Great blog post by CockroachDB on open source business models and their plans to make money:
If you’re serious about building a company around open source software, you must walk a narrow path: introduce paid features too soon, and risk curtailing adoption. Introduce paid features too late, and risk encouraging economic free riders. Stray too far in either direction, and your efforts will ultimately continue only as unpaid open source contributions.
I would say same goes for any developer-focused company whether OSS or some other hybrid free/premium model. It is truly an art form when it comes to striking that steady balance between developer and community love versus generating revenue and potentially alienating those who supported you.
This is also an important question as it relates to fundraising for dev-focused startups. Introduce your pricing page too soon and that is the metric that Series A investors will track religiously. Bet the farm on developer love and metrics only and you may never get enough traction to get to that next round.
From what I have seen in our portfolio, goal #1 is always to build an amazing community, focus on developer love and track the metrics and tweak. Without the developers, you have no customers.
Optimizing for Price at Seed Stage is a Mistake
Next step is where the art comes in — do I just put a “contact me” form for anyone wanting team or enterprise features or do I throw up a pricing page like below:
My perspective would be you are better off putting a “contact me” page early on to learn as much as possible about who your potential buyers are, your users, budgets, and willingness to pay. Going after revenue too early can be distracting and also take away from building an amazing product. One of our portfolio companies, replicated, has done a great job with this:
Taking your time and learning as much as you can about your community and users also gives you ultimate flexibility into what you charge for and what business model to pursue.
Give Investors a Reason to Believe
There is no 100% sure way to go from Seed to Series A but assuming you have an amazing product, the timing of when you implement pricing is critical to getting to that next level. From my experience, the investors at the Series A stage who truly understand infrastructure software will agree with this approach of optimizing the developer metrics and usage and showing what an inbound funnel may look like versus focusing on the pure revenue.
That being said, it is becoming more and more difficult to solely get the developer metrics (downloads, registrations, projects/services created, any other adoption number) needed to raise a Series A. Lately I have seen success with a hybrid model where you emphasize developer love and then take the amazing enterprise leads reaching out to you and converting a few of them into customers. You don’t need to close a ton, and you don’t have to have a locked down pricing model. However, you do need to demonstrate a steady pipeline of inbound leads and potential customers and give investors a reason to believe that these inbounds are real and not just tire kickers. At the Series B stage it is a whole different ball game.
Originally published on Medium.