How to get funding for Open Source Projects

The Practical Guide to Open Source Financial Support, was originally designed by Nadia eghbal, in order to teach developers, consultants and entrepreneurs to How to Get Funding for Open Source Projects. The objective is to complement all the information that Nadia he has raised and given some extra tools to the great work he has prepared for us.

"I work with open source, how can I find funding?"

Listed below are all the ways that Nadia and I know so that people can receive funding for their work with open source, the list is more or less ordered from small to large. Each funding category is linked to various case studies.

The categories are not mutually exclusive. For example, a project might have a fundación and also use crowdfunding to raise money. Someone else could do consultancy and also have a donation button, as well with all the necessary combinations. The purpose of this guide is to provide an exhaustive list of all the ways that you can get paid for working with open sourceYou must select and test which one works best for you, each project and circumstances are different, that is, what works for us probably will not work for your project.

Donation Button

We can put up a donation site on our website. Stripe and PayPal are two good services that you can use to accept donations.

Pros

• Few conditions
• Easy installation and little maintenance work involved "Just install it and get donations"

Cons

• Usually not a lot of money is raised, unless you have put in a lot of effort to encourage people to donate.
• In some countries and for some donation services regulations, you need to have a legal entity in order to receive donations (SFC y OpenCollective are fiscal sponsors that you can use for that purpose).
• More difficult to manage people or international donors.
• Sometimes it is not clear who "deserves" the money in a project or how it is distributed.

Study cases

• Go
• Transmission

Rewards

Sometimes projects or companies post rewards in exchange for doing work on their open source software (For example: "Fix this bug and collect $ 100"). There are several websites that help facilitate the placement and collection of rewards. 

Pros

• Open to community participation
• The money is tied to doing a specific job (more like paying for the service than a donation)
• It is mainly aimed at performing security work on open source software

Cons

• Can create perverse incentives in a project (low quality, increase distractions)
• Rewards are generally not very high (~ <$ 500)
• Does not provide recurring income

Study cases

• Bountysource: Help for Free Software projects

• GitHub Rewards Program

Crowdfunding (one time only)

If we have a specific idea that we want to put into practice, a campaign of crowdfunding One payment can help us raise the funds we need. Both individuals and businesses may be willing to donate to your campaign.

Pros

• Few conditions
• There are platforms that allow you to legally handle these donations easily and quickly.

Cons

• A lot of marketing work must be done for the campaign to be successful.
• Usually it has to be tied to concrete results, perks
• Not much money is particularly raised (~ $ 50K for one time)
• Companies are not always comfortable donating in these types of campaigns.

Study cases

• GNUPanel v2.0
• AD 0
• MediaGoblin
• REST WP-CLI

Crowdfunding (recurring)

If you want to finance a project that is in progress, you can set up a recurring crowdfunding campaign, with a monthly or annual financial commitment that is renewed indefinitely (or until the donor cancels). Those who use your project on a regular basis (including individuals and companies) may be willing to fund your work.

Pros

• Few conditions
• The collection of money can be easily managed by anyone through for example:Patreon y OpenCollective

Cons

• Difficult to get donors to commit to recurring payment (often requires pre-existing brand / reputation)
• It is difficult to explain the results and benefits that come associated with recurring donations
• Usually not a lot of money (~ $ 1-4K monthly)
• Businesses generally do not feel comfortable donating in these types of campaigns

Study cases

• mochajs
• react-boilerplate

Books and merchandise

If you are an expert in a certain topic that other people may find useful to learn, one of the best options you can have to finance your projects is by writing and selling a book or series of books. You can find a publisher (like O'Reilly) or self-publishing. In addition to selling books, some projects sell merchandise (eg, T-shirts, hoodies) to support their work.

Pros

• The results are associated with you and not the project, so you retain creative freedom
• It can serve as a marketing tool for the project itself
• It can be a recurring source of income, from the moment you start your project until it ends

Cons

• Book sales often don't generate enough income
• May distract from basic project development
• Creating a book or marketing merchandise can have upfront costs

You can also read a debate that we had in the past about Free Documentation versus Copyright and Intellectual Property! Because not everything is Free Software.

Study cases

• Moon
• CocoaPods (fundraising for charity)

Advertising and sponsorships

If the project has a large audience, you can sell sponsorships to advertisers who want to reach them. You will likely have a very specific audience (eg if you have a Python project, you can assume that your audience is likely to be people technically familiar with Python), in order to use that to your advantage.

Pros

• Business model aligned with something that people are willing to pay for

Cons

• You need your audience to be large enough to justify sponsorship
• You need to manage trust and transparency with the user base (ex. No tracking)
• The job of finding and managing customers can be very arduous

Case study

• From Linux

Being hired by a company to work on the project

 

Sometimes companies hire people to do open source development. Find a company that uses the project you want to work on. It is often a deal with divisions (eg 50% company work and 50% open source work). Alternatively if you have an idea for a new project, you can find a company that is interested in using what you produce. In these cases, having a proven experience will be very useful.

Pros

• It draws on those with resources (i.e. businesses)
• It can be well aligned with the needs of the company
• Steady income

Cons

• It usually consists of "getting lucky": there is a clear, repeatable path to finding this disposition
• The Project must already be known and used
• You can become a person who does not contribute to the bottom line of the company, which makes you expendable
• Governance and leadership issues, the company could have undue influence on the project
• It can affect the dynamics and balance of the project

Case Studies

• Donald Stufft + Hewlett-Packard and Python packaging
• Rich Hickey + Cognitect and Clojure

Start a project, while you are an employee

Many open source projects started as employee side projects. The project could end up outperforming the company, but starting it as a side project can be a great way to incubate the idea.

If you follow this path, make sure you understand your company's policy on open source work. Some companies encourage employees to contribute open source during working hours. Some might treat their open source work like an enterprise project. Don't assume anything; ask someone in your company before you start.

Pros

• The freedom to try new ideas without worrying about salary
• It can be well aligned with the needs of the company
• Suitable for new ideas, experimental

Cons

• Need to do it as a side project or be approved to work on it during salary time
• Risk of undue company influence
• Can lead to complicated governance after the line

Study cases

• Mozilla and Rust
• Google and Go
• Facebook and React

Subsidies

Grants are large donations that do not require payment. Large companies often receive other benefits by subsidizing their work, such as knowing their skills, demonstrating the impact of their actions, a report of their work or mainly tax benefits.

Donations can come from many places, including software companies, foundations, philanthropic foundations, and the government. The technical and legal aspects of a grant vary greatly depending on who makes it. For example, a company might give you a "concession" but legally treat it as a consulting invoice. A philanthropic foundation can only make donations to nonprofits, so it would have to be nonprofit or you usually have to find a nonprofit to sponsor it. If you are unfamiliar with grants, the best way to understand how grants behave is by talking to someone who has received one before.

Pros

• Less ties
• Grant money can help focus the project for an uninterrupted period of time
• It gives the possibility to innovate and experiment with the project

Cons

• Not many donor foundations related to software
• Subsidies are finite. They have yet to find sustainability beyond the life of a grant

Case Studies

• Dat
• Django + Mozilla Open Source Support

Consulting services

Consulting can be a flexible way to finance open source projects. You have more freedom to structure your time as you like (for example, consulting 30 hours a week and spending 10 hours a week on the open source project). Consultants can generally charge more for their time than employees because the job is less stable, they do not receive benefits, etc. If you want to plan to do this type of work on a regular basis, you will likely need to create some type of legal identity to back it up (An LLC or equivalent outside of the US).

If your project is very popular, you can also offer consulting and services for the entire project itself. For example, a client can pay to implement the project for them, build something custom, or train them on how to use it.

Pros

• Business model aligned with something that people are willing to pay for

Cons

• Consulting requires a lot of preparation, generally it does not scale very well since it requires human capital.
• Business needs may require more time than desired so writing code or other tasks related to the project itself may be compromised
• May be at odds with making software that is easy to use
• The Project has to be popular enough that people are willing to pay for related services

Study cases

• Neighborhoodie
• OpenSSL

SaaS

SaaS means software as a service. In this model, the code base itself is open source, but it is possible to offer additional paid services that make it easier for people to use your project. It is one of the most popular ways to make an open source project profitable, in addition to allowing your development to be constantly updated.

Pros

• You can build a community around the open project and make money at the expense of the special services and functionalities that are provided
• It allows the open source project to focus on users and needs.
• Can scale by number of users

Cons

• Often means that the accommodation must be cheaper than hiring a developer run the project.
• Having "Two Levels of Support" may not all open source users will be happy.

Study cases

• WordPress.com
• Moodle
• Gitlab

Dual license

Sometimes projects offer an identical code base with two different licenses: One that is commercially friendly and one that is not (GPL Example). The latter is free for anyone to use, but companies pay for the business license to avoid any legal problems.

Pros

• Business model aligned with something that people are willing to pay for
• You can climb well if you are successful

Cons

• It may be in contradiction with the manufacture of open access software
• The Project has to be large enough so that there is a need for the customer to pay for the Business License

Study cases

• MySQL
• SQLite

Open core

Regarding the model of open core, defines that some aspects of the project are free, but other features are owned by the project and available only to paid users. Usually this works when there is demand from the business for the project.

Pros

• Business model aligned with something that people are willing to pay for
• You can climb well if you are successful

Cons

• You need to have something that you can charge for (which means making certain unique features).
• It may be in contradiction with the manufacture of open access software
• Having "Two Levels of Support" may not all open source users will be happy.

Study cases

• Docker
• Elastic

Foundations and consortia

A foundation is a legal entity that can accept and / or disburse donations. Since its purpose is not to make a profit, it can be a great option to signal the neutrality of a project.

Pros

• Neutrality. The Foundation protects the code and helps the administering community
• Influence distributed across multiple donors
• Can legitimize project, companies feel more comfortable donating to foundations than to individuals

Cons

• Only worth it for big projects
• Difficult to create according to the laws and regulations of each country.
• Requires community effort and the execution of various skills

Study cases

• Ruby together
• Python Software Foundation
• Node.js Foundation

Venture Capital

Venture capital is a form of financing for high-growth companies. Unlike a bank loan or other forms of debt financing, venture capitals take equity (one percent ownership in your business) in exchange for financing. The downside is that unlike taking out a loan, you don't have to pay your creditors but your business. If your project is successful, your investors will receive a good sum of the profits made.

Venture capital is "high risk and high productivity", venture capital firms are more risk tolerant than, say, a bank, but they also want a big reward if they are successful. If you are not familiar with the venture capital process, the best place to start is through conversations with other developers or entrepreneurs who have made their project successful thanks to a venture capital firm.

Pros

• Institutional support can be useful to grow your business
• Large amounts of capital available

Cons

• Venture capital comes with the expectations of a high ROI (that is, to get back your investment quickly and with great returns). History suggests that this is structurally difficult for open source companies to achieve.
• Venture capital can change motivations and distract from priorities

Study cases

• npm
• confluent

Of course, the main objective of the free software and open source community is to share their knowledge and create tools that allow access to technology freely and transparently, but it is no secret to anyone that software creation is a process It is time consuming and in some cases even operating expenses, so financing is an issue that worries most developers and free software companies.

We would like to know what mechanism they have used to receive financing in their projects and what are your impressions and recommendations.