Open Source Companies 101 | Emily Omier  ## Metadata - Author: [[OpenUK]] - Full Title: Open Source Companies 101 | Emily Omier - Category: #articles - Document Note: --- tags: - #OpenSource - #BusinessModels - #OSSCompanies Author: Emily Omier Source: YouTube – Open Source Companies 101 | Emily Omier Reference: [Open source companies 101 | Emily Omier](https://www.youtube.com/watch?v=P9WaMP77afo) date created: 2025-08-22 23:05 --- # Title: Open Source Companies 101 – Definitions, Models, and Challenges ## Table of Contents: - [📝 Summary](#-summary) - [📖 Main Content](#-main-content) - [🗒️ Notes](#️-notes) - [📖 References](#-references) - [🗣️ Paraphrase](#-paraphrase) - [📰 Newsletter](#-newsletter) - [✅ Action Items](#-action-items) - [🧪 Hypotheses](#-hypotheses) - [📊 Methodology](#-methodology) - [❓ Questions](#-questions) - [🔮 Future Research](#-future-research) - [💡 Implications](#-implications) - [🧠 Learning Styles Assessment](#-learning-styles-assessment) - [📊 Accessibility Assessment](#-accessibility-assessment) - [🌍 DEIB Assessment](#-deib-diversity-equity-inclusion-and-belonging-assessment) - [✅ Logical Validity](#-logical-validity) - [🔍 DARVO Analysis](#-darvo-analysis) - [🔍 SEO Evaluation](#-seo-evaluation) - [🎯 Conclusion](#-conclusion) --- ## 📝 Summary: Emily Omier outlines the definition, scope, and challenges of open source companies. She defines them as **for-profit entities fundamentally dependent on open source projects licensed under OSI approval**. These companies must contribute significantly to projects and provide both standalone open source value and a commercial offering. Omier debunks common fallacies, such as assuming community traction equals commercial success, or that open source is always the best business model. Instead, she highlights the **tension between project and product**, the need for business outcomes, and the importance of distinguishing between ideal users and ideal customers. --- ## 📖 Main Content: Omier begins by clarifying what constitutes an open source company: 1. Contributes significantly to projects with OSI-approved licenses. 2. Business model is fundamentally tied to the open source project. 3. Operates as a **for-profit** entity. She stresses diversity in scale, geography, and funding models—ranging from one-person bootstrap companies to multinational VC-backed enterprises. The talk emphasizes that **open source projects must provide independent value** while the company must also create a **commercial offering people are willing to pay for**. Business models vary (support/services, SaaS, enterprise distributions, complementary products). Omier addresses fallacies such as: - Community growth ≠ commercial growth. - Open source companies are not inherently more ethical. - You don’t need a hyper-engaged community to succeed. - Not all companies start with an open source project. - Open source isn’t always the optimal business model. Key challenges include: - Managing the **project-product balance**. - Ensuring OSS efforts contribute to **business outcomes**. - Avoiding competing solely on “free.” - Navigating the gap between **ideal users vs. ideal customers**. She concludes with advice: build value that is transparent, measurable, and differentiated—while maintaining alignment between community and commercial strategies. --- ### 🗒️ Notes - [00:05](https://www.youtube.com/watch?v=P9WaMP77afo&t=5) Definition → for-profit, OSI-approved license, significant contribution, dependency on OSS. - [02:24](https://www.youtube.com/watch?v=P9WaMP77afo&t=144) Diversity in OSS companies: solo to thousands, global, bootstrap to VC-backed. - [04:39](https://www.youtube.com/watch?v=P9WaMP77afo&t=279) Not all must be project maintainers; dependency defines importance. - [06:58](https://www.youtube.com/watch?v=P9WaMP77afo&t=418) OSS must provide value independently; commercial layer must add monetizable value. - [09:18](https://www.youtube.com/watch?v=P9WaMP77afo&t=558) Business models: SaaS, services, enterprise distros, complementary products. - [11:38](https://www.youtube.com/watch?v=P9WaMP77afo&t=698) Fallacies: community ≠ revenue; OSS ≠ morally superior; not always best model. - [13:52](https://www.youtube.com/watch?v=P9WaMP77afo&t=832) Tension between project and product; avoid competing on free. - [16:16](https://www.youtube.com/watch?v=P9WaMP77afo&t=976) Need measurable business outcomes; OSS must “pull its weight.” - [18:24](https://www.youtube.com/watch?v=P9WaMP77afo&t=1104) User ≠ customer; target overlap should resemble a Venn diagram. --- ## 📖 References: - Open Source Initiative (OSI): [https://opensource.org](https://opensource.org) - CHAOSS metrics: [https://chaoss.community/](https://chaoss.community/) - DBT Labs example: [https://www.getdbt.com/](https://www.getdbt.com/) --- ## 🗣️ Paraphrase: 1. *Original*: “An open source company must provide standalone project value, plus a commercial offering that people will pay for.” *Paraphrase*: To succeed, an OSS company needs both a freely valuable project and a monetized layer offering distinct benefits customers are willing to purchase. 2. *Original*: “Community traction doesn’t equal product-market fit.” *Paraphrase*: A thriving OSS user base does not guarantee paying customers; product-market fit must be validated separately. --- ## 📰 Newsletter: 💻 **Open Source Companies 101 with Emily Omier** What exactly makes an “open source company”? Emily Omier breaks it down: a true OSS company contributes significantly to OSI-approved projects, relies fundamentally on them, and operates for profit. But don’t fall for myths—community growth doesn’t guarantee revenue, and OSS isn’t always the best business model. Omier highlights strategies from support services to SaaS offerings, while addressing the classic challenge: balancing the OSS project with the commercial product. Her advice: build independent project value, add a commercial layer customers will pay for, and avoid competing solely on “free.” More insights here → [Watch the talk](https://www.youtube.com/watch?v=P9WaMP77afo) --- ## ✅ Action Items: - Apply Omier’s **project-product tension insights** to WordPress governance (align community and enterprise needs). - Advocate for **clearer business outcomes** when projects request funding (aligns with OSPO leadership aspirations). - Use definition of OSS companies to frame **The WPCC advocacy** and GoDaddy open source strategy. - Educate WordPress contributors on separating **project growth vs. commercial growth** expectations. --- ## 🧪 Hypotheses: - OSS companies that define **clear commercial layers** are more sustainable. - Project adoption without **aligned commercial fit** leads to stagnation. - Global diversity in OSS companies improves resilience of the ecosystem. ### 📊 Methodology: - Case studies of OSS companies across models (SaaS, services, distros). - Comparative revenue analysis between community growth and customer acquisition. - Surveys on perceptions of OSS company legitimacy. ### ❓ Questions: - How can OSS companies balance **community transparency** with **revenue confidentiality**? - What role should **foundations** play in mediating between OSS projects and companies? - Can OSS companies succeed without “project maintainership”? ### 🔮 Future Research: - Longitudinal studies of OSS companies that pivoted away from open source. - Role of **ethics framing** in OSS company branding. - Evolving definitions of OSS dependency in hybrid models. ### 💡 Implications: - Broader definitions → more inclusive OSS company ecosystem. - Better alignment between OSS and commercial strategies → sustainable models. - Insights guide OSPO leaders in balancing transparency and profitability. --- ## 🧠 Learning Styles Assessment: - **Visual**: No diagrams; add business model charts. - **Aural**: Limited → consider podcast/audio release. - **Verbal**: Strong—clear definitions and narratives. - **Physical**: Absent → could add interactive case studies. - **Logical**: Strong → deductive definitions, business logic. - **Social**: Medium → event context supports discussions. - **Solitary**: Medium → could a - Summary: Emily Omier discusses the fundamentals of open source companies, emphasizing the criteria for defining them, such as significant contributions to OSI-approved projects and dependency on open-source relationships for business success. She highlights the diversity of open source companies, ranging from small one-person ventures to larger VC-backed entities worldwide. Additionally, she addresses common misconceptions about open source companies, including the need for a super-engaged community and the assumption that open source is always ethically superior to closed source options. Emily also delves into the practicalities of building an open source company, stressing the importance of providing value through both the open source project itself and a commercial offering that extends beyond the project's capabilities. - URL: https://www.youtube.com/watch?v=P9WaMP77afo okay so thanks everyone for joining me I am going to talk about open source companies 101 so I'm going to cover sort of like really basic uh theory of both defining what an open source company is and sort of the the basic fundamental idea behind building one uh this is basic stuff but I thought that it was a good way and I think other people agreed to start off this track because if we're going to talk about building open source companies then we need to agree a on what that is and B on sort of the fundamental idea behind uh building an open source company and what the sort of common threads are between all open source companies that's what I'm going to cover uh before I start I'm going to introduce myself just a little bit I'll skip over the stuff that uh that Matt talked about um but also I I'll talk really briefly about the the open source uh Founders Summit because uh as part of organizing this I've actually put a lot of thought into what is an open source company um because if you're organizing an event that's specifically about business for founders of Open Source companies and like we're doing uh making sure to only include uh open source Founders you have to have sort of a line around what it what constitutes an open source company and what doesn't so uh the first thing I'm going to do is talk about what is an open source company now I do not expect every single person to agree with my definition but this is what I think of when I think of an open source company first of all it's a company that contributes significantly to one or several projects with an OSI approved license so the OSI approved license is the the black and white part um the contributes significantly part um that's a little bit more subjective uh but the point is they have to be a software editor they have to actually be be contributing to to a project the second one is that the business is sort of fundamentally dependent on this open- source project on the relationship with this open source project so if the open source project goes away uh the business is either really fundamentally altered or it can't exist anymore it's extremely fundamental to the company and then the third one um I actually haven't seen other people bring this up before but it is important in the cont context of Open Source uh the company is for profit and the people running the company uh have profit as their goal so you will see a lot of efforts to monetize open source projects that are organized as a nonprofit organization uh I think that's interesting we can argue about is that a business model or not to me fundamentally uh if you are running a business that means that you're looking for profit uh so uh an organiza or a foundation or a non profit is just it's a different model but it's not a business okay so open source companies are diverse this is also in my opinion something that gets lost in a lot of conversations so there are oneperson open- Source companies there are individuals who maintain a project have monetized the project and they sell something maybe it's a service maybe they have um a commercial product that's related to it um this is an open source company if it meets all of those criter IA there are open source companies that are 2,000 3,000 person as well so they're all sizes um they make all different kinds of products so in a lot of um a lot of places there's a lot of focus on the dev tools uh on open- Source uh companies that are making projects for developers but that is far from uh all open- Source companies there's also open source companies that are bootstrapped uh like if you have that one person company it's probably going to be a bootstrapped company um and then uh of course there's also VC backed uh open source companies and they are also all over the world so again we tend to talk a lot about the companies that are in San Francisco or that are in London um but there are open source companies that meet all three of my criteria that are really all over the world including in a lot of places that we do not generally think about when we think about tech companies uh so let's talk a little bit about some of the Shades of Gray here uh I think as I mentioned there's a lot of subjectivity in some of the some of the definitions um one thing that comes up is does the company have to be the project maintainer or does the company have to be led by the the core maintainers of the the project um I tend to think no and there are definitely some some companies out there that I think meet the criteria for an open source company uh who are not project maintainers um and then of course obviously there's companies that were the project maintainer and then they donate the project to a foundation and that means they're going to lose a certain amount of control but there are also companies that contribute substantially to a project that are fundamentally dependent on that uh on that project as part of their business uh who did not start and have never been maintainers of the project uh and then the the last point is what exactly does it mean for the open- source project to be critical uh and this is something that I think is really open to discussion uh I mean it it sort of makes it not the best of definition uh but um if if something is really critical uh that to me it just means that the the business would have a fundamentally different model if uh if the open source project were to go away um but let's be totally honest any open- Source company could uh decide that they're going to abandon the open source um the open source model in the future so like what exactly does does this mean that the the open source project is critical honestly I don't know maybe it's it's kind of like a you know it when you see it situation okay let's move on and talk about some really basics for how to build an open- Source company uh it's actually really simple the the like foundational theory of building an open source company is super simple so step one you have to have a project that provides value uh the project has to do something that's valuable I didn't actually mention this in my my definition of what an open source company is but there's a lot of companies out there that uh have some op Source components but they're like their SDK is is U open source for example but they there's no way that you would use that SDK if you were not also a a commercial customer of that company uh so that to me does not fit the definition of an open source company um so your open source project has to provide value in and of itself for people who do not have any kind of commercial relationship with your company and then the second piece extremely important you have to have a commercial offering of some kind that provides additional value that goes above and beyond whatever it is that your project delivers and it has to be something that people are willing to pay for I mean there's all sorts of values that you could provide that maybe people are not going to pay for um but this is actually really hard to put into practice and I also think a lot of people sort of lose sight of of this sort of fundamental philosophy of what it means to build an open source company what types of open source companies are there out there so I specifically didn't say that you need to build a product that delivers additional value I said a commercial offering um because I think that offering support and or and or services on top of an open source project is a valid business model um so and you can have a a valid open- source company that meets all the criteria and provides support and services that's your commercial offering uh that is a a type of Open Source companies there's also open source companies that have a cloud product or a SAS product um that package together and manage the open source projects uh you can have an Enterprise distribution of some kind that your customers are going to run on Prem um you can uh have a complimentary open source and Commercial product I think that's actually really interesting where you have an open- source project that delivers outcome X and you have a commercial product that delivers outcome y why and they're complimentary so all of your open source sorry all of your commercial customers are also open source users um I think that that's a model that's really interesting personally uh so one of the difficulties actually in talking about open source companies is that the strategy that you're going to follow and the business model that you're going to follow is very different if you have a SAS model or if you are providing services and support uh so when people talk about like here's a here's a playbook for open- Source companies I actually don't think that that's really valid because you have to say like here's a playbook for um building a SAS product as an open source company uh because those the the models are just so different if you want to have a a a really like clear inclusive view of of all open- Source companies you can't have just one Playbook but let's talk about some fallacies uh about open source companies and again these are things that I think pretty much apply to all open source companies people often think that you will be able to convert x% of your project users to paid customers now depending on who you're talking to uh the actual number that that X represents might be different uh but the truth is in most cases you won't find like a a very clear correlation between Community growth and Commercial growth uh it's not just like if we if we add a hundred Community users we're going to convert one of them to our to our commercial offering um often that's not how it works and the reason is because project Market fit does not equal product Market fit um you have a different audience for your project than you do for your project your product or I should say your commercial offering so just because you have massive Community traction doesn't necessarily mean you have like a slam dunk profitable amazing company uh the last one sometimes I I feel like it's like an undertone in discussions about o open- Source businesses sometimes people seem to think that open source companies are are ethically superior to closed Source companies I actually don't think that that's the case um I think open source is a model um there are reasons for building an open- Source company um but I don't think that they're necessarily like better it doesn't it doesn't make you a better person to build an open source company versus to build a close- source company um I have more of these uh I think it's also wrong to think that you have to have a super engaged o um open source community in order to build an open source company so the way that an open that an open source project can contribute business value to your company are different there's different models and in some of those models the engagement that you have in your community is really irrelevant so sometimes the reason that having an open source project is really important is for transparency so you're going to end up having a lot an easier time getting people to sign contracts with you uh because they're able to examine their your code because they understand the license structure and yes there are other ways to get around this like um allowing people to um keep your code in escrow for example in case you go under um but it is usually much simpler to get something through a legal department if you just say look this is open source you know what open source means we don't have to educate you about our like specific uh the specific fancy license that you've never heard of this is just open source here's what it means um let's let's push this through so in cases like that where the reason that being open source is important is related to transparency and the ability to convince your customers that your coach code does what you say it does and doesn't do the things that you say it doesn't do uh your open source adoption is kind of irrelevant they don't care um another fallacy is that in all open source companies it always starts with an open source project and then you uh add the commercial offering later there's a lot of companies where that didn't happen where they started with a commercial uh offering of some kind uh and then later decided that open source was a good approach for whatever reason and so open sourced a big a big chunk of their source code um that happens and it happens for a variety of reasons it's just a mistake to think that all open source companies uh follow exactly the same trajectory and then uh