Fixing the Broken Open Source Funding Model with Sustainable License

Sustainable — of, relating to, or being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged. - Merriam-Webster Dictionary

Open source is built on the principles of transparency, participation and collaboration. And open source software is thriving. It’s everywhere. Every decently complex software is using some open source software underneath.

But its funding model, giving it away for free, does not allow its creators to fund the effort and is inherently unsustainable and broken. In fact, it has always been broken. The only reason it seems to be working is thanks to generous funding by big companies and venture capital, both driven by their private interests.

Engineers are more expensive than software and we are in an engineering crunch. There are just not enough engineers in the US. Meanwhile, the software industry is doing great. Four out of five 1 most valuable companies, each worth over a trillion dollars, happen to be software companies. Surely, if you look at the salaries of engineers in big companies, they can easily exceed half a million dollars per year in Silicon Valley.

Meanwhile, Open Source Creators Don’t Get Paid

Typically, a creator economy works like this: 1) Creators make things. 2) They charge for those things to their users. 3) They use that money to make more things.

In Open Source, it goes like this: 1) Creators make software. 2) They give it away for free. 3) They use ??? money to make more software.

If no money is being made from selling the software, then who foots the bill for development? Running an open source project can be a back-breaking work. Who pays for the time and effort put in by its creators?

This question is a bit of a taboo to ask. People tend to brush aside the question by saying, Well, the creators are just really passionate people, who enjoy building software.” And that’s true. Many engineers are truly passionate about the field they are in. But passion can’t buy you a loaf of bread, pay your rent or your kids’ education; funding does that.

Who’s Funding Open Source?

There are 3 ways open source software gets funded:

  1. The software is being built and funded by a big company for its own usage. These days, companies are becoming more open to releasing their software as open source. They also tend to be more sustainable, thanks to practically unlimited funding such projects get from their parent companies. Example: Android, Kubernetes both run by Google.

  2. The OSS is funded by Venture Capital to build a profitable business around it. Giving the software away for free allows for massive growth — which is exactly what a VC model depends upon. That massive user base is then converted to revenue by providing closed-source features, or providing a hosted service, or both.

  3. An indie creator creates OSS as a side-gig paying for their time via their job or by dipping into their savings. The double working hours or the financial burden of not getting paid can lead to creator’s burnout ultimately causing them to leave the project behind — it is inherently unsustainable. Yet statistically speaking, this is the most likely way an OSS starts.

Venture-Backed Open Source

Venture Capital is limited to a few promising projects, which happen to fall into the sweet spot of massive adoption and massive revenue generation ability. However, raising VC money creates two different set of stakeholders: Users and Investors (shareholders).

A venture-backed company’s officers have a fiduciary duty to maximize shareholder interest. And that has led many open source companies to move away from open source license in a way to maximize their revenue. MongoDB, Elastic, Confluent, Redis Labs, etc. are all examples of companies that now use non-open-source licenses.

Still, venture capital has helped these companies fund the development of open source. But, while the VC model can work great, it can also work against you by delaying the product-market fit.

As a first-hand account, we build Dgraph for 6 years funded by VC money aiming for massive adoption. And our GitHub stars did rise spectacularly surpassing all graph databases published on GitHub to become the most starred graph DB.

While there were thousands of free Dgraph instances running in the wild based on our telemetry, by the time we were able to launch a cloud service to generate revenue, the funding ran out leaving us with no other option than to lay off employees — causing the core contributors of the project to abandon it.

The truth was, Dgraph’s path was heavily dependent on venture capital to pay for the cost of development and without it, it couldn’t survive.

Appeal to Morality for Donations

The fact is, most open source projects don’t even raise VC money. What happens to these projects? You don’t have to look too far to realize that they are massively underfunded. Examples include colors.js, log4j, boltdb, etc.

There has been an outcry for companies to recognize their moral duties and donate to the open source projects they are using. And there have been recent efforts to make donations more popular via GitHub sponsors and Quadratic funding.

While these are noteworthy efforts, the underlying truth remains that people just don’t want to pay for something that others are getting for free. Speaking more broadly, people don’t want to pay more than what their peers are paying — that forms the basis of a fair society.

Open Source is Unsustainable

This leads to the irony that creators of software that are powering trillion-dollar companies paying million-dollar salaries have to resort to donations that might or might not come. Ultimately, giving software away for free is just not sustainable.

I wager that users are willing to pay for the software they’re using as long as the pricing is fair and transparent. In fact, they pay for software all the time. And creators need to be paid for their software, so they can earn a living, make the software their full-time job, and sustain building the software long term.

Any commercial license can charge for software. What’s makes this different is the need to maintain the freedoms of run, study, modify, redistribute and commercialize the software”. And that’s where Sustainable License comes in.

Introducing Sustainable License

Sustainable license allows for the software to be downloaded, run, studied, modified, and redistributed, without any mandate to release the modifications, and without any discrimination against production use, or against commercialization by providing a hosted service or otherwise.

The only stipulation is that the users pay for their usage. The price of the software is baked into the software itself, hence making it fully transparent for all. Thanks to web3, the software can charge for usage automatically and anonymously.

For creators, it means a source of income without compromising on the ethos of open source. And for startups, it means a source of revenue from day 1 which allows them to find product-market fit faster and decrease their reliance on venture capital for survival.

Isn’t Sustainable License just like X, Y, or Z? No, it’s not. To better understand the Sustainable License, please check out this FAQ we’ve put together.

The open source world’s most prominent lawyer, Heather Meeker worked on creating this license. We could not find any commercial license which was as liberal as Sustainable License is — encouraging users to use, modify, or even commercialize the software. If there is a way by which we can make it more liberal without giving up on monetization, do reach out and let us know, and we’d be more than happy to consider the suggestions.

A Sustainable Path Forward

In short, Sustainable License is the most liberal commercial license we could create. It balances the freedoms provided by open source software with monetization, allowing creators to earn money from their work and reinvest that back into their efforts to continue the development long term.

My upcoming project, Outserv would be released under Sustainable License. And I encourage other developers to consider Sustainable License as a sustainable alternative to open source licenses.

  1. As of the date of publishing this post, those are Apple, Microsoft, Alphabet, and Amazon.↩︎


July 19, 2022