1) Team

A superb team is a must in all start-ups. The special thing with open source startups is that they may have a history as an open source *project* before becoming a commercial business. The team must understand how to master this evolutionary transition.

2) Innovation

It’s not enough to be less expensive, or faster, or the same as others but open source. There has to be a genuine, value-adding innovation that users and customers get a new benefit from.

3) Participation

The strength of open source lies in massive participation by users worldwide. It takes special dedication and skill to build an
architecture of participation.

-1) Open source as the silver bullet

Well, it isn’t. It’s dangerous to think that opensourcing something will solve all problems. It probably won’t. Open source accelerates what would happen anyway. If you have a crappy product, it will die sooner if you opensource it. If you have a great product, it will succeed sooner if you opensource it. Open source also is not a business model in itself. You have to figure out the business model as a separate exercise
(there is a handful of good alternatives).

-2) Too much money

If you have too much (VC) money, you may not notice soon enough that you need to change something in your model or your product.

-3) Impatience

Great businesses take time to build. Sure, you should have a very ambitious plan with success waiting around the corner. But you should also have the patience to keep going even when things don’t look good. The night is coldest just before the sun rises.

But first my own observations:

3 Success factors / best practices:

1) Solid value proposition

Pretty obvious, but it is surprising how difficult at it is to explain your product or service offering concisely and compellingly.

2) Business model that supports healthy margins

There are challenges in the open source business where you are competing against incumbents with an offering that typically seems to be priced lower, or at least in my experience I have seen most open source start-ups battling with lower margins than their proprietary counterparts, this needs to be figured out for open source businesses to really scale out.

3) Entrepreneurial management

Markets change and evolve rapidly, especially in an emerging industry that does not have all the business ‘’rules’’ set in stone yet, so it is often necessary to change the business model quite rapidly over the development of the company, and that in my mind requires management team that is constantly looking to find better ways of growing the business, and not just looking after the numbers.

3 Things to avoid (=risk / failure)

1) Open it and they will come (customers, partners etc), ‘’field of dreams model’’ (in ref to the Kevin Costner movie)

Open source is not magic. At times as open source has been surrounded by hype, some companies have thought that they could cure a bad business and a bad offering by just opening up the source code. Unfortunately it does not work that way, and it is not that easy.

2) Under/over resourced

People and money wise you can go wrong in two ways, either you don’t have enough of them or you have too much of them. Either way you will struggle at some point and possibly even go out of business. Knowledge about how to find the right balance is something that comes with experience; there is no science behind that.

3) The 30 minute elevator pitch

This reflects back to the first ‘’do’’ but I wish I had a buck for each time an entrepreneur has continued his pitch to me with words ‘’you just don’t quite get it yet, let me explain…’’ Well, if I don’t get it quickly, how does the message get to your potential partners, investors, customers etc.?

To get this chain started I want to ask some colleagues to come up with their own 3 & 3 observations as well as to forward the challenge to their select colleagues, so I am challenging the following gentlemen: