Distributed growth

As discussed in a recent post, the structure of stock can be the source of much tension in collaborative start-ups, whose main purpose is to connect people who will make business together. Such structures need a certain size to be sustainable, and the growth needed to reach that size requires a lot of efforts. And to achieve these efforts, start-ups raise a lot of money, that they have to pay back with a large retribution. So customers, who are the ones who actually create value in this model, happen to leave a non negligible part of that value only to grow a network that will benefit others. That doesn’t really sound fair.

We discussed an alternative to this funding model. But beyond this question of funding, it might be reasonable to find another way to grow. This is even more obvious when you think that any other functions in an Internet start-up is so scalable. Making a web platform requires very little work. Testing and fixing it is so easy. Hosting costs are negligible. And most functions can be automated. So the web can connect distant people who have no relation to the company to make business in a distributed way, but we should communicate in a highly centralized, hierarchical way?

There may be an alternative. The same way Internet start-ups compete with traditional businesses by externalizing their main service, they can grow by externalizing their sales/communication/community management function to a distributed network of local connectors managing their own community of users. You end up with a “glocal” community, a network of networks. Each single community is a small start-up of its own, managed by a connector. It is linked to the global network on which it relies for the platform development, and coordination. But it can live its own life, grow to any size one likes and have its own animation and culture. This model has the relevance of a small local group, but the strength of a global network.

If the Internet is to make all business models distributed, there is no reason why there should still be hierarchical armies of sales persons to sell those distributed services. It means giving up some money, and also some revenue. There are probably many obstacles on that path, difficulties that we don’t foresee. But it looks like it might be worth giving a try. And we will.

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Collaborative shareholding?

We recently discussed on this blog why it makes sense to crowdfund free software. That’s why we created a crowdfunding platform tailored for free software. But as any other platform of that kind, it needs to reach a certain size to be sustainable.

All platforms of the so-called collaborative economy gather people so that they can make business together. But because of the network effect, the more people gather, the more value the platform has. And until the platform reaches a certain size, it needs extra effort to live. And after that size the bigger the network, the greater the value. That’s why so many platforms raise millions. So that they can communicate about it and make it grow.

But then you need to pay back the investors, which means for the platform to grab some of the value made by the users. You end up with users working together, paying for the platform to grow, in order to pay the investors. From that moment on, the platform is in conflict between the interests of its users and those of its investors and tensions may appear. This issue has been raised a lot recently under different aspects, such as the analysis by Janelle Orsi of the recent lawsuit against Lyft, or questionings on who owns the sharing economy platforms and on the impact of the sharing economy on social conditions.

So how can we solve this conflict between the interests of the users and the shareholders? Just make the users your shareholders! And offering users a chance to invest in a platform they rely on for their own revenue is not only a way to prevent conflicts, it is also a good way to improve users commitment. Plus if you get a large number of users to join, it can bring the platform a good quantity of cash! For the users, it is a way to secure the platform that brings their income, and to make sure it doesn’t move in a way prejudicial for them. And also to get some cash if some dividend is paid.

After all, we make the platforms for our users. It’s reasonable they should get involved in building them, and become part of them. That sounds just more sustainable and fair. And more collaborative.

 

 

 

 

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Funding free software?

Open Initiative arose from the need to make software in a different manner. To make software that works. To stick to the real needs. To share to go faster. Because that’s not how the industry works currently.

The software industry was built in an industrial culture. Large investments, strong Intellectual Property protection, long development cycles, and standardized products with mass sales. And in fact, that made sense for heavy industry, but it still made some sense, for distribution issues, in the early IT world.

But the Internet came and disrupted all of this. Software is specific because it has no replication cost. With virtually no distribution costs, there is no need for a long cycle anymore. You can make your prototype, test it, distribute it, upgrade it and fix it again. All of this with no heavy cost. No production line to build, no shipment to organize, no stocks to manage. And yet, we still think of IT companies the same way we think of industrial companies.

There is another way. If you invest a lot in a product to get it done, it is crucial to protect it strongly so that you can get good return on your investment. But if your investment is small, it can be better to let others use it, so that you can profit from their work as well as they profit from yours. That’s what open-source software is about. So free software is not only more transparent and fair, it is also more efficient, because it creates an ecosystem on which you can base your work to create quickly very powerful software.

But that’s not all. As software can be updated easily, it’s better to test it as often as possible. Free software makes it even easier because you get a community that can test your software quick and often. So, less risk, less investment, more efficiency, more fairness. That sounds like a good deal right? That’s what we mean by “make software in a different manner”. That’s why Open Initiative came to life.

And you say: if it’s free software, how do you make a living? Well, as Stallman said, it is free as in “free speech”, not as in “free beer”. Free software developers need to earn money, as everybody else. And that’s why we created Open Funding. Free software brings value to everybody. So the price should be shared between everybody. And crowdfunding is about sharing the effort of funding, when free software is about sharing the effort of development. It just makes sense.

So, fund it by the crowd, make it by small steps, let users test and validate, make it open source. This is a different way.

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Crowdfunding free software

Last week we participated in the Rencontres Mondiales Décentralisées du Logiciel Libre and we were asked why crowdfunding is a good model to fund free software.

Since we started our platform we came up with many reasons why it may be the best way to contribute to the creation and innovation in this field. Free software development has long been kind of the “underdog” in the development world and this is because people tend to mistake the “free” for “no money” when it really stands for “open”. Stallman famously defined it by free as “free speech”, rather than “free beer”.

So here’s some explanation on why at Open Funding we find it as a great method to go with:

The cost is lower for funders. It’s different if you try to pay the development alone to pay it with a group of people interested in the same project. The crowdfunding model is simple and appropriate: if more people contribute to the funding of a feature, each one has to give less money to make it to the goal. This means sharing the costs of the work.

This can help developers have a wider audience than they would have achieved in a regular way. Through crowdfunging, they’re creating a community, a group of people who’s interested in their work and are willing to pay for it. These users proved by their funding that they are the most likely to engage for their software, so it is a good core for the community. The developer can use them to structure it’s user community. It’s the basics of community management, but crowdfunding is a good tool for that.

But it goes even further. By offering different options of features to fund, the developer can test his community in a “lean startup” way. He will have a better knowledge of his users’ needs and expectations as clients.

Image: 'Crowdfunding'  http://www.flickr.com/photos/16991062@N07/8661000014 Found on flickrcc.net

http://www.flickr.com/photos/16991062@N07/8661000014
Found on flickrcc.net

Because that’s another difference with Open Funding: our platform is not based on donations but service delivery. That means, developers get paid for a job they’re doing and users obtain a product they’ve paid for. This means a new economic model for free software developers.

Today, most developers earn their living though associated services, but that means revenue is not linked with the development effort, and therefore it’s very difficult to have a dedicated resource on development. The software often suffers from that.

Open Funding’s model is meant to be fair with both sides : there’s a results engagement from developers, and users can have the software for less time and money. The project development also is accelerated, because the idea is make possible that developers can invest themselves on this work on a full-time basis. And the payment is secured, developers don’t have to harass their clients to get paid.

With Open Funding the payment is right where it should be: at the core of the community management. Because getting users to pay for a software they need and love is the best way to create a dynamic and engaged community.

So if you’re a developer this is a way to get the funding you deserve and if you’re a user, the way to have the products you’re in need of. Developers’ work is important, here it is rewarded at the level it should, and users participate in the process as they validate the work done by the developer and can even propose new features to the project.

And that’s basically the spirit of free software. Everyone can participate by their own means to make it better and help it grow, so crowdfunding works in this way, helping improve the creation of free software together.

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