accrues will change.
- 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.
- Permissionlessly 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.
- Use open-source alternatives to avoid platform risk, vendor lock-in and rent-seeking behavior. Use code that you can fork and self-host. Oracle 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.
- 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 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.
🔥 Hot Takes
- 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.
“Monetization pollutes intrinsic motivation of developers.”
Why do open-source projects seek donations and sponsors? Great software requires resources. Sustainable public goods matter. This is why Gitcoin is gaining traction.
“This sounds idealistic. Very few people actually contribute to these projects.”
Contributions are one side of the equation. The other is the ability to fork and customize code. This leads to less lock-in and less rent-seeking. The ability to fork a project, paradoxically, makes it less likely that you’ll need to. Forkability forces fairness.
“I can make more money with a closed-source model.”
Monetized open source is not a hammer. Think from first principles. What’s the best way to achieve your mission? Do that.
- Who should I talk to about monetized open source? • The tweet behind this report.
- Building a $1 Million Business Solo with Mike Perham of Sidekiq • Mike reached $80,000/month without hiring.
- 8 Ways to Make Money from Open Source • Includes donations, paid support, dual licensing and more.
📁 Related Reports
- Open Startups • Open-source contributors build in public.
- Productized Services • Scale while avoiding key-person risk.
- Consulting • Carve a niche by focusing on one open-source ecosystem.
- Growth Tools • Open-core projects are growth tools for paid tiers.
- Digital Products • Make themes for open-source ecosystems.
Thanks Stewart Townsend, Steve Sewell, Tarun Muvvala, Marc Seitz, Ashwin, Ime Essien, Jorge Masta, Jordan Divecha, Yarty Kim, Chaitanya and Clint Gible. We had a great time jamming on this report.
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