Startups in 14 sentences

Paul Graham has an article on the top 13 things to keep in mind for entrepreneurs. I have one to add (for software startups):

– Going open source can help
You might have a brilliant idea and a cool new product. It mostly will be disruptive technology. You might think of changing the world. But people might have to modify the way they were doing things. What if you run out of funds midway or some other unforeseen event by which your company has to shut shop? Customers will be vary of deploying solutions from startups for fears of them going down. If the customers are given access to the source code, they’re at least insured they can have control over the software if your company is unable to support it. And letting them know this can win some additional customers — who knows!

10 Replies to “Startups in 14 sentences”

  1. >I do not really wish to start whole open source or not thread here. But open source might not be always best way to go. Mainly when generating revenues with open source is not easy task. All advantages of open source is well understood and on technical level there should not be any disagreement. But what RedHat or other so far successful vendors have managed to do is not easy and obvious things for other solutions. Say for OpenOffice product how many people actually need support? I know open source does not mean sell it for free. But anybody can buy your product , get the code and even redistribute it for free or less money than yours. so its not always easy. For startup getting early revenues is as important as the final product.

  2. >Please bear in mind I’m not asking startups to go all out and embrace GPL. They just need to give some insurance to the customers that they won’t be left in the lurch — one way of doing that is by saying “if we go down or if we cannot serve you any further, we guarantee to open our code with you and you can use it for your own purposes only” or whatever copyrighting or licensing the startups deems fit for that particular use-case (and the willingness of the customer to pay extra $$$ for such a freedom).

  3. >hmm ..fair enough. Only thing is deciding such things as “we can no server you better” clause. As to have real use case of such class customers need to have say in that.Customers should be able to decide if they think they are being served or not .. but then this puts start up owners at disadvantage as there can always be tricks of trade which can be found to get access to source code even when you does not need it. So yes theoretically it sounds really cool … but to have practical consensus on such thing is very difficult.
    But there might be some way out from this … and as you already pointed out GPL might not be that .. or IMO its less likely to be GPL.

  4. >I’m no lawyer obviously. No contract will say “we can’t serve you better” :-) But something to that effect — to make the customer feel at ease. Also, the license can be restricted for the use of the product and / or its derivatives obtained by using the code obtained from the startup only for the internal benefit (and continuation of existing uses of the said software) of the company.

    Of course, this is going to take a lot of strength on the part of the founders and stake-holders of the startup; but if it means extra business and more revenue because a customer is willing to pay you more for this kind of insurance, it might just prove to be a saver for the startup.

    Every one loves insurance. We buy all kinds of them — health, life, vehicle, house insurance, etc., and our lives currently hinge on software working. All software, as it’s all-pervasive. And almost all of this software comes without any guarantees. If some company really did insure against some unpredictability in this software business, I think it’ll make it real big.

    I’m not saying a third-party company insuring against losses due to software glitches; just the freedom to have control over software a company deploys.

    Looks like the comments are growing more than the entry itself; but that’s a good sign. After-thoughts, discussions and laziness on my part to write everything when writing the post are all good things.

  5. >Opening the source of software modules allows customers to modify them in the future. From a company that bundles software with products with the features coming more from the software end, “customization” is a key drive to open the source.

    However, merely giving away source with the software or product alone doesn’t suffice. There are many companies who do this for “buzz”. This ought to be done with some documentation and support offered.

    Few companies distribute source responsibly with off-line support. Source bridges the gap between the producer and the consumer for a class of products (both software and bundled hardware+software.) This is the gap that companies strive to bridge in the sales process. So I see it as more than insurance; it is strong value with the software.

  6. >If I am a large existing player and a startup is disturbing me with its innovative disruptive idea, typical strategy says that I will buy that startup, generally, at a premium.
    Now, if the startup is an opensource (to its customers, only, e.g.), I will only buy its product once and demand for the source! citing conditions “am not being served as expected”…
    And kill!

  7. >Anonymous –

    I have two points:
    1. I already mentioned in one of the comments above — the “can’t service you better” can be “if we go down”. It depends on the lawyers of the company to frame these sentences.

    2. Red Hat’s entire source code is open. Red Hat employs engineers to work on upstream projects. This upstream work not only benefits Red Hat, but also benefits rival companies like Novell and Canonical. Inspite of that, Red Hat continues to make profits and hold its ground. In fact, Oracle takes the same Red Hat code base as Red Hat Enterprise Linux and rebrands as their own. Customers still prefer Red Hat.

    The game is not just about the software. It’s also about the people behind the software and the services and guarantees the people give along with the software.

  8. >Anonymous [04-Apr-2009] –

    I believe you will need to cite a case here. Buy Product Once, Get Source and Kill; sounds too easy to be true.

    General –
    Actually I have source code of some game engines released by id software, and I know gaming companies who compete who have this, yet, I don’t see anyone killing “id”. I also have pieces of OpenSolaris and OpenStorage from SUN. IBM shouldn’t have even made that $7b bid after expressing interest in OpenStorage among other areas from Sun.

    I could even do this with “proprietary software” where source is offered whenever I pay (a much smaller sum than net worth of a company.) There are tons of companies who are willing to part with source for higher costs.

    Sun wouldn’t have Virtual Box and MySQL “bought out” if they could just use the source instead. Buying Out is one of the available “exit strategies” for a cash-strapped startup.

    Clearly someone has to prove that Redhat’s profits have dropped because Canonical and almost everyone else who has taken on pieces of code has cut into a static pie of consumer market.

    For OpenOffice, I think resurrection of Lotus with the OpenOffice source is proof enough that an entirely different company used this. Transgaming’s Wine is open-source except for a portion of the DirectX (not all of it) libraries. You could potentially run your own company and beat them, or a “Giant” can have them without buying source. Transgaming emulates Windows libraries on Unixes (starting with Linux and now on Mac OS X.) Does an Apple certified vendor or Apple actually sell proprietary Microsoft Windows Games support? (Not to my knowledge.)

    Revenues: Eric Raymond probably has a few tips. Product Engineering outfits do widget frosting, the model that’s simple to understand. Some “violate” Open Source citing that they cannot make profits; on similar arguments raised here. Savings as revenue is an oft cited case. Today it is far more relevant. If your cost to create something is potentially reduced you can reduce the price a customer has to pay while you still make a profit.

    My former employer did buy software for incorporating into products. My former employer is a profitable product company. However, because we could not modify one small piece of the bought-in black box (with no possibilities to acquire source at any cost) we just had a 25% increase in development life-cycle. That was “Loss.” We decided never again to consume anything from “closed source” companies as it potentially created black boxes of uncertainty within our own products.

    NB: Open Source is not Free(dom) Software always nor is it Free (Beer.)

    PS: Source is a more primitive formal expression of the binary format of the product which is re-usable and easier to modify than the binary format of the product.

    The binary format of many products can also be reverse engineered. (Remember Borland!? They did not advocate Open Source but where caught up.) This is also easy for a heavy-weight as opposed to a smaller group.

    Myth: “Open Source makes a startup vulnerable to acquisition.”
    Truth: “Low on Cash makes anything vulnerable to acquisition.”
    Myth: “Open Source companies suffer a handicap while trying to make revenue.”
    Truth: “Companies unprepared to serve their customers suffer a handicap while trying to make revenue.”

    Time, the press stopped incorrect interpretation of Open Source as non Revenue Generating.

    Watch for Guy Kawasaki’s take on “Revenue from Open Source” and “Open Source enabling Startups.”

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