WEBVTT 00:00.000 --> 00:07.000 Thank you. 00:07.000 --> 00:10.000 Hello everyone. 00:10.000 --> 00:20.000 I'm pleased to be here to talk about another way to get open source project or open source 00:20.000 --> 00:23.000 companies funded. 00:23.000 --> 00:31.000 It's one of the most controversial way to do it, but I'd like to share with you some information 00:31.000 --> 00:40.000 and some ideas to get better with this option. 00:40.000 --> 00:42.000 I'm Stefan Appampalonia. 00:42.000 --> 00:47.000 I'm the vice president of Rio's, the Italian network of his source companies. 00:47.000 --> 00:52.000 And we are part of Appal. 00:52.000 --> 01:00.000 The European Association of National Association of Networks. 01:00.000 --> 01:02.000 Sorry. 01:02.000 --> 01:14.000 So what we are talking about, venture capitalists can be both an opportunity 01:14.000 --> 01:23.000 but even a serious threat for the freedoms and open source software. 01:23.000 --> 01:32.000 Because venture capitalists operates in high risk 01:32.000 --> 01:39.000 and then they are expecting high revenue deal. 01:39.000 --> 01:47.000 And so it's not so simple to align the needs of the open source companies 01:47.000 --> 01:57.000 to maintain their freedoms and openness together with the needs of getting 01:57.000 --> 02:00.000 an aggregate amount of money. 02:00.000 --> 02:16.000 So the question is, can we align this different needs of the board? 02:16.000 --> 02:25.000 So let me start with analyzing the interest of one and the other side. 02:25.000 --> 02:36.000 Why an open source company, when I say open source, I mean open source companies. 02:36.000 --> 02:43.000 Because venture capitalists invest in companies because they usually, 02:43.000 --> 02:50.000 or taking a speaking venture capitalists wants to have the shares of the companies. 02:50.000 --> 03:02.000 So it's not possible to have venture capitalists invest in association or other kind of entities. 03:02.000 --> 03:13.000 So they bring money to a company but even competencies like the previous funds. 03:13.000 --> 03:23.000 Because of course it's important to have competencies relationship to build a growing project 03:23.000 --> 03:30.000 around every software and even around open source software. 03:30.000 --> 03:39.000 And so they are able to accelerate, especially the marketing activities, the sales activities. 03:39.000 --> 03:54.000 Somehow even the innovation, even though open source is able to innovate itself quite well. 03:54.000 --> 04:08.000 And why they are interested the venture capital interested in open source? 04:08.000 --> 04:19.000 Well, today open source is everywhere, even in the enterprise market with huge amount of money. 04:19.000 --> 04:27.000 And especially in Europe, we have opportunity, thanks to the interesting digital sovereignty. 04:27.000 --> 04:34.000 And you put all mix and match private and public resources. 04:34.000 --> 04:47.000 Moreover, we already have success cases with venture capitalists investing in open source. 04:48.000 --> 05:02.000 I've analysed some data and here we have two charts reporting the status of these activities. 05:02.000 --> 05:12.000 It's not simple because every day I discover new ventures, new investment, so it's very dynamic. 05:12.000 --> 05:22.000 But we can have some partners in these data. 05:22.000 --> 05:26.000 And now I need my water. 05:26.000 --> 05:41.000 And as you can see, we have the majority of the VC's quite small precede seeds and seedless areas. 05:41.000 --> 05:47.000 They are defined by the dimension of the investment. 05:47.000 --> 06:08.000 So the majority of the investment is quite small, but we, however, we have some good and important cases with a huge amount of money. 06:08.000 --> 06:17.000 On the other side, we have the geographical distribution. And of course, the majority is based in US. 06:17.000 --> 06:37.000 But recently has a major and quite good dynamic market in the US, especially in France, Germany and UK. 06:38.000 --> 06:48.000 Here I have a couple of references, a couple of names. 06:49.000 --> 07:01.000 OSS capital is fully dedicated to open source or commercial open source companies. 07:01.000 --> 07:08.000 And while they have invested in a lot of open source companies. 07:08.000 --> 07:18.000 And here we can discuss a lot if all these are open source or not, but let me analyze later this issue. 07:19.000 --> 07:36.000 Why combinator is the biggest incubator for start-ups in the world and has dozen of open source companies in its portfolio. 07:36.000 --> 08:01.000 And sequoia capital instead is maybe one of the biggest venture capital firm in the world and is not dedicated only in open source, but has invested a lot in many, many big deals with open source companies. 08:01.000 --> 08:20.000 So let me take a look at the past and trying to find the success in this deal. 08:20.000 --> 08:29.000 I have prepared a list of great success with venture capitalists and open source firms. 