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Understanding Open Source Business and Financial Models

Before considering if it is a DPG, we have to understand, what is considered open source?​​

DPGs must use an open source license, therefore the startup or a part of the business model must be open source. We will go in depth about the technicalities of open source in this guide. On a high level, here’s what you need to know.

Open source is a way to license software, hardware, and content so that they can be be continuously improved, modified and redistributed by any purpose commercially. Some companies see open source as an adoption mechanism through building a community which leads to free organic marketing.

Open source is also…​

MethodMovementCulture
To develop and distribute software and a set of best practices to make software and build teams that make softwareMovement based on ideals and philosophy beyond only codeCollection of people, values, and ideas that take the form of software projects and communities

What are the challenges that startups typically face?​

  • Cost: Many startups struggle to develop sustainable cost structures. Market competitiveness now requires significant investment in R&D, testing, and product development, which includes surveying, research, coding and more, all of which many companies have minimal budgets for.
  • Funding: Many startups struggle to develop sustainable cost structures. Market competitiveness now requires significant investment in R&D, testing, and product development, which includes surveying, research, coding and more, all of which many companies have minimal budgets for.
  • Copyright: It is becoming increasingly difficult to protect IP, so businesses that create and capture them entirely from a proprietary product are being threatened by competition.
  • Diversity: More companies are discovering the importance of having diverse teams, which can add a rich range of perspectives that can widen a company's reach and enrich successful product development. As such, companies with very homogenous teams are falling behind.

What are some myths and misconceptions that exist surrounding open source?​

Myth #1: I've heard that it's impossible to make money in open source because anyone can just take your code and market it themselvesMyth #2: I've heard that open source software is susceptible to feeling disjointed because there so many people with different coding style working on the project.Myth #3: I've encountered so many OS repositories that don't seem to be actively maintained. Is it true that the majority of open source projects are abandoned?
Fact: Despite the fact that your code or hardware design is freely available, there are a number of businesses that are profitable, have received investment, and have been acquired and gone public with open source solutions.Fact: It's true that disjointed software can happen, and that it can set a project back or even run it into the ground.  However, following coding best practices and ensuring extensive documentation surrounding project and coding guidelines and protocols can, along with good project communication and a common, well-articulated vision, help to ensure that the software remains a unified project.Fact: Approximately 98% are only modified in the year after they are created and are never touched again. However, this may be tempered by the fact that about 1/2 of the active projects have only one contributor and close to 90% have 5 or fewer. This indicates many projects are non-professional in nature.

How do you continue to make OS projects sustainable:

  • Make sure developers use the product, so they have stake in making it better
  • Have a clearly defined vision that everyone can agree on
  • Get enough people onto the project such that no one developer is overwhelmed with feature requests or bugs, but not too many people such that it is hard to juggle the contributors and stick to a singular vision.