| Reprinted from: Yuan Desk Club
Compared with overseas, domestic open source projects started relatively late, but they have flourished in recent years. On Gitee, the code hosting platform with the largest number of users in China, the total number of users has exceeded 8 million. Chinese developers have become the second largest group of developers after the United States. At the same time, open source is also popular in the investment and financing industry. According to statistics, in 2021, the amount of domestic open source investment and financing will reach the highest level in history, reaching 5.2 billion yuan, a year-on-year increase of 86%.
How to allow more developers to make money from open source may be a problem that Chinese open source projects need to face in the future. In the fifth episode, two experts from the investment community were invited to explain the reasons behind the popularity of open source financing and the business model of open source.
The guests invited for this issue are:
Zhang Wensong, author of LVS and investment partner of Hillhouse Venture Capital
Founder and Chairman of CSDN Jiang Tao, Founding Partner of Geekbang Venture Capital
Here is the complete video, where you can watch the exciting discussion between the host and the two guests.
Let's take a look back at the exciting content of this episode.
Why open source projects are favored by the investment community
Moderator-Song Keke: In recent years, many open source companies and projects in China have obtained a lot of financing cases, and the number can be said to have started to blow out. Today we would like to invite two teachers to share the main reasons behind it. Teacher Zhang Wensong first.
Guest-Zhang Wensong: The first point is that open source is a very efficient way. Through the process of open source, more external developers participate and develop together. This development method may produce higher quality source code. The second point is It is possible to get more customers through open source. There is a term called open source with goods. Through open source, you can reach more users. In the future, you will sell commercial versions and professional versions of services. There is a huge one. Chance. The third point is that a lot of open source software is basic software. If the basic software is used by others, if it is still closed source, it is a black box, which is difficult to be accepted by users. In fact, more underlying software must be open sourced. You can know that it is very safe and reliable, and more users will come to use it. Based on these three reasons, more software projects at home and abroad are carried out in an open source manner.
Host-Song Keke: Didn't Jiang always see such a phenomenon?
Guest-Jiang Tao : Yes, it is the commercialization of open source. Since 2013, the commercialization of open source has made a relatively big breakthrough in the US market. The superiority of the open source company's products has been better verified, and it has also achieved a good commercial result. In the past, there were only a few open source companies with a revenue of more than 100 million US dollars, but now there are more than 50 companies. From 2013 to now, the market has grown by a factor of 10. Last year, there were three companies, such as Kafka's company called Confluent, HashiCorp, and Gitlab, all of which were more than 10 billion. The business model is proven in the US.
In addition to the kind of contributors bringing goods, there is another very important reason, that is, users are decision makers and developers. Which software I use, in the end, I make the decision to buy this software, which reduces the cost of decision-making. Such a model, combined with the development of cloud native, for example, open source, you can build it yourself, this version will be updated, it will be updated in two weeks, then do you want to continue to update, the cost of maintenance is very high high. For software code, let’s take reports for example. Grafana is developing very fast now, and it is also a unicorn. The report system is simple. There are hundreds of people who write open source there, and thousands of people contribute, right? It will be updated in two weeks For a version, you don’t need to build a private version. You might as well buy his cloud service, or you can buy his private cloud service to get the highest quality support. As long as the company's decision makers understand the efficiency of technology, they should never do it themselves if they can't do it. It is best to use open source if they can open source. I think the United States has also experienced such an evolution, and now we are ushering in such a process.
In the past, I thought that technology was actually a cost or efficiency in China. With the digital economy, the company's business is all about technology. How to make good use of technology has become an important part of the company's development. The CTO is not spending money, but earning money, because once the technology engine is broken, If the business stops for a minute, you will lose a lot of money. At this time, it is better to invest in technology. Therefore, the Chinese investment community has also seen the success of this business model in the United States, and there are market opportunities. As long as the company enters the digital age and technology is important, he will attach importance to open source.
Guest-Zhang Wensong: I think open source software is a cornerstone of the entire Internet industry, because almost all Internet companies use open source software, which can greatly reduce costs. If open source software is To B, more companies can enjoy the benefits of open source software.
How open source projects are valued
Host-Song Keke: Both of you have experience in this kind of investment. Is the valuation method different from traditional enterprises and technology companies in the financing process of open source technology start-up companies or projects?
Guest-Zhang Wensong: The valuation of entrepreneurship is related to the entrepreneurial model. For example, our project, whether it is open source or closed source, what problems to solve, what value can be created for customers, and how big is the market size and how much penetration can be achieved? , How to build an open source ecology through open source, how to acquire customers, what is the final business rhythm, how much is the revenue, and finally after a few years, it will be a profitable business, and then in the next ten years, for example, how much will I earn? , according to the discounted cash flow model, it is possible to return to how much it is worth now. This set of models is probably the same for any start-up company. If we do open source projects and realize commercialization, this process must be sorted out. On the one hand, it helps open source developers to think more clearly about commercial projects, and it also tells investors that they are willing to invest, which can accelerate the development of open source projects.
