Authored by: Sam Endacott (Principal, firstminute capital). Feel free to reach out on [email protected].
Contributions from: All the great open source teams that firstminute has been lucky to partner with (including Matthew Hodgson & Amandine Le Pape, Element; Antti Karjalainen, Robocorp; Will Falcon, Grid AI; Jan Oberhauser & Claudia Bates, n8n - and more to come in our next piece on Open Source), stars of the myfirstminute series (Matt Mullenweg, Automattic; Ross Mason, Mulesoft & Dig Ventures; Kevin Ryan, MongoDB, Alleycorp and many more), as well as my venerable firstminute colleagues Arek Wylegalski (loves open sources, doesn't like "content") and Spencer Crawley (loves "content", doesn't really understand open source; thank you for the syntax corrections though).
At firstminute, Arek and myself have been driving our commercial open source practice. We have backed a stable of superstar early stage founders who are building commercial applications on top of compelling open source frameworks. It isn’t easy, but we think each of them has a chance of forging some of the most meaningful technology businesses of the next decade.
We’ve been lucky enough to partner with Element (Encrypted communications), Robocorp (Robotic Process Automation), Resemble (AI-generated Synthetic Voices), Nuxt (JAMstack framework), Grid (Abstract away Machine Learning Infrastructure), n8n (API-first workflow automation) and many more not yet announced alongside some great investors including Benchmark, Index, Craft, Sequoia, Automattic, Notion & Dawn.
Not long ago, one of these superstar founders, who we were busy trying to win over, asked us to summarize our learnings from having been investing into open source companies for the last few years.
Below are some of those findings – which we know will of course continue to evolve, the more questions we ask and the more mistakes we make.
Over the last few years, as seed investors to our founders building open source companies, we tend to focus on several core themes which we believe are critical in building a sustainable business that is set up for future success:
Nurturing the Community 🌆
Tracking the right metrics 🌟
Getting the licensing model right 🚔
Hiring exceptional talent 🥇
Monetising effectively with your customers 🧮
Series A Fundraising 💸
Nurturing the Community 🌆
The foundation of any strong open source community is transparency. This is a prerequisite, in order to avoid friction between the economic goals of a company and the interests of the community.
Amandine Le Pape, co-founder of Matrix.org, an open source framework with 25m users and 55k servers, explains that “in our experience the key to build a successful open source business is to be true about it. Only by genuinely wanting to build a strong community and make the world a better place with your open software your company will be able to rise with the tide of enthusiasm of the community supporting the project. And only then you will be able to hire super talents who are passionate about the mission.”
With this approach, Amandine and her co-founder Matthew Hodgson have gone on to build Element, an end to end encrypted and federated messaging platform. Deployed with many governments, as well as Mozilla and Wikipedia, the product has the same features as Slack with the added functionality of being fully encrypted, self-hostable and decentralised. This means that governments and large enterprises will be able to remain in control of their most sensitive data.
According to Matthew, “one thing to do well: transparency always. One thing to avoid: trying to please everyone - especially as open source communities can sometimes optimise for very different things to the mainstream!”