The open-source movement has transformed the way software is developed and disseminated, with one notable exception: hardware. At the very least. Despite this, Andreesen Horowitz has still sought out and funded some of the earliest-stage, open-source startups through their early years.
The startup has recently received a pre-seed round of funding last year, embracing alternatives to traditional open-source models.
AppFlowy, Airplane, Cal.com, and Hopscotch are alternatives to Okta. One common characteristic shared by all these companies is their open-source nature, which has enabled them to secure funding from OSS Capital. The text highlights the juxtaposition between open-source and proprietary approaches, juxtaposing the principles of offering something freely with those of generating revenue.
“The unique appeal of open-source corporations lies in their inherent philanthropy, which harmonizes with capitalistic pursuits that drive sustainable financial returns.” “Initially, they’re incredibly paradoxical – a perfect blend of innovation and naivety that propels them forward, but ultimately leads to their transformation into massive corporations.”
The intersection between “philanthropy” and “enterprise” lies at the core of OSS Capital’s investment thesis, as posited by Jacks – he advocates for a world with more open-source initiatives and underpins his approach to “manifesting that vision” with a capitalist framework.
Jacks posited that capitalism has the potential to foster more effective and enduring positive outcomes than philanthropy. “I envision capitalism as the ultimate expression of philanthropy, with industrial open-source networks and startups serving as the perfect embodiment of this philosophy, thereby facilitating accelerated innovation globally through open supply.”
Open for enterprise
JACKS was one of the first industrial corporations to emerge in response to the widespread adoption of Kubernetes, an open-source container orchestration system spun out of Google. Kismatic, dubbed the startup of entrepreneur Jack, emerged as a pioneering enterprise software company in 2016. Jack’s company also initiated the establishment of Kismatic Cloud Native Computing Foundation in 2016.
Following Kismatic, Jacks co-founded a cloud-based knowledge management start-up, which, although ultimately unsuccessful, served as the catalyst for his thoughts on open-source companies around this time.
Jacks explained that the fund wasn’t the culmination of a grand strategy, but rather a natural progression of his intense focus on open-source companies, which led him to start a blog series that eventually culminated in the establishment of the fund. Lacking any background in venture capital or investment strategies, I felt uncertain about my ability to navigate this complex environment.
In 2018, OSS Capital emerged, founded by Jack, who served as both general partner (GP) and investor. OSS Capital has successfully closed three funds, each totaling $50 million in investments, and is on track to wrap up its fourth fund by early 2026.
While OSS Capital primarily focuses on seed-stage investments, it also participates in select follow-on rounds, such as its joint investment in Collection A funding for W4 Games and the open-source game engine Godot last year. The company has successfully completed more comprehensive due diligence processes for subsequent funding rounds, leveraging a special-purpose vehicle (SPV) to create a distinct entity for individual investments.
While Shopify’s full-stack internet framework offers numerous benefits, it’s essential to consider the various exit options available to developers building admin applications on this platform.
Jacks noted that while the outcome was modest for their company, it has yielded substantial benefits for Shopify.
To date, OSS Capital has made approximately 80 investments, with news emerging earlier this week that Jack will transition his agency from an ERISA-qualified firm (ERA) to a registered investment advisor (RIA) to comply with regulatory requirements surrounding crypto. While Jacks maintains he’s not “diversifying into crypto,” his firm has quietly made several investments within the space over the past few years, including a $40 million investment in capital, alongside Brian Armstrong, CEO of Coinbase.
As of now, OSS Capital boasts a diverse portfolio of limited partners (LPs), comprising individuals with ties to the open-source software ecosystem. Here are these four esteemed technologists: Automattic CEO and WordPress co-creator Matt Mullenweg, alongside Crimson Hat co-founder Bob Younger, Cockroach Labs’ co-founder Spencer Kimball, and MongoDB co-founder Eliot Horowitz. The venture capital firm Andreessen Horowitz boasts an impressive roster of investors, including YouTube co-founders Chad Hurley and Steve Chen, Shopify founder and CEO Tobias Lütke, GitHub co-founder Tom Preston-Werner, and founding Google investor Ram Shriram, among others.
Additionally, OSS Capital counts several larger institutional traders among its investors, including Automattic, the firm’s largest company investor to date since its second fund. Notable figures within the organization’s network include esteemed individuals such as Steve and Howard, both renowned for their investments in the enterprise capital and private equity sectors.