08:29.000 --> 08:38.000 Do you agree with this list? Oh, sorry. I've missed a part of the sentence. 08:38.000 --> 08:51.000 From the VC perspective, we have a list of great success because, as you can see here, the investment. 08:51.000 --> 08:59.000 So the funds raised by the companies are always quite small. 08:59.000 --> 09:12.000 It's not really small because we here we are somewhere around $1 billion, but compared to the market capitalization. 09:12.000 --> 09:20.000 So the value of the current value of these companies, there is a huge difference. 09:20.000 --> 09:28.000 So I point is, but it's not it's not correct. 09:28.000 --> 09:42.000 So the aggregates value is 2.7 billion, as money rises, and capitalization of $91 billion. 09:42.000 --> 09:49.000 So we are more than 30 by 30 multiplies. 09:50.000 --> 09:57.000 So of course, from the VC perspective, these are for sure great success. 09:57.000 --> 10:06.000 And so they can continue to invest and put money in open source companies. 10:06.000 --> 10:17.000 On the other side, let me list a, let me show a list of failures. 10:17.000 --> 10:28.000 Yes, it's the same list because from the open source community and the openness, those are for sure failure. 10:28.000 --> 10:33.000 Maybe not totally, but let me discuss about it later. 10:34.000 --> 10:49.000 I have partially removed complimenting it a lot because I discuss about it later, and I think it's not so bad at all, and let's see later. 10:50.000 --> 11:05.000 So as you will know, many of the companies initially open source or pure open source elastic started as a pure open source project and a company, 11:05.000 --> 11:12.000 where based on totally, partially two license products. 11:12.000 --> 11:31.000 But during his part, I have all the others, except let me say redact because redact has not changed the license, but somehow has restricted the availability of it's product for free. 11:31.000 --> 11:47.000 So it's roughly the same. All the other has moved to a more restrictive license and at the end, not open source has, as I has defined it. 11:47.000 --> 12:16.000 So one question here, how we show that this issue comes directly from the VC, here we have a chart reporting the average time, 12:16.000 --> 12:36.000 between the IPO, the initial public offering, so the process to be listed to the stock exchange and the license change to a non-open source license. 12:36.000 --> 13:00.000 All this companies shifted after the IPO in a few months, let me say, and the youngest shifted in advance probably because they saw the other companies and decided to anticipate the move. 13:00.000 --> 13:28.000 So technically speaking, it's the IPO or the needs to quarterly report revenues and the increase of the revenues to push those companies to change the license and to leave the open source has we want to be. 13:28.000 --> 13:52.000 So it's mainly related to the pressure of the revenue coming from the market instead of the VC directly because the VC's usually has planned for a long time, so they are not pushing so much the revenue. 13:52.000 --> 14:16.000 On the other side, the choice to move to an IPO is led by the VC, so indirectly, however, they are responsible of what happened. 14:16.000 --> 14:37.000 Let me see what happened deeply in that case because for me we already have something good, even from the open source community in that case. 14:37.000 --> 14:59.000 The first one is that today we have no evidence that the shift of the licensing has produced benefits for the companies, so we can pay to the VC and to the market. 14:59.000 --> 15:11.000 It's not useful to restrict the product, you can leave open source and go ahead, so this is quite interesting. 15:11.000 --> 15:26.000 The other good news is that it's about the community resilience because in many of that cases the communities reacted with the fork. 15:26.000 --> 15:50.000 And so then we have open search, open top, open bow, bulky and those project are quite running quite well today and so we have another benefit. 15:50.000 --> 16:10.000 Today we have great full open source, full open source products maybe thanks for sure, thanks to the investment to the initial investment of VC in that company. 16:10.000 --> 16:35.000 Of course it's not the perfect way we'd like to do these things, but at the end of the day we can count these benefits even in that let me say failure example. 16:35.000 --> 16:44.000 So let me summarize the risks. 16:44.000 --> 17:01.000 The market pressure leads usually to the license changes and even worse, the community trust. 17:01.000 --> 17:17.000 So this is a bad side effect because we risk to lose the trust in the open source project. 17:17.000 --> 17:40.000 The growth that all costs mindset is not usually conflict with the sustainable development of open source projects, so we are always fighting between these needs. 17:40.000 --> 17:54.000 And the essential rise between community and the business side. 17:54.000 --> 18:07.000 What we can do because I'd like to leave here with some proposals and not just a simple analysis of what has happened. 18:07.000 --> 18:16.000 I've listed three, but I'm open to discuss with you all in a few minutes other opportunity. 18:16.000 --> 18:31.000 I've listed three options we can try to push to solve or to reduce the risk we have seen with the VC investments. 18:31.000 --> 18:41.000 The first one is trying to align and to mix the profit and the purpose. 18:41.000 --> 19:05.000 We have some initiatives like open call venture, VC firm, that's required to define in the chart of the companies to maintain the license open. 19:05.000 --> 19:15.000 And this is, this is defined as a public benefit in the VC firm under the VC firm movement. 19:15.000 --> 19:21.000 How many of you knows about VC firm benefit corporations? 19:21.000 --> 19:26.000 Benefit corporation at the end of my colleagues. 19:26.000 --> 19:48.000 My company is a benefit company, so benefit corporation defined it together with the profit as a goal, other goals for the public benefit and open source and maintaining open source projects can be one of these. 19:48.000 --> 20:06.000 Open core venture required to the company they are going to invest to modify their chart and guarantee that open source deposit will remain open source. 20:06.000 --> 20:20.000 We have another example of pairing profit and leading the investment through the partners. 20:20.000 --> 20:49.000 Taking into speaking, UNICEF founder is not a venture capitalist because they are equity-free, so they don't require, they don't require the shares, but I'd like to mention it because it's a great example of pairing public benefits and partners with the investment in open source projects. 20:49.000 --> 21:03.000 So they're required to be open source and to have an high impact on, or potentially high impact on changing for children. 21:03.000 --> 21:24.000 Another way to minimize or to get better with VC is to mix public and private funds or to have a public venture capitalist invest in open source. 21:24.000 --> 21:52.000 In Italy, we have CDP venture, they are not investing in open source yet, but I hope, I think they have a couple of companies, but they don't have yet vertical funds to do that, but it can be a perfect example of public money invested in open source. 21:52.000 --> 22:13.000 They can require to maintain open source to the public benefits, and maybe the sovereign tech fund can think about the venture capitalist's activities in the future. 22:13.000 --> 22:31.000 In the previous talk, I gave a couple of hours ago in a totally different scenario, I proposed to reduce taxes for open source investment. 22:31.000 --> 22:53.000 We can define a create a load to reduce taxes for those venture capitalists investing in open source, maintaining open source freedoms. 22:53.000 --> 23:08.000 The last option I'd like to share with you is leveraging fundations. 23:08.000 --> 23:21.000 Fundational are doing a great job to lead the open source projects to provide open governance to that project. 23:21.000 --> 23:41.000 But they are not rising capitalists for the projects, and we can think about placing the core open source projects. 23:41.000 --> 23:54.000 I didn't mention core ventures, the first example I gave to you has been created by the funder of GitLab. 23:54.000 --> 24:10.000 In fact, GitLab is still open source or open core, but we have the core under the OSI license, even GitLab is listed to the stock exchange. 24:10.000 --> 24:22.000 We have some good example of venture capitalists investing in open source and maintaining open source. 24:22.000 --> 24:49.000 I mentioned GitLab because the other example of my list of the bad cases was a conference shift to a non OSI license, but a conference has built its product on top of Kafka. 24:49.000 --> 24:59.000 Kafka is under the passion foundation, so we are guaranteed that the core cannot be changed. 24:59.000 --> 25:07.000 This is not perfect solution, but it's good. 25:07.000 --> 25:27.000 I'd like to address you to be careful with a single vendor company, totally owning a project because the risk is very high. 25:27.000 --> 25:46.000 In this case, we can be guaranteed that the at least the core cannot be changed, and so we don't care about what will happen to the conference. 25:46.000 --> 25:55.000 I have another ambitious proposal for the future. 25:55.000 --> 26:06.000 What do you think about creating something like open source investment forum just five minutes? 26:06.000 --> 26:11.000 I am at the end. 26:11.000 --> 26:35.000 So a place may be managed by foundation or foundation, where this is startups and public and private stakeholders can work together to define the best practices to maintain the openness, but at the same time to drive the investment to the open source projects. 26:35.000 --> 26:48.000 This is just an idea and I'd like to discuss about it with you. 26:48.000 --> 27:15.000 The conclusion, of course, it's really difficult to align the VC investment with the open source of sustainability, but we have some opportunities through good governance models, strong communities and a well-defined plan to build this solution. 27:15.000 --> 27:19.000 And to reduce the risk of the projects. 27:19.000 --> 27:21.000 So I'm at the end. 27:21.000 --> 27:28.000 I'm here to answer your question just three minutes or something like that. 27:28.000 --> 27:32.000 And my contacts are here. 27:32.000 --> 27:42.000 Thank you. 27:43.000 --> 27:47.000 I'm really excited to read that. 27:47.000 --> 27:55.000 And there's the impression that our VC from the consensus company are open core. 27:55.000 --> 27:58.000 So from your experience and that's my question. 27:58.000 --> 28:00.000 Are you doing fine? 28:00.000 --> 28:07.000 I mean, is it a no-go to go discuss with venture capitalists in regular venture capitalists? 28:07.000 --> 28:19.000 If you have a GPL based model based on subscription and warranty, you know, like the usual GPL model, which I've ever listened to you. 28:20.000 --> 28:36.000 The question is, most of the cases, maybe, all of the cases are related to open core model or at least permissive licenses. 28:36.000 --> 28:48.000 And it's really, the question is, is it possible to have venture capitalists investing in GPL and strong capital licenses? 28:48.000 --> 28:55.000 Of course, it is very, very difficult. 28:55.000 --> 29:08.000 I have in mind some cases, but with more investment and technically speaking, not venture capitalists. 29:08.000 --> 29:15.000 Because we have some new ones of the players. 29:15.000 --> 29:26.000 So if we speak about equity investments, it's quite hard. 29:26.000 --> 29:37.000 It's much more easier with Apache license and even much more for them to invest in a well-defined, 29:37.000 --> 29:44.000 IP intellectual property resources. 29:44.000 --> 29:50.000 There is a case related to the trade marks. 29:50.000 --> 29:55.000 Because it's not just the model of license. 29:55.000 --> 30:06.000 In fact, the market has not recognized the value of the shift of the license. 30:06.000 --> 30:17.000 Because after a few years, nothing changed in the stock value after the license change. 30:17.000 --> 30:30.000 But the ownership of the trade mark, and so I didn't mention another detail about Kafka and Confluent. 30:30.000 --> 30:32.000 The name are different. 30:32.000 --> 30:37.000 We have Kafka with his own logo and trade mark. 30:37.000 --> 30:42.000 And we have Confluent with its own intellectual property and trade marks. 30:42.000 --> 30:50.000 When has in Elastic Search, for example, how we have the same name as the company, 30:50.000 --> 30:56.000 or Mongo that changed the name of the company to pair the name of the product, 30:56.000 --> 31:04.000 the risk is really high because they can block, they can change the license, 31:04.000 --> 31:11.000 and the community has to fork, change the name, start from the ground. 31:11.000 --> 31:24.000 So maybe differentiated the trade marks and the code, the name of the code, the project, can balance the risk. 31:24.000 --> 31:29.000 And it's a venture debt risk, and it's not a start. 31:29.000 --> 31:32.000 I don't want to be poor. 31:32.000 --> 31:36.000 I do not debt rate over because I'm a close-demon, but I don't want to see that out. 31:36.000 --> 31:41.000 My question is like, did you try to submit the share of the second source? 31:41.000 --> 31:44.000 Runa capital. 31:44.000 --> 31:51.000 It's one of the most important capitalists for open source. 31:51.000 --> 32:00.000 And they have an index of open source, interesting open source. 32:00.000 --> 32:05.000 We are not expecting a dinner, of course. 32:05.000 --> 32:10.000 We didn't agree before in advance. 32:10.000 --> 32:18.000 But the question is like, how do you imagine a company that has changed the license? 32:18.000 --> 32:24.000 You try to estimate the share of all the second source of the system, which changed the license. 32:24.000 --> 32:34.000 Because it seems like, well, as we see, like, together we found that a few thousand open source times over the last 20 years. 32:34.000 --> 32:38.000 But there are just a few examples where the license was changed. 32:38.000 --> 32:44.000 And even though it's a bit of a question like, was it that bad? 32:44.000 --> 32:48.000 But the company is still good, maybe. 32:48.000 --> 32:54.000 I think this is good to ask this question. 32:54.000 --> 32:55.000 Okay. 32:55.000 --> 32:56.000 The time is up. 32:56.000 --> 32:58.000 Next speaker is coming. 32:58.000 --> 32:59.000 Okay. 32:59.000 --> 33:01.000 Thank you very much.