Open source startups: Don’t try to be Red Hat

If you were a VC, you’d be looking for a way to turn your millions into billions. If you had only ever made money by betting on proprietary corporations, you would probably conclude that open source was a poor way to win big.

If, like Andreessen Horowitz VC and former XenSource CEO Peter Levine, your work on an open source platform had made you rich, you might conclude that open source had a role to play, but could never make you as rich as Oracle and probably not even as rich as Red Hat has become through its once-in-a-lifetime exploitation of the Linux and GNU commons. Indeed, that’s the conclusion Levine reached in an article for TechCrunch this week.

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But both outlooks have been superseded by the maturity of open source. It’s possible to grow valuable, giant businesses with open source. The key to doing so is to avoid monetizing open source building blocks while you invest in and innovate around them. That sounds counterintuitive, but it’s happening at companies like those Lauren Orsini controversially named recently: Square, LinkedIn, Facebook, Twitter, and Google.

None of these companies sell software; they don’t even sell platforms. Rather, each has built a business that’s powered by open source software, and each has gone on to create new projects that developers all over the world want to use. Those developers don’t compete with them. Rather, they have a vested interest in the code they are using, so they fix bugs and develop features.

When smart developers do that, they realize that contributing back to the original project makes more sense than sustaining a fork of the code themselves. Thus, they contribute. Some model this as a “gift economy” — and there’s no doubt that a sense of community is important for open source developers. But fundamentally this is about self-interest and making sure the code ends up in a place where the most people will be motivated to use and maintain it.

The belief that open source needs to have “an upstream” where there’s “a business model” has always seemed rather quaint. In this age of distributed version control, of Git and forks-as-goodness and pull requests, there is no longer a strong concept of “upstream.” Rather, the code gravitates to the place where there’s the greatest chance of it being improved. If that’s the original project, then maybe “upstream” is a reasonable match to the concept, but in today’s Generation Git, there can be many peers and code flows between them.

As a consequence, building your business on the expectation of being the “master upstream” is foolish. You benefit most from open source not as a dictator, but as the most favored collaborator. You benefit not by selling support and service — although that’s a viable business model if you don’t want to get big — but by being part of a giant, distributed R&D community, with bug fixes and features flowing in as all the other members of the community scratch their itch and contribute back to the place that’s most likely to benefit them if they do.

In this world, people will “take” your code and use it. After all, that’s the flexibility given to them by having an open source license. If you are controlling, toxic, and rule-bound — say, you require conformance to a specific social norm or completion of a legal agreement — chances are they won’t send anything back to you. Rather, they will take your code the way you licensed it, and others will join them to build a living, growing community without you.

Ironically, the behaviors that VCs often demand of their “open source startups” could well drive away the very talent they need. The sort of VC thinking that expects a company to become the next Oracle is likely to put an upper bound on their growth. While some of the contributors in a community might be present for direct profit from the code, the community as a whole is actually a mesh of different participants, all with their own motivational models and all paying their own way to achieve them outside the context of the community.

Communities do not have business models — those are for businesses. If the motivational model of some participants involves business, that harms no one. But the community itself is about the liberty to align interests, not about the presence or absence of profit.

That’s why the biggest new open source projects of recent years don’t have a dominant company. Twitter’s Bootstrap, Facebook’s Open Compute, Square’s Picasso, the OpenStack project — each is powering a market in its own right. Each has a founding benefactor that’s gaining hugely from the innovation and kudos the project is generating. None is measuring its success on a metric of becoming a billion-dollar software business.

I’d go further than Levine. It’s not even “open source as a service” — the creation of platform businesses — that is at the maturity point of the open source phenomenon. The giant businesses of the future don’t monetize open source; they monetize innovations made possible by open source. So the ambition to be Microsoft, Oracle, or even Red Hat is the wrong metric for success in open source. Rather, how many building blocks are you creating and influencing? How big a distributed R&D team is working for you? How many companies have a systems architecture that resonates with yours?

This, ultimately, is why the basic flexibility of open source — to use software for any purpose, to access and improve the source code and distribute and deploy any way you wish — is so fundamentally important. Limit those “four freedoms” in deference to your so-called business model and you’re actually boxing in your opportunity and cutting it off from the future.

This article, “Open source startups: Don’t try to be Red Hat,” was originally published at InfoWorld.com. Read more of the Open Sources blog and follow the latest developments in open source at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.