

Ask HN: Open-source project as startup? - cool-RR

Would it make sense to apply to YC (or to one of its recent imitators) with an open-source project?
If not, then why?<p>It might be a weird idea, but after all, an open-source project makes something people want, it has leverage, and it can sure use some money.<p>So can anyone give a good reason why this will not work?
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mahmud
In terms of profitability, a simulation software would be hard to monetize as
"software as service"; anybody technically inclined to want to do simulations
will probably have a lab unix flavors, parallel libraries and other goodies to
just download your tarball and run it themselves.

Simulation is not exactly sales automation, data capture, billing or
inventory.

Your best bet is to reach out to federal safety and security agency, and sell
them a heavily customized version of the tool (usually the problem du jour;
few years ago was terrorism, now it's home foreclosure, job loses, etc.) you
will be prepared to have a few PhDs on board to sell it to the governments and
you might need to reach out to your local governments and municipalities.

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cool-RR
If anyone is wondering what the project is about, it is a framework for
writing simulations in Python. It could take any kind of simulation: Physics,
game theory, epidemic spread, electronics, whatever.

(Yes, I know of SimPy, it's something different.)

~~~
SwellJoe
Are you familiar with SciPy? The company behind SciPy, Enthought, had revenue
in the millions when I last worked with them three years ago and were doubling
every year.

They are predominantly a service business, however, and provide custom
software for a few very large clients (oil and gas industry, and one very
large consumer products company). They've moved slowly in the direction of
products rather than services, but I don't think they've ever quite made the
break from being a custom software shop for (very profitable) niche markets.

I explained their business as a way of saying that while you can build a
profitable business and make yourself rich on the kind of tools you're talking
about (the founders of Enthought are doing very well for themselves and could
probably sell the company tomorrow and retire multi-millionaires; they're also
doing fantastic things for their Open Source community at the same time), you
can't raise money in the valley for that kind of company. Until you figure out
how to productize what you're doing, and make it possible to increase revenue
faster than you increase head count, you aren't building a startup. You might
be building a business, and that might be awesome, but valley investors pretty
much only invest in startups.

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cool-RR
By the way, do Enthought have something for simulations?

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SwellJoe
Yes, though I don't know enough about the field to say how it relates to what
you're doing. I was holding them up as a business model to look at, not as an
example of "here's your competition", though maybe they are. I dunno.

They work with geological data to help oil companies build safe platforms
(losing a platform to a natural gas deposit costs millions of dollars and
occasionally human lives, for example, so the amount they're willing to spend
to prevent it from happening is incredibly high), as well as profitable and
efficient wells. They also work with fluid dynamics data for a consumer
products company, to make sure your toothpaste comes out of the tube without
splattering, etc. All seem like "simulations" to me. But I don't know.
Visualization is a big part of what they do, as well, and SciPy has awesome
realtime visualization capabilities (lots of folks also like MatPlotLib, which
works nicely with SciPy).

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teej
The Phusion guys tried doing it and have had a really hard time making it
work. And these are guys who have essentially turned the Rails world upside
down with their OSS.

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tptacek
It seems more likely to me that they're having a hard time making it work
because there isn't a lot of money to be made in the market they've chosen.
Accelerated X11 was also not a great proposition.

JBoss made it work because they were a pin-compatible replacement for
something IBM was already charging a fortune for to large enterprises. But
Phusion sells to the cool kids, not the suits, and the cool kids shop at
thrift stores.

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tptacek
Wasn't Webmin an open source project?

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cool-RR
Did they operate like a startup? Where can I read about it?

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SwellJoe
I talked a bit about it (where "it" is "building a business on Open Source")
last year on our blog: [http://inthebox.webmin.com/open-source-and-business-a-
precar...](http://inthebox.webmin.com/open-source-and-business-a-precarious-
partnership)

~~~
cool-RR
I'm starting to read it, it's very helpful, thanks!

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tdoggette
My advice: You've given up a lot of copyright protections on your code.
Register trademarks, and defend them. Your code is freely distributable, but
you can still protect yourself against people using your name for their own
profit. Look at what Mozilla does, for example.

~~~
mahmud
He has given up nothing. Free software is freedom, and don't forget that 99%
of the time people have the freedom to IGNORE whatever you publish and use
something else.

You can have your closed-down code base where nobody knows your software, and
you're just another hacker. You open source it, get users, and you're suddenly
a software publisher; all it takes is for one university or corporation to
contact you for help and you're free to ask for compensation. If your software
was locked down, you wouldn't have had that lead to begin with.

~~~
tdoggette
I didn't mean "given up" in a bad way; I was raised on OSS and think it's a
great concept. I favor the use of it, even in cases like this., simply because
it's a better way of doing things.

However, the fact remains that going open source reduces one's ability to
control one's work. Trademark protection means that you can't be out-competed
by yourself.

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delano
I can't speak in regards to whether it makes sense to apply to YC, but from a
general perspective, a company that produces open sources software is no
different than any other business: you need to clearly understand how you will
generate a profit.

The answer may be consulting but that's a difficult route b/c anyone can
generate a profit from consulting. It's not unique. You need to figure out how
to provide something that's better than everyone else. As Warren Buffet would
say, you need a moat.

~~~
tptacek
That's not the problem with consulting at all. Consulting is, if anything, far
more defensible than a typical product.

The problem with consulting is that it doesn't scale. You can only deliver it
with trained consultants, who cost lots of money. Build a good product and you
can sell it to 100 people as easily as you can to 10. That's why products are
considered better money than consulting.

~~~
delano
That's true. Your point is more clear than mine.

What I intended to say is that it's difficult to differentiate one consultancy
from another. You have to do that based on clearly proven, previous
performance. When you're starting a new company, it's easier to sell something
that's new (like a service or product).

~~~
tptacek
I don't understand the point you're trying to make. It is just as hard to
differentiate a product as it is to differentiate a consultancy. And there are
far more differences between consultancies than "experience".

~~~
delano
This thread is about open source software. My point is that it's easier to
differentiate open source software from other open source projects than it is
to differentiate a consultancy from other consultancies.

The reason is simple: a customer can try out an open source project for free.

~~~
SwellJoe
And then they can hire the people responsible for the Open Source project.

That's kinda the point of Open Source as a marketing tool. If someone sees how
awesome your Open Source software is, and they want more of that same brand of
awesome (but to do something just a _little_ bit different), they know exactly
where to go.

I just talked about a software services business that I worked with a few
years ago called Enthought, and it's deeply relevant to this threads interest.
While at University the company founders built a set of Open Source Python
(and Fortran and C++) components for scientific computing. They then went on
to start a software services business with a little bit of money raised from
family and friends. Their revenue is now in the millions (I can't be specific
about how many millions, as I haven't known with any specificity for many
years, and I've never been told that they would want me to talk about those
numbers with specificity). Their business has very frequently first come from
customer exposure to their (deeply awesome) Open Source software.

~~~
delano
That's a good story. I've been working exclusively on open source software for
the past 6 months so it's encouraging to read about positive outcomes.

~~~
tptacek
There's also the SourceFire outcome, where you go public.

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delano
Ah, that's another good one. Thanks.

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russell
The crux of the matter is how are you going to make money? After all investors
want a payback. The best advice I've seen here is to find a consulting niche
in security. See if DARPA has something on their wish list or apply directly.
I suggest you do some serious networking in your city/state. Maybe team up
with someone who needs your platform to leverage their expertise.

Tell us where you are. Maybe someone might have a lead.

~~~
cool-RR
_Tell us where you are. Maybe someone might have a lead._

(Drumroll...) Jerusalem, Israel.

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mixmax
The major problem is that you don't really have a competitive advantage. What
will stop your potential competitors from simply downloading the open-source
software and start using it themselves?

When you do a startup you want to find a good niche that makes good money, and
where competition won't start pouring in once you've proven that there is a
market. So you need some kind of barrier, with YC startups it seems to be
technology.

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huhtenberg
How are you planning to make money ?

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cool-RR
I know, it's the question. But I recall pg claiming something to the effect of
"if it's something people want, don't worry, we'll find a way to make money
from it." (I'm probably not 100% accurate with this quote, I don't remember
exactly how he said it.)

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braindead_in
Few obvious things which come to mind.

1) Dual licensing 2) Charge for commercial support 3) Sell hosted versions
(might not apply to you) 4) Advertising?

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huhtenberg
#1 and #2 require substantial legal expense and a lot of subsequent sales and
support _management_ effort. And unless a founder has a prior experience
building this kind of organizational infrastructure, it will be a very painful
experience to go through. All in all, it's a project that is simply too risky
for the investors to put their money into.