Host-Song Keke: An open source project has been incubated by the Apache Software Foundation or the Linux Foundation, and has become a graduated project, or a top-level project. Is this kind of start-up company more valuable for investment? Is there such an inference?
Guest-Jiang Tao:
There are two phases of investment. In the first stage, angels can be considered as a blind investment, that is, how to invest when the business model has no income or very little income. At this time, something called credit endorsement is required. For investors, you have to prove it. The incubation of the foundation is a proof, at least it means that the foundation has selected him as a top project from a bunch of projects. The second is that, some people say, look at my Github Star number, which can also be used as a filtering criterion. You must first PK your benchmark. This is the first thing investors want to see, your past records. The other is do you have some proofs from the past, right? This proves that you are better than others in the market. In the past, he was better than us, but the current record shows that I am better than him, and I can find another excuse. Yes, this is the first stage, so what you said, I think it is necessary if you want to start an open source business.
The second thing is that not all open source projects can be commercialized. There are 200 million open source projects in the world, and 24,000 of them have more than 2,000 Stars. This is 24,000 according to our statistics. There are only more than 50 companies in the United States that cost more than 100 million US dollars, so you have to look at why they can be commercialized, either basic software or cloud services. For example, if there is a VUE Cloud, then he can He has collected money, right, but he is VUE and does not have Cloud, so he cannot collect money, you can see that Elasticsearch can collect money. Elasticsearch said that you can do it yourself, but I have a Search Cloud for you, right, so it is not easy for all JavaScript frameworks to go to the front end, but this front-end project is the most active. According to the Github statistics, the front end is the most active, but if you want to do business, you have to look at the market, open source devours closed source, is there any player in this field that you can kill?
Guest-Zhang Wensong: In fact, the front-end framework can also provide many opportunities for commercial monetization. For example, the front-end framework is very popular, and there are some advertising plug-ins in it. If there is traffic, there are actually many monetization methods. In China, Hillhouse invested in a company called Uni -App, Uni-App is actually a front-end framework that unifies many small programs, whether it is an Alipay applet or a WeChat applet. He is still Uni-Cloud in the end, where he can make money.
Guest-Jiang Tao: So you can make money by turning into Cloud, so if you want to see if your business can turn into Cloud, wordpress like that is still doing well in the United States. If you want to take a step forward in user-oriented delivery, you should help him complete the final work, making it easier than before, right? If you have Cloud services, then this company must be a company worth more than $1 billion.
Business Models of Open Source Projects
Moderator-Song Keke: Two teachers, please share with us what kind of business model an open source-based enterprise should adopt, and how many business models there are. Which business model do you prefer?
Guest-Zhang Wensong: I just mentioned the OpenCore model. After OpenCore, we must open source the core code to help customers solve a certain core scenario. The license is very important for the open source model. I personally prefer to license The certificate should be as loose as possible, not restrictive, because it involves the user's rights, because the user can copy it, even for commercialization. In fact, free software puts more emphasis on the rights of users. I can distribute, modify, and even sell the rights of users. This is a right that users want to obtain.
Although some are open source software, they are also listed companies like MongoDB. In the past, it was AGPL. AGPL can be open source because it is put on someone else to build a Cloud Service, but later in 2018 he changed it to SSPL (Server Side Public License), basically removes the user's right to commercialize, and only he can do commercialization. If it is such a project, of course he has accumulated a certain user base at the beginning. In fact, many people who do open source software do not like it very much, because his SSPL License has been said by OSI (Open Source Initiative) that his License is not a Open source license, and more server releases, Redhat server release, Fedora CentOS, its software package, MongoDB software package is removed from the distribution package as soon as its license comes out, This model will greatly affect the development of his open source community.
Not only will the core code of OpenCore be open source, the license will be more relaxed, and others will be commercialized. The overall development of this open source project will be more efficient, there will be more users, and more software will emerge. A more powerful open source ecosystem can be formed. After using the open source ecology, even if I commercialize a small part, it is possible to realize this huge commercial value,
Guest-Jiang Tao: I think there are actually different paths.
Represented by Red Hat, it actually does a package business. I will help you package and provide some enterprise-level services. This is the first generation of open source business model, and there is still this demand.
What about the second generation, things like MongoDB, or Hadoop like Cloudera, most of which are Open Source, and then there is an Enterprise Enterprise fee, this model is probably not very successful.
Entering the third generation is OpenCore. It wants to form a closed loop with business, plus cloud services. It may be a basic software that can also provide cloud services. Of course, you can download this version back and install it there yourself, but Who will guarantee this service?
