

Is developing open source software a viable route for a startup? - runarb

The startup where I work is developing enterprise type software. The software itself is great, and have been selling ok in our home marked (Scandinavia). But now we want to venture out in the wider world. Unfortunately we are having a hard time reaching out to potential customers that are located far away.<p>We feel that we basically are left with two choices:<p>* Hire more sale and marketing staff to get the sale pipeline going. This is a known and safe route, but may require more VC.<p>* Make our software open source and hope that it spreads in the wild.<p>Does it make sense to follow the open source route for a startup? Can it somehow come back to haunt us (for  example making it harder to get VC founding in the further, because we got no ipr)?
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naner
I'm a big supporter/user and small contributer of free software. That being
said...

 _Make our software open source and hope that it spreads in the wild._

This is not a business strategy. You are going to give away for free what you
are currently selling? How would that help?

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runarb
Agreed, Naner raises a very good point. Just uploading it on GitHub won’t help
much. However wouldn't I be right in thinking that it would be easier to get
press, adoption and attention to something that is open source?

Maybe my question instead should be something like: Given relative small
resources, is it easier to succeed as a startup if your product is open
sourced?

For business strategy so are we leaning towards the usual rout of releasing
the software as open source, to encourage a more rapid adoption, while the
company sells ongoing support contracts, custom integration, services and
consultancy.

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rumcajz
By making the software open source you can sneak into enterprises under the
management radar. You can make friends among ordinary developers in the
enterprise. They can recommend your additional plug-ins, services or whatever
you are selling to the management. However, at that point you'll need strong
sales department to make the sale actually happen.

So, the two options are not alternatives, rather they complement each other.
You'll need sales staff in any case. Making the product open source can help
the sales staff to sell related products.

Whether it's worth it is up to your consideration.

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ScottWhigham
Is he trolling us? I can't tell. It's such a ridiculous scenario/question that
I just find myself unable to take it seriously. On one hand, I want to help -
to answer with good info - but on the other hand I don't want to waste my time
with a joke of a question. I'm choosing to believe that he's trolling.

~~~
runarb
Sorry, but it was not my intention to troll anyone. I am fully aware that both
open source and propertarian software models are viable business models.
However most successfully open source projects were probably open source from
the start.

I am more wondering if open sourcing propertarian software are a good way to
reach the masses? And if so, what risk would we be taking on?

I don't think I am the only on wondering about this. Tom Preston-Werner
(Cofounder & CEO at GitHub) has written about some of the same issues at
[http://tom.preston-werner.com/2011/11/22/open-source-
everyth...](http://tom.preston-werner.com/2011/11/22/open-source-
everything.html) .

~~~
ScottWhigham
Fair enough...

I probably disagree with your premise that you likely have to hire VC to go a
more sales/marketing approach (hard to say w/o more context). Of all the
jobs/areas, sales is the easiest to hire without a large cash outlay. If you
had said, "We likely need VC money because we need to rewrite a huge chunk of
the code", I would've bought that but to say you need that money to build a
sales team doesn't make sense to me.

For example, let's say I have a $1m/yr enterprise software company and we have
no sales staff. If I want to go hire a sales person, what is it they want out
of the deal? They want a product that meets marketplace needs, is well
supported, is easy to demo, has a track record, and then I want to get paid as
much as possible for each sale. You've proven that you have a saleable product
and a track record, it seems. The next important part is the last part: "for
each sale". You pay them commission - maybe not 100% commission at the start
but, by month six, they are likely no less than 50% commission. It's far from
a no-risk strategy but it's far cheaper than hiring engineers and having to
pay 100% salaries w/ no add-on to sales. You could hire a sales manager and
three sales people who, after six months, are on 50% commission. Within a
year, they're on 100% commission plus bonuses.

With all that being said, yes, I'm making it seem simpler than it is. But, at
this stage (and without knowing more about your business), it seems like the
above hasn't been considered. A good sales person will drive your marketing
for you, at least initially. He/she will say, "I need x and I need y to sell
this product." You can then contract out x and y. The big cash outlays are
going to be buying lists for the sales people and sending them to conferences.

Lastly, I would say that, if you find it tough to hire/find salespeople
willing to work on commission, that either (a) your product price isn't being
seen as profitable from a commission salesperson's POV, or (b) they believe
either your support or product/market fit are just not good enough for them to
make a high commission.

Sorry - I just don't see that as a big deal for a company selling enterprise
software.

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benologist
Naner raises a very good point but there's more to it. Your problem right now
is reaching customers, a github repo is going to suffer the exact same
problem.

If you're able to market your github repo to your potential users/customers
why not market your software instead?

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lumberjack
If you aren't currently offering support and training with your software, that
might actually be a reason why companies are reluctant to start using your
product.

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stephengillie
Redhat has been selling service contracts to support their free software for
more than 10 years.

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brudgers
Red hat started out selling their software. Their transition to a services
company was facilitated by Linux software being integrated into enterprise in
a mission critical manner.

Most software is less critical to an IT department than an OS, and few things
justify the scale of support within enterprise.

