I have already learned a lot, thanks to everyone who has contributed so far!

Ps. If I have missed some links, please let me know at mikko.puhakka at gmail.com

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:

1. How did you get started?

The idea of founding a consultancy company specialized on open source technologies came from six guys which were probable the best Linux experts and most active open source advocates in the region. A year before, I had left a good job in Finland to try to start the same kind of company in Zaragoza, so when they asked me to join in as the non-geek member of the team I could not resist.

Before founding Warp we applied to become a part of CEEI, which is a incubator for innovative companies funded by the regional government and which gives some grants and support for its members. On the other hand, we started the development of our own product eBox together with another company in the region, DBS (this company has recently closed down). The deal was simple: we did the work, they funded the direct costs.

With these two sources of funding and a main competitive advantage (we were and still are the only open source based company in the region) we could start looking for customers and projects. A lot of work and really tiny
salaries for several months and Warp was launched.

2. What is your product?

eBox Platform is a user-friendly Linux server. It is focused on managing corporate networks with the simplicity of an appliance server and the flexibility of a Debian Linux. It is the server that Canonical would build
for the SMEs segment (actually, they have plans to build a server for SMEs and I have heard they are watching eBox very carefully).

So far, eBox is still under development, with our 1.0 first stable version expected for September 2007, when we will start offering professional services on top of it. Our community is also growing pretty fast, with more
than 22,000 downloads, an average 10% monthly growth and almost 180 active members in the community.

3. Key milestones?

Milestone 0 would be the foundation of Warp in September 2004 and the start of our business. The first real milestone was the release of eBox 0.7 under GPL in December 2005. After that moment our agreement with DBS ended and we needed to look for other sources of funding if we wanted to continue with eBox, so we approached CDTI, an organization dependant on the Spanish Ministry of Industry which funds innovative start-ups.

The second milestone was May 2006, when we participated at Innovate!Europe Conference presenting eBox. The marketing and promotion we got locally was so huge that the perception the market had about us shifted from “just a bunch of geeks taking about communist stuff” to “a young innovative company that gets international recognition”. A few months later we were flooded with projects, and we have been like that since, even we have been growing quite fast.

The third milestone was in July 2006, when the CDTI accepted our proposal and granted us the funds we needed to complete eBox 1.0. Moreover, after that we are officially considered one of the most innovative companies in Spain, which has opened many unexpected doors and has put our name in some of the circles of power in the country.

And hopefully the fourth milestone will be in September 2007, when we release eBox 1.0

4. Why did you decide on the open source model?

It was the natural model for us, considering our background and that we sell ourselves as open source experts. On the other hand, I don’t know how we could have had eBox as popular as it is now (getting feedback from people at the One Laptop Per Child project, for example), got it translated into a dozen languages by volunteers, had it thoroughfully market-tested before launching the business, got several partnership proposals before having the first stable version, …with virtually no budget for marketing and communication.

5. How do you see Warp / Ebox in 5 years?

Difficult question. Five years is a really long time in our industry and it is particularly long for a company that did not celebrate yet its third anniversary.

I like to think about Warp in a few years as a well established player in the open source sector in Spain, attracting good talent and launching innovative projects that could become promising products in their niches, just like we
are doing with eBox.

And about eBox, I think we have a good chance to make it a very popular professional product. We still have to see whether we succeed in giving great value both to the community and the market at the same time, and if we manage to make it grow both in users and in business.

6. Some comments on Open Source and Spain

The community movement in Spain has always been very strong, and some regions have been global pioneers in implementing policies in favor of open source, but the private sector has been quite conservative so far. Even among the start-ups it is hard to find a real open source mentality and, oddly enough, the few ones that exist are not usually in the traditional hubs of innovation (Madrid and Barcelona), but in peripherical regions such as Aragon, Galicia, Andalucia, …