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+---
+template:
+slug: cloud-foss
+title: Cloud (F)OSS is good model
+subtitle: On building (mostly) open source startups
+date: 2022-02-07
+---
+
+Of late, I've been thinking a lot about what makes a startup work, and I
+think open sourcing your product -- or a good portion of it -- is a
+great approach. To be clear, I'm only talking about SaaS platforms, and
+not any other kind of product. Hence, I'm dubbing this as "Cloud FOSS".
+
+The title of this post was initially "Cloud FOSS is the way", but I
+quickly realised that I know next to nothing about actually building
+companies and I'm really just talking out of my rear end. Nevertheless
+it's still pretty fun to try and reason about why the open source model
+is great for startups, so reason we shall.
+
+Broadly speaking, there are two kinds of "Cloud FOSS" companies:
+- the open source and cloud versions are identical, entirely free software (à la
+  [sourcehut](https://sourcehut.org))
+- the cloud version has exclusive "premium" features that aren't present
+  in the open source version -- a.k.a the open core model; it seems to
+  be gaining a lot of popularity in recent times with the likes of
+  Gitlab etc.
+
+Let's dissect each approach and see what drives them.
+
+## the all-FOSS absolutist model
+
+As mentioned above, sourcehut is a great -- if not the only -- example
+of a company built this way. Unless of course, I'm gravely mistaken
+(wouldn't be the first time!), and you know of another, or are building
+one yourself -- please [email me](mailto:x@icyphox.sh); I'll be happy to
+mention it here.
+
+For those unaware, sourcehut is an entirely free software
+company/startup that's building a software development platform; a suite
+of tools and services like git/hg hosting, CI, mailing lists, issue
+tracking etc. All of these can be self-hosted, with [plenty of
+docs](https://man.sr.ht/installation.md) to get started doing so. Or,
+you can of course, pay for the hosted service at [sr.ht](https://sr.ht),
+their flagship instance.
+
+Granted, this one's probably quite hard to pull off, especially if you're VC
+backed or have investors of any kind. When your product is free
+software, you can't really bake in analytics and other creepy
+user-tracking shit that's common these days; what pages perform better,
+what buttons do users click more often, the likes. And naturally, you
+don't really have metrics to show your investors that your latest
+feature du jour is doing great (or not).
+
+Thankfully for us, sourcehut is completely bootstrapped. They've
+[written
+about](https://sourcehut.org/blog/2022-01-09-how-does-our-business-work/)
+their business model, and it's beautifully simple: they make money from
+users subscribing to their service -- the hosted version of the
+sourcehut software -- and from other free software consultation gigs.
+That's it. And they're quite profitable. Very cool sourcehut.
+
+## the less absolutist open core model
+
+The open core model, according to Wikipedia's definition:
+
+> primarily involves offering a "core" or feature-limited version of a
+> software product as free and open-source software, while offering
+> "commercial" versions or add-ons as proprietary software.
+
+Typically in SaaS offerings, the "commercial" version is a hosted
+version of the open source software, _plus_ the usual suspects like
+analytics, project management, user management, and a seat count for
+different subscription tiers. Some startups may simply continue to
+operate this way, with feature parity between the open source and cloud
+versions (minus the meta "features"); however, this may not always be
+the case.
+
+Oftentimes, in accordance with the definition above, the open source
+version may be _feature-limited_, with some parts of the core feature
+set only available on the cloud version. In most cases, this probably
+doesn't matter to the average self-hoster, since the paywalled features
+will most likely be irrelevant to them -- usually catering to larger
+deployments (support for say, CockroachDB), or enterprise-level
+deployments (Active Directory support, SSO), etc.
+
+The business model is quite simple -- get initial traction via the
+self-hosted open source software, while building out your cloud
+offering. The community built around the self-hosted software are your
+initial pool of potential paying customers. Generally, these are either
+early-stage startups (seed to series A) who don't have a large enough
+team to manage additional infrastructure, or large enterprises who are
+happy to pay for well, the enterprise features. These enterprise deals
+may even transition into large on-prem contracts.
+
+One thing to note about most open core projects is they'll most likely
+enforce a CLA or a Contributor License Agreement. This usually says
+something to the effect of "while you own the copyright to your code,
+you grant us the rights to make money off it, or even relicense it
+should we wish to do so". It's [probably not a good
+idea](https://drewdevault.com/2018/10/05/Dont-sign-a-CLA.html) to sign
+one.
+
+## why cloud FOSS works
+
+Cloud FOSS as a basis for building a company probably works because of a
+bunch of reasons. As a startup, getting an initial foothold in the
+market can be hard, and offering a fully open source version of your
+platform can simplify that a whole lot. Setup a GitHub organization, do
+a Show HN and Bob's your uncle. Obviously, it isn't _that_ easy, but you
+get the idea.
+
+Having an initial userbase from open source can be very useful. You
+essentially get free insight into what features work and what don't,
+and what features your users want. You also get bug reports, issues from
+various deployment scenarios, environments, operating systems, etc. A
+goldmine of information to help drive product development decisions.
+
+Further, having a community built around your product helps too. High
+quality contributors (sometimes), an audience for PR events, the ability
+to conduct user surveys and most importantly, a hiring pool.
+
+With that concludes my ideas on why Cloud FOSS is a good way to build a
+startup. Again, I must reiterate that I literally have no idea what I'm
+talking about and whatever I posit is merely a result of "Oh I've seen
+it work this way before". I'm happy to hear what you think.
+
+<hr>
+
+This post was inspired by a conversation with
+[Prithu](https://prithu.dev).