For example, financial companies, Internet companies are all driven by open source, financial companies are not, but they are definitely on the way, but he has a very serious problem, so who will support me, his research and development capabilities must not be as good as those Internet companies also need to use these basic software. In the past, they had service providers, such as IBM and Oracle. Who will serve them now? He is willing to spend money, and he does not want to be greedy for such a small gain. So OpenCore plus Cloud Native, this model is a very important factor for the explosion of open source business. In addition to an external factor, I just talked about the drive of the digital economy, so this model has formed a flywheel effect. I have open source, which allows developers to know more about me. Today, users think I am not good, and next month I will Just improved, it is a very powerful force, I can see your changes and transparency. Now there is an open source company in the United States. It is called MakeDocs. It makes documents and invented a Sponsor model. For example, if you use it, you can bring up your needs. If you spend money, I will let your needs go forward. Next Version: I have an open TODO List, you say I will pay and I will be your sponsor, and I have a TODO List, then I can list it for you.
Guest-Zhang Wensong: I have experienced this. Someone who was working on the LVS project was willing to sponsor a certain demand, because the LVS project did not have this function at that time, and he was willing to pay part of the money. I am also very happy and willing to make this function first.
Guest-Jiang Tao: So I think China needs to gain a foothold in global open source. On the one hand, top companies need to develop, and on the other hand, they should take advantage of engineer bonuses to allow developers to flood into open source to make contributions, forming a cycle. You see, we rely on open source to write code, but can this open source improve it a bit? Many projects are open source at the waist, and only a few people maintain them there, including that Log4j, the original heartbeat Open SSL, and those few Germans. In use, let's subsidize it and control the waist in China, so this will have a great advantage in China in the future.
Another advantage is the combination of commercialization and hardware. Behind the hardware, cloud services and software capabilities are needed. If this thing is made into some open source projects or commercialized, it can be improved, but no one has done this solution yet. We should use this advantage to combine hardware and software. China has advantages, and we will set the standard. Software can’t develop standards, others did it earlier than you, and you can’t catch up, right? But with the combination of software and hardware, we can develop standards. I think China has an advantage in this, that is, open source and openness. The reason why open source is successful is that there is openness. There is a license and a set of standard gameplay. Everyone forms a certain alliance mechanism to unify the interface. China also lacks this interconnection now.
Guest-Zhang Wensong: I especially agree with Mr. Jiang’s statement that the combination of hardware and software in China is a huge advantage, but on the other hand, I think that even if it is pure software, because China has the largest developer group in the world, through open source collaboration , can develop more useful software, this advantage is also huge in China.
Moderator-Song Keke: To sum up, the dividends of the cloud-native era, including open source plus the advantages of China's electronic information manufacturing industry, form an aggregation effect, which is to combine the advantages of open source with the advantages just now The two advantages mentioned, and then form a relatively leading global product and enterprise in China. On this basis, we will consider the business model, not just focus on a small open source project.
Guest-Jiang Tao: The digital economy puts forward requirements for technical capabilities. In addition to leading Internet companies in China, other companies such as the automobile and financial industries have begun to pay attention to technology. China's development is relatively fast in the world. Watching the live broadcast, China's retail industry is running very fast, and now it is the turn of the industrial Internet. The industrial Internet is larger in terms of output value, which in turn requires that the base of the digital economy is an open source base. China must be able to do a good job of this service, otherwise what will happen if something goes wrong. In fact, many bosses or industries have gradually realized this awareness. The driving force of the market has driven the development of technology itself, and the formation of a closed-loop business model. China is now ushering in a small blowout of open source entrepreneurship.
Guest-Zhang Wensong: I believe that a big blowout will come sooner or later. There are small blowouts now, and there will be big blowouts in the future. If you do an open source project, you must have a global vision. Open source has no national boundaries. Through open source, users all over the world can reach it. It is a huge opportunity for Chinese open source projects.
The above are the selected views of this issue. For more highlights, please watch the full program.
See you in the next issue of "Source Table Meeting" for more exciting events!
Related Reading| Related Reading
How the Open Source Program Office (OSPO) is enabling engineers to give back to open source
The "Open Source Compliance Guide (Enterprise)" was officially released, providing reference for promoting my country's open source compliance construction
"Target->User->Indicator"——The Way of Enterprise Open Source Operation｜Kandao@谭中意
Introduction to Kaiyuanshe
Founded in 2014, Kaiyuan Society is composed of individual members who voluntarily contribute to the cause of open source. It is formed according to the principle of "contribution, consensus, and co-governance". It has always maintained the characteristics of vendor neutrality, public welfare, and non-profit. International integration, community development, and open source projects" is an open source community federation with the mission. Kaiyuanshe actively cooperates closely with communities, enterprises and government-related units that support open source. With the vision of "Based in China and Contributing to the World", it aims to create a healthy and sustainable open source ecosystem and promote China's open source community to become an active force in the global open source system. Participation and Contributors.
In 2017, Kaiyuanshe was transformed into an organization composed entirely of individual members, operating with reference to the governance model of top international open source foundations such as ASF. In the past eight years, it has connected tens of thousands of open source people, gathered thousands of community members and volunteers, hundreds of lecturers at home and abroad, and cooperated with nearly a hundred sponsors, media, and community partners.
