VC Funding

Venture Capital (VC) funding is used by many start-ups to gain money for growth. While this can be useful for a project intended to grow, it’s a common indicator of likely future change as founders look to potentially sell, and as investors desire a return on investment.

Many FOSS projects, especially those which can be used a web-based software services, take on VC funding. Unfortunately it can be seen time and time again that such funding increases the likelihood that a project will eventually change their balance between provided user freedoms and profitibility gains, at least once open source has been successfully used for initial adoption and growth.

Often the changes made will be done gradually, following the rights-ratchet model as described by Simon Phipps. For VC funded FOSS projects this generally looks like this:

• Project is initially provided under a FOSS license.
• Project changes to a strong copyleft license (often AGPLv3) with CLA.
• Project provides an “enterprise” non-FOSS variation with minor features at first.
• Project slowly changes the balance of features between FOSS and non-FOSS variants.
• Project later makes larger changes (pricing, FOSS version availability, management changes etc…) once the FOSS portion has become less significant, and once users rely more on non-FOSS features.