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timgl
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timgl
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Quite a few comments but really like the depth of the article so far.
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| Open source projects have long battled with how to finance themselves. We're lucky to have significant funding and wanted to share what we did to help other cool projects take off. | ||
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| For those who've not met us before, PostHog provide open source product analytics. We went through the YCombinator [W20 batch](https://www.ycombinator.com/companies?batch=w2020), which took place from January to March 2020. We have raised $3.025M since we started in January, and wanted to share what we did. We may well not be a typical company, but we would hope this gives some lessons learned regardless. |
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This leaves ambiguous whether we raised this money since we started the company, or since we started fundraising. i think the theme of the article should be 'we've done this bloody quickly after starting', though that might make us look inexperienced...
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| You get complete control this way. That might make it easier to do the "right thing", or to be more creative in what you build since you won't have to be disrupting or creating a multi billion dollar market as a constraint. However, the financial pressure of payroll in the early days might make it tough to optimize for long run decisions. You need to feed yourself somehow! | ||
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| We think there is also a lot of risk in this route too. Humans get tired and hungry. It takes a ton of drive to achieve a profitable company. Giving up would be the major risk. We felt this was a similarly high level of risk to inflating your burn rate above your revenue. That risk is likely worse with open source rather than SaaS - you'll have to manage to build a free product first, then a paid version (unless you go down the hosted/not hosted route, which can create competition from the cloud providers). |
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I think "you need to manage to build a free product first, then a paid version" should be more of a thread throughout the article, rather than mentioned in passing, as it's a huge difference between normal SaaS companies
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Todo: cover product<>community fit versus product<>market fit
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| If it's a side project and you have no need to support yourself, this lets you work at your own pace and see if you can make a little money doing it, unless you're exceptionally popular! | ||
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| Realistically, it will be very hard to support yourself, let alone to grow a team if you want to build a big business and you have rent to pay. However, this could be a cool way to start before doing bootstrapping or VC in the future. |
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There's an interesting point around donations: there's not a lot of incentive for companies to donate money, and even if they do the amount will be a fraction on what they would spend on actual software.
| * February 14th: We did a mini launch for a few YC companies to get early feedback | ||
| * February 21st: PostHog [launched on HackerNews](https://news.ycombinator.com/item?id=22376732) | ||
| * March 6th: Day 1 of fundraising and first cheque ($10K!) | ||
| * March 12th: Left San Francisco due to covid and started working fully remote from the UK. We had around $350K total investment (including the YC money) at this point. Everything seemed to slow down at this point for 3 weeks. |
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would be interesting to see more of the steps in between (so it's obvious it slowed down for a while)
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Todo: add a 'cash counter' for our bank balance!
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| Once that's done, take a moment to think if anything could have been better for next time. If you get rejected, we found investors were very helpful and nice with giving feedback - just bear in mind the reason for rejection may not be the real reason. Did they just walk out of a bad meeting with their LPs, or did they get burned by a similar company once before? There's an incentive for them not to tell you these things. | ||
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| Do not underestimate how much pipeline you need to build. There is a lot of legwork. My investor spreadsheet ended up with 157 rows. That number doesn't reflect that we often had 2 - 5 meetings with the same person. I would estimate I did about 200 calls, each lasting about 45 minutes, in \~6 weeks, on top of all the booking meetings in. We probably had 30 rejections, usually due to us being "too early", often coming from investors who hadn't invested in open source companies before. At first, these felt disheartening, but after a while it became clear some people love what we're working on, and others don't, so we stoped caring! |
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These stats are great, and maybe should be illustrated or at least put at the top as a TL;DR or something
contents/blog/raising-3m-for-os.md
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| date: 2020-06-02 | |||
| title: How we raised $3M | |||
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As a meta point on the entire article, I wasn't sure who the article was written for. I think it's worth having a single person in mind, and having a title like "How to raise $3m for an open source project" so that the article feels a bit more coherent.
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Thanks for all the above - this feedback is at the exact level of detail I needed. I think it feels a little incoherent. I'll try to make it a bit more "open source" specific - written for someone who runs or is thinking of running an OS project and wonders if they could build a bigger / better project. |
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