How to commercialize open source

If software is eating the world, open source is eating software. OSS projects have more opportunity than ever before.

How to commercialize open source

In early October 2019, Peter Levin at Andreessen Horowitz published a seminal work in the history of open source software (OSS).

Levin's post about the commercialization of open source explains the historical progress of the OSS movement from "free software" to multi-billion dollar exits. He shares a framework that open source entrepreneurs can follow today, and posits how SaaS is the future for open source commercialization.

The following November I delivered a talk at DeveloperWeek Austin on the same topic. The vision was to share an update on my then employer's progress over the prior four years growing an open source project. I highlighted business model and pricing experiments, why launching the industry’s first cloud editor platform mattered, and how we expanded our value to the enterprise.

The goal of the session was to "share the growing options available to the founders of open source projects who want their passion project to become a sustainable business."

Since Levin's seminal work articulated more eloquently than I ever could, I re-wrote the presentation leaning on several of his concepts. He had explained our experience commercializing an open source project since 2015 so clearly.

One of the key theories underpinning Levin's model is the path from "community to commercialization." It starts with project-community fit, concluding with value-market fit. Levin defined them like so:

  1. Project-community fit: where projects create a community of developers actively contributing to the open source codebase. Measurement can include GitHub stars, community commits, pull requests, and overall contributor growth. At this stage, the project is not yet commercialized.
  2. Product-market fit: where third-party developers deploy the project in commercial applications. Measurement can include SDK downloads, NPM dependency updates, and if cloud deployed a wide range of usage statistics. The project might be generating revenue but can't be said to be "commercialized." 
  3. Value-market fit: where the project's sponsoring business unlocks a value proposition customers want to pay for. Measurement is revenue and project profitability.

At the third stage and beyond, the open source project looks more like a commercial business, delivering professional services, training, and channel partner programs (to name a few). Revenue is broader than the core project and charging for cloud hosted deployments.

During my four years marketing the open source TinyMCE editor we unknowingly "muddled our way through" these stages, eventually achieving value-market fit. If Levin's framework had existed four years earlier, we might have had a more predictable path to growth.

Levin's gift is a framework that I believe every open source project can follow to commercialization.

Frameworks are important, whether in marketing or commercializing open source projects. They provide a construct we can apply to our understanding of the world. They help make sense of uncertainty, creating constraints we can use to test hypotheses. Levin's framework is a clear path to success.

Marc Andreessen, founder of a16z – where Levin is a general partner – famously wrote that "software is eating the world." I believe open source is eating software.

Open Source: From Community to Commercialization is the ultimate guide to building an open source business.