Introduction

When you think about open source and business, it’s easy to fall into a false dichotomy. Is open source a selfless collaboration, or can it be a business? The answer is…yes!

Some open source projects are labors of love and truly selfless gifts to the world, or a form of public service, or a way to establish resume credentials, or non-commercial community projects that were never intended to belong to anyone. 

But some of them can also be a springboard for a new kind of business. That usually happens when developers who love open source development want to combine their passion with their livelihood. Or sometimes, businesses grow out of non-commercial projects, hobby projects, experimental work, or even projects within large companies with programmers dedicated to open source R&D (like Meta, Google, or Microsoft). 

We call businesses created around a specific open source project commercial open source software (COSS) businesses. These businesses are not just using open source software developed by others, but actively managing a project that forms the backbone of their enterprises.

Today, more and more developers are building COSS businesses to find their path from an open source project to sustainable success.

Can You Get from A to B? 

Lots of people ask, with healthy skepticism, how it is possible to make money developing open source software? Open source software is free. So how can you create a business that gives its core offering away? Isn’t that impossible?

Building a great business is never easy. Building an open source business is absolutely possible—but you can’t do it using the rules of the proprietary software business. If you understand the approach you need to take, the path from an open source project to a business is as easy (or as difficult) as turning any other innovation into a successful business.

In fact, today, building a COSS business is arguably easier than building a proprietary business. COSS businesses enjoy advantages in capital efficiency and customer acquisition that are unique and powerful. These include:

• Distributed and asynchronous development using open source development tools
• Word-of-mouth marketing
• Highly engaged community feedback

If you are developing software, the approach of the proprietary software business model is to maximize protection of your intellectual property, grant limited licenses, and charge as much as the market will bear for those licenses. That model has worked for decades for companies like Microsoft and Adobe, the quintessential proprietary software companies. But that model is behind the curve now, and is being eclipsed by COSS business models, for one main reason:

Users Want to Control Their Technology 

A user’s desire for control can take many forms. Corporate IT managers need transparency to do proper technology diligence and ensure that products are secure and robust. Developers need source code access to understand how products work, or to customize them, or to ensure compatibility with other software or systems. Even non-developer end users may be curious about how the software they use actually works. Open source software meets all these needs, because it shares source code and offers a license allowing anyone to study and change the source code. That gives the user freedom and transparency—the watchwords of the open source movement. This freedom is driving the ever-growing demand for open source software.

A few decades ago, before the ascendancy of open source, customers put up with licensing binary-only software, shored up with promises by vendors to keep software in a technology escrow or promises of ongoing maintenance and support. But the open source movement changed all that. It is no coincidence that the biggest names in on-premises binary software licensing—like Microsoft and Adobe—are focused on consumer products, where the user has no bargaining power. We click to accept those licenses because we have no choice. But today, enterprise customers, who may be paying millions a year in software license fees, almost always demand access to source code. In the enterprise software market, users have much more bargaining power, so demand in that sector has swung heavily toward open source. We’ve seen this not only at the infrastructure level (such as data, middleware, or developer tools like MongoDB or Kafka) but also at the application layer (social media protocols such as Nostr or Bluesky; messaging such as Matrix or Signal, and productivity tools such as Proton, NocoDB, and Cal.com).

Moreover, the advent of the web has had far-reaching effects on business, because it has made delivery of information nearly cost-free. That provides businesses with a powerful marketing and distribution channel, enabling them to offer free basic services in order to create markets for premium or additional services. With this technological change, consumer expectations changed, and now consumers expect a try-before-you-buy option. 

That is one key strategy for how COSS businesses grow. The open source software at the core of the business is a fast and efficient vehicle to engage the community, including potential customers. That “honeymoon phase” is free of charge for the customer and inexpensive for the vendor to deploy. But running a successful COSS business requires a sophisticated understanding of the relationship between the business and the community. It has to be a two-way street. The community is a separate and key asset of a COSS business, apart from the potential for sales it creates.  The business delivers more value than it monetizes in the community.

At Chinstrap Community, we want to dispel the myth that open source and business are mutually exclusive. In fact, they are two sides of the same coin. Private capital can help provide valuable, sustainable COSS projects.

Openness is the future of enterprise.

This post is adapted from the introduction to From Project to Profit.