the last one I also think it is a mistake to say that open source is always the best option in terms of the the best business option so there are also some people out there who will um say that open source is is always the best business model um I don't think that that's true I think that there are there are real business reasons to to have a significant portion of your codebase be open source um but it is not appropriate in all cases and when you're building a company you should really think through is this given my specific business given the things that my specific software or my specific commercial offering does uh is an open source approach most appropriate in this case it isn't always okay so let's talk briefly about uh some of the challenges that I think all open source companies share like the the common threads the first one is that there's always going to be a tension between your product or your commercial offering and your project this is because you're going to have to Define your your you have to divide your resources between those two things uh this this is true if you have services this is true if you have a a product um but also because there's always the risk that you can make your project too awesome if you give too much away uh you will your ability to make money and again this is true no matter what model you're following um and so this creates a tension right because you have to create value that people really appreciate with your project but but you also have to make sure that there's still some value that you can capture and that is goes back to that really fundamental idea of what an open source company is um and it's really hard to do in practice you always have to manage the project prodct the project product relationship um so this is just this is about Community communicating for yourself and for other people what the difference is between your project and your commercial offering I have an example here that I think is good from uh DBT Labs which sort of illustrates how the outcome is different uh between their um open source and their product and that's the key is that you have to be really clear about what the difference in outcome and the difference in Persona the difference in use case between your open- source project and your commercial offering the next thing is that you can't be just doing your open source software for fun if you are in this to build a business and your business has limited resources which even if you have like massive amounts of venture funding your resources are still limited you can't be doing stuff that's just a charity or that's just for fun so you have to understand how is your open source uh project contributing to actual business outcomes and there's there's a menu of ways that uh the open source Source can uh provide business outcomes but it's not the same for every single company so you have to be you have to be clear on that you have to measure and you have to be willing to change things if you feel like in this case your open source project is not pulling its own weight okay this is also a really big deal in open source companies a lot of people will start an open source project because they're unhappy about how expensive the alternatives are but if the main value that people get out of your project compared to everyone else is that it's free it's going to be really hard to actually make money on that later on so you want to make sure that there are other things there is other differentiators between your project and the Alternatives even I do not like I do not encourage anyone to compete on price but it is better to at least say we're cheaper than the Alternatives than we're free okay so I touched on this briefly but this is a big challenge your ideal user and your ideal customer are not the same so you're going to have to manage the relationship between the personas in your user base and in your your community and your icps for for potential commercial customers um these are sort of the different ways that those communities can overlap sometimes it looks like a Target sometimes it looks like a vend diagram sometimes it just looks like two circles uh I actually think if it just looks like two circles you need to fix something that's not a good that's not a good strategy um it's more common to have a VIN diagram or a Target and I actually think of those three the one that you're going for is the vend diagram not the target um you notice of course this is kind of stating the obvious that the ideal customer profile is always smaller just keeping that in mind that is absolutely true for pretty much every every open source company okay so to recap really quickly an open source company is a for-profit entity that has a critical relationship to an open source project and the basic idea behind building an open source company is to build a project that provides value and a commercial offering that builds additional value that people are willing to pay for and then that is it um I have a free ebook that's about positioning for free open- source projects not for companies but for for free projects there's my podcast my website send me an email if you have questions and if you have questions and you want to ask them right now I think we have time but I'm not sure okay [Applause] cool, Open Source Companies 101 | Emily Omier, OpenUK, 01hqxb1hy40qyv6yayjdwmxpxp.