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In today's digital landscape, trust and transparency have become paramount due to evolving consumer expectations, regulatory pressures, and the increasing complexity of technology.
Open source software offers inherent transparency, community oversight, and adaptability, making it an ideal solution for building trustworthy and secure technology. By allowing anyone to inspect, audit, and contribute to the code, open source fosters a collaborative environment that enhances security, reliability, and ethical standards.
With our new open-source vertical, we aim to leverage these strengths to launch new companies built around trust, differentiating themselves in the market with transparent solutions.
Open source software is eating the world faster than traditional software
In 2011 when eFounders was born, industries traditionally considered non-tech were reshaped by software. It was a gold rush towards digital transformation, driving innovation and enabling new business models. This transformation was top-down and centralized. Most of this transformation has already taken place and there is are not much opportunity for growth left.
As Joseph Jacks from OSS capital aptly describes in his article, the landscape has significantly evolved.
Today, a second wave of transformation is occurring. Trust and transparency are now crucial due to the vast amounts of data online, regulatory pressures, and increasing technological complexity. Consequently, open-source companies are growing faster than traditional software companies, and it is just the beginning.
Another interesting point to note is the exponential growth of open-source companies within Y Combinator. When I attended YC in 2018, only about 2% of YC companies were open source, whereas last year it was 14%. This shift isn't just about following trends; YC recognizes the unique advantages open source offers startups.
A great setup for startups
Open source offers a unique and powerful setup for startups:
Customer-centric product development: By focusing on building a product that customers love, startups can leverage the engaged and passionate open source community as a default design partner and contributors. This community provides rapid iteration and feedback, essential for refining a product and ensuring it meets customer needs.
Key differentiation and global reach: Open source enables startups to differentiate themselves at their core by solving the trust and transparency problem. They can achieve this with a global self-serve distribution from day one, leveraging world of mouth while they build a great product. Not falling in the trap of paying your customers to use your product.
Open source makes especially good sense when:
There are trust and transparency issues: This one should be obvious now: open source fosters trust and transparency, crucial for industries where these factors are paramount. If an industry lacks clear data usage policies for example, it presents an opportunity for an open-source solution.
You customer is a developper: Developers prefer self-service models where they can try and modify the product themselves, avoiding the need for demos or prolonged support interactions.
Customization and integration are needed: For problems requiring extensive customization or niche features, open source offers the necessary flexibility. Users can add integrations or modifications themselves or through paid services.
But how do you make money?
Open source companies can generate significant revenue through various means beyond the free software itself:
Hosting: While the core software is available for anyone to use and modify, only a small portion of users choose to self-host. Configuring, maintaining and updating a software stack is complex and time consuming. Built-in hosting services are usually very good value for money, making most customer start freemium and convert to cloud hosting if they are happy with the product.
Premium features and services: Revenue is also generated through premium features, support services, and custom development. These offerings provide additional value, driving business growth and sustainability.
We’re excited to start launching companies aligned with these convictions. If you are interested in founding a company, reach out to us here.