Jacks revealed that he hasn’t actively pursued additional institutional investors, including nonprofit organizations, foundations, and endowments. I’ve yet to thoroughly optimize the design of the fund’s parameters. The narratives surrounding individual traders suggest that these are individuals whom we deeply respect and admire – people who have built open-source companies over the years, having perceived our efforts.
Open community
Are there numerous options available in the market, catering to various needs and purposes? The notion of vertically-specific funding models presents an intriguing opportunity for first-time entrepreneurs seeking extensive industry expertise.
The co-founder and CEO of the innovative startup secured a significant investment in a seed round of funding, just six months after its inception, with OSS Capital leading the way. And as Lopes noted, the initial collaboration yielded valuable insights and connections, paving the way for further development.
“Recognizing the significant investment needed to cultivate a reliable ecosystem, they offered valuable expertise on how early-stage companies strike a balance between open-source and proprietary approaches – crucial insights that helped inform our strategic direction moving forward,” Lopes told TechCrunch. “In particular, being able to collaborate with prominent open-source leaders is an added advantage.”
The introductions featured notable figures such as Bob Young, founder of Red Hat, alongside executives from prominent companies like Elastic and GitLab, who have joined OpenBB’s advisory board.
Despite the allure of open-source funding models, embracing such approaches directly contradicts the notion that lax software licensing can hinder building a resilient and enduring business. Through a collaborative effort with several startups, error tracking platform Sentry is championing a novel licensing model known as “Source Available,” a nod to the realization that while open source offers flexibility, it can also present commercial constraints for startups.
Sentry’s head of open source clarified to TechCrunch, “Open-source isn’t an enterprise model – open source is a distribution model, it’s a software development model, primarily.” While licensing agreements do impose constraints on available business models,
Jacks firmly endorses this perspective, lending unwavering support to its validity. He concurred wholeheartedly, stating truthfully that he was in complete accord. That’s stunning, assuming his venture capital agency is genuinely committed to open source. While OSS Capital’s name may seem self-explanatory to some, for others it might not be immediately clear what the “OSS” abbreviation represents – specifically, that it denotes “open source software.”
However, it’s at this point where we delve into the intricacies of open-source software (COSS), which often focuses less on the fundamental components of the software stack and more on incentivizing the creation of fully fledged SaaS apps through the promise of open-source opportunities. Companies have long relied on the ‘freemium’ model, where their go-to mannequin features open-source software at its core but locks away a significant chunk behind a premium, proprietary paywall. While allowing prospects to experiment with features, host their own content, and customize settings, the platform requires a separate payment for comprehensive internet hosting and advanced business solutions once these needs arise.
What Jacks genuinely struggles to reconcile is the distinction between “open source” and what he actually commits to financially support.
There exists a fundamental dichotomy between “open source” and “industrial open source,” noted Jacks. “Open source is a licensing model, an innovation catalyst, and a philosophical framework – not what we invested in; OSS Capital doesn’t invest in open source.” We facilitate financial transactions that enable clients to amplify their investment, generating significant additional revenue. “I’m driven to achieve my goals and am genuinely thrilled about the prospect of earning significant profits.”
Beneath the surface of this debate lies a massive gamble: that the open-core approach will ultimately triumph over purely proprietary solutions.
According to Jacks, his perspective is that the open core approach will significantly disrupt traditional closed core SaaS companies. “As I’ve consistently maintained throughout our fund’s existence, my conviction stems from Marc Andreessen’s insightful remark; whereas others might argue that software consumes the world, I firmly believe it’s the other way around: open-source is devouring software at an exponential rate.”
Many experts share his concern. In 2020, GitLab CEO and co-founder Sid Sijbrandij launched Open Core Ventures (OCV), which, while sharing a similar underlying philosophy with its parent company, distinctively adopts an incubator approach to building and investing in companies centered around existing open-source projects. According to Sijbrandij, open-core startups are destined to eventually surpass the majority of venture-backed startups, acknowledging, however, that this transformation may take an extended period.
“The openness of our open-core model stems from empowering customers to collaborate – this approach instills confidence, fosters agility, and accelerates development pace, unlike traditional closed-source software.” As the open-core model matures, more entrepreneurs are eager to establish businesses under its umbrella – this hybrid approach lies somewhere between proprietary and open-source, offering a unique blend of flexibility and control. We anticipate that companies will gradually converge towards a middle ground on this spectrum, rather than occupying the polar opposites.
