Thank you.
Hello everyone.
I'm pleased to be here to talk about another way to get open source project or open source
companies funded.
It's one of the most controversial way to do it, but I'd like to share with you some information
and some ideas to get better with this option.
I'm Stefan Appampalonia.
I'm the vice president of Rio's, the Italian network of his source companies.
And we are part of Appal.
The European Association of National Association of Networks.
Sorry.
So what we are talking about, venture capitalists can be both an opportunity
but even a serious threat for the freedoms and open source software.
Because venture capitalists operates in high risk
and then they are expecting high revenue deal.
And so it's not so simple to align the needs of the open source companies
to maintain their freedoms and openness together with the needs of getting
an aggregate amount of money.
So the question is, can we align this different needs of the board?
So let me start with analyzing the interest of one and the other side.
Why an open source company, when I say open source, I mean open source companies.
Because venture capitalists invest in companies because they usually,
or taking a speaking venture capitalists wants to have the shares of the companies.
So it's not possible to have venture capitalists invest in association or other kind of entities.
So they bring money to a company but even competencies like the previous funds.
Because of course it's important to have competencies relationship to build a growing project
around every software and even around open source software.
And so they are able to accelerate, especially the marketing activities, the sales activities.
Somehow even the innovation, even though open source is able to innovate itself quite well.
And why they are interested the venture capital interested in open source?
Well, today open source is everywhere, even in the enterprise market with huge amount of money.
And especially in Europe, we have opportunity, thanks to the interesting digital sovereignty.
And you put all mix and match private and public resources.
Moreover, we already have success cases with venture capitalists investing in open source.
I've analysed some data and here we have two charts reporting the status of these activities.
It's not simple because every day I discover new ventures, new investment, so it's very dynamic.
But we can have some partners in these data.
And now I need my water.
And as you can see, we have the majority of the VC's quite small precede seeds and seedless areas.
They are defined by the dimension of the investment.
So the majority of the investment is quite small, but we, however, we have some good and important cases with a huge amount of money.
On the other side, we have the geographical distribution. And of course, the majority is based in US.
But recently has a major and quite good dynamic market in the US, especially in France, Germany and UK.
Here I have a couple of references, a couple of names.
OSS capital is fully dedicated to open source or commercial open source companies.
And while they have invested in a lot of open source companies.
And here we can discuss a lot if all these are open source or not, but let me analyze later this issue.
Why combinator is the biggest incubator for start-ups in the world and has dozen of open source companies in its portfolio.
And sequoia capital instead is maybe one of the biggest venture capital firm in the world and is not dedicated only in open source, but has invested a lot in many, many big deals with open source companies.
So let me take a look at the past and trying to find the success in this deal.
I have prepared a list of great success with venture capitalists and open source firms.
Do you agree with this list? Oh, sorry. I've missed a part of the sentence.
From the VC perspective, we have a list of great success because, as you can see here, the investment.
So the funds raised by the companies are always quite small.
It's not really small because we here we are somewhere around $1 billion, but compared to the market capitalization.
So the value of the current value of these companies, there is a huge difference.
So I point is, but it's not it's not correct.
So the aggregates value is 2.7 billion, as money rises, and capitalization of $91 billion.
So we are more than 30 by 30 multiplies.
So of course, from the VC perspective, these are for sure great success.
And so they can continue to invest and put money in open source companies.
On the other side, let me list a, let me show a list of failures.
Yes, it's the same list because from the open source community and the openness, those are for sure failure.
Maybe not totally, but let me discuss about it later.
I have partially removed complimenting it a lot because I discuss about it later, and I think it's not so bad at all, and let's see later.
So as you will know, many of the companies initially open source or pure open source elastic started as a pure open source project and a company,
where based on totally, partially two license products.
But during his part, I have all the others, except let me say redact because redact has not changed the license, but somehow has restricted the availability of it's product for free.
So it's roughly the same. All the other has moved to a more restrictive license and at the end, not open source has, as I has defined it.
So one question here, how we show that this issue comes directly from the VC, here we have a chart reporting the average time,
between the IPO, the initial public offering, so the process to be listed to the stock exchange and the license change to a non-open source license.
All this companies shifted after the IPO in a few months, let me say, and the youngest shifted in advance probably because they saw the other companies and decided to anticipate the move.
So technically speaking, it's the IPO or the needs to quarterly report revenues and the increase of the revenues to push those companies to change the license and to leave the open source has we want to be.
So it's mainly related to the pressure of the revenue coming from the market instead of the VC directly because the VC's usually has planned for a long time, so they are not pushing so much the revenue.
On the other side, the choice to move to an IPO is led by the VC, so indirectly, however, they are responsible of what happened.
Let me see what happened deeply in that case because for me we already have something good, even from the open source community in that case.
The first one is that today we have no evidence that the shift of the licensing has produced benefits for the companies, so we can pay to the VC and to the market.
It's not useful to restrict the product, you can leave open source and go ahead, so this is quite interesting.
The other good news is that it's about the community resilience because in many of that cases the communities reacted with the fork.
And so then we have open search, open top, open bow, bulky and those project are quite running quite well today and so we have another benefit.
Today we have great full open source, full open source products maybe thanks for sure, thanks to the investment to the initial investment of VC in that company.
Of course it's not the perfect way we'd like to do these things, but at the end of the day we can count these benefits even in that let me say failure example.
So let me summarize the risks.
The market pressure leads usually to the license changes and even worse, the community trust.
So this is a bad side effect because we risk to lose the trust in the open source project.
The growth that all costs mindset is not usually conflict with the sustainable development of open source projects, so we are always fighting between these needs.
And the essential rise between community and the business side.
What we can do because I'd like to leave here with some proposals and not just a simple analysis of what has happened.
I've listed three, but I'm open to discuss with you all in a few minutes other opportunity.
I've listed three options we can try to push to solve or to reduce the risk we have seen with the VC investments.
The first one is trying to align and to mix the profit and the purpose.
We have some initiatives like open call venture, VC firm, that's required to define in the chart of the companies to maintain the license open.
And this is, this is defined as a public benefit in the VC firm under the VC firm movement.
How many of you knows about VC firm benefit corporations?
Benefit corporation at the end of my colleagues.
My company is a benefit company, so benefit corporation defined it together with the profit as a goal, other goals for the public benefit and open source and maintaining open source projects can be one of these.
Open core venture required to the company they are going to invest to modify their chart and guarantee that open source deposit will remain open source.
We have another example of pairing profit and leading the investment through the partners.
Taking into speaking, UNICEF founder is not a venture capitalist because they are equity-free, so they don't require, they don't require the shares, but I'd like to mention it because it's a great example of pairing public benefits and partners with the investment in open source projects.
So they're required to be open source and to have an high impact on, or potentially high impact on changing for children.
Another way to minimize or to get better with VC is to mix public and private funds or to have a public venture capitalist invest in open source.
In Italy, we have CDP venture, they are not investing in open source yet, but I hope, I think they have a couple of companies, but they don't have yet vertical funds to do that, but it can be a perfect example of public money invested in open source.
They can require to maintain open source to the public benefits, and maybe the sovereign tech fund can think about the venture capitalist's activities in the future.
In the previous talk, I gave a couple of hours ago in a totally different scenario, I proposed to reduce taxes for open source investment.
We can define a create a load to reduce taxes for those venture capitalists investing in open source, maintaining open source freedoms.
The last option I'd like to share with you is leveraging fundations.
Fundational are doing a great job to lead the open source projects to provide open governance to that project.
But they are not rising capitalists for the projects, and we can think about placing the core open source projects.
I didn't mention core ventures, the first example I gave to you has been created by the funder of GitLab.
In fact, GitLab is still open source or open core, but we have the core under the OSI license, even GitLab is listed to the stock exchange.
We have some good example of venture capitalists investing in open source and maintaining open source.
I mentioned GitLab because the other example of my list of the bad cases was a conference shift to a non OSI license, but a conference has built its product on top of Kafka.
Kafka is under the passion foundation, so we are guaranteed that the core cannot be changed.
This is not perfect solution, but it's good.
I'd like to address you to be careful with a single vendor company, totally owning a project because the risk is very high.
In this case, we can be guaranteed that the at least the core cannot be changed, and so we don't care about what will happen to the conference.
I have another ambitious proposal for the future.
What do you think about creating something like open source investment forum just five minutes?
I am at the end.
So a place may be managed by foundation or foundation, where this is startups and public and private stakeholders can work together to define the best practices to maintain the openness, but at the same time to drive the investment to the open source projects.
This is just an idea and I'd like to discuss about it with you.
The conclusion, of course, it's really difficult to align the VC investment with the open source of sustainability, but we have some opportunities through good governance models, strong communities and a well-defined plan to build this solution.
And to reduce the risk of the projects.
So I'm at the end.
I'm here to answer your question just three minutes or something like that.
And my contacts are here.
Thank you.
I'm really excited to read that.
And there's the impression that our VC from the consensus company are open core.
So from your experience and that's my question.
Are you doing fine?
I mean, is it a no-go to go discuss with venture capitalists in regular venture capitalists?
If you have a GPL based model based on subscription and warranty, you know, like the usual GPL model, which I've ever listened to you.
The question is, most of the cases, maybe, all of the cases are related to open core model or at least permissive licenses.
And it's really, the question is, is it possible to have venture capitalists investing in GPL and strong capital licenses?
Of course, it is very, very difficult.
I have in mind some cases, but with more investment and technically speaking, not venture capitalists.
Because we have some new ones of the players.
So if we speak about equity investments, it's quite hard.
It's much more easier with Apache license and even much more for them to invest in a well-defined,
IP intellectual property resources.
There is a case related to the trade marks.
Because it's not just the model of license.
In fact, the market has not recognized the value of the shift of the license.
Because after a few years, nothing changed in the stock value after the license change.
But the ownership of the trade mark, and so I didn't mention another detail about Kafka and Confluent.
The name are different.
We have Kafka with his own logo and trade mark.
And we have Confluent with its own intellectual property and trade marks.
When has in Elastic Search, for example, how we have the same name as the company,
or Mongo that changed the name of the company to pair the name of the product,
the risk is really high because they can block, they can change the license,
and the community has to fork, change the name, start from the ground.
So maybe differentiated the trade marks and the code, the name of the code, the project, can balance the risk.
And it's a venture debt risk, and it's not a start.
I don't want to be poor.
I do not debt rate over because I'm a close-demon, but I don't want to see that out.
My question is like, did you try to submit the share of the second source?
Runa capital.
It's one of the most important capitalists for open source.
And they have an index of open source, interesting open source.
We are not expecting a dinner, of course.
We didn't agree before in advance.
But the question is like, how do you imagine a company that has changed the license?
You try to estimate the share of all the second source of the system, which changed the license.
Because it seems like, well, as we see, like, together we found that a few thousand open source times over the last 20 years.
But there are just a few examples where the license was changed.
And even though it's a bit of a question like, was it that bad?
But the company is still good, maybe.
I think this is good to ask this question.
Okay.
The time is up.
Next speaker is coming.
Okay.
Thank you very much.