Open Source Revolution: How One Investor’s Bold Bet is Reshaping Tech Startups
In a world where tech titans dominate headlines, a quiet revolution is brewing. Joseph Jacks, founder of OSS Capital, is placing a daring wager on the future of open source startups. This move is turning heads in Silicon Valley and beyond.
Jacks sees these companies as a unique blend of giving and profit-making. “Open source startups are both generous and business-savvy,” he notes. “They offer free tools while building sustainable revenue streams.”
This approach raises eyebrows. How can a company give away its core product and still make money? Jacks believes it’s not just possible—it’s the future.
“We’re betting that open-core models will replace traditional software companies,” Jacks states boldly. “Open source is eating software faster than software is eating the world.”
OSS Capital has backed over 80 startups since 2018. These include alternatives to popular tools:
- FormBricks (an open-source Qualtrics alternative)
- AppFlowy (Notion Alternative)
- Plane (Jira Alternative)
- Cal.com (Calendly Alternative)
- Hoppscotch (Postman Alternative)
- Cerbos (Okta Alternative)
These investments highlight a growing trend. More startups are choosing open source as their foundation. But why?
- Community Power: Open source projects tap into a global network of developers. This leads to faster innovation and bug fixes.
- Trust and transparency: Users can see and modify the code. This builds trust and allows for customization.
- Lower Marketing Costs: Word-of-mouth spreads quickly in the open source world. This can reduce customer acquisition costs.
- Talent Attraction: Many top developers prefer working on open projects. This helps startups hire outstanding talent.
But challenges remain. Monetization is a key hurdle. How do you turn free users into paying customers?
Many adopt an “open core” model. The basic product is free and open source. Advanced features come with a price tag. This balance is tricky but can be very rewarding when done right.
Sid Sijbrandij, CEO of GitLab, shares Jack’s vision. He predicts 80% of venture-funded startups will use open-core models in the future. “It provides trust, agility, and speed you can’t get with closed-source software,” Sijbrandij explains.
Not everyone agrees. Some argue open source limits business options. Chad Whitacre, head of open source at Sentry, points out: “Open source isn’t a business model. It’s a distribution model that can restrict monetization.”
Jack acknowledges this view. “Open source alone isn’t enough,” he admits. “We invest in commercial open source. There’s a key difference.”
This difference is at the heart of OSS Capital’s strategy. They look for startups that balance openness with smart business plans.
The approach is attracting big names. OSS Capital’s backers include:
- Matt Mullenweg (WordPress co-creator)
- Bob Young (Red Hat co-founder)
- Tobias Lütke (Shopify founder)
- Tom Preston-Werner (GitHub co-founder)
These tech leaders see potential in Jack’s vision. They’re betting that open-source startups will reshape the software landscape.
Early signs are promising. Shopify acquired one OSS Capital investment, Remix, in 2022. It’s now a key part of Shopify’s developer tools.
Looking ahead, Jacks plans to raise a fourth fund by early 2026. He’s also expanding into adjacent areas like crypto, though cautiously.
The open-source revolution is still in its early days. But with visionaries like Jacks leading the charge, it’s gaining momentum. We may witness a change in the construction, distribution, and monetization of software as more startups adopt this model.
For tech enthusiasts and investors alike, this trend is worth watching. The next tech giant might just have its roots in the open source world.