Hi guys,
I was wondering if there were some SW people here.
Are there different criteria / dd filters when reviewing an OSS company?
Does OSS come with different valuation metrics? (say 100% recurring revenue, selling/deploying their own OS solution to SMB customers)
Thank you!
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Flying so not going to write out a full response to this right now. But look at Confluent, MongoDB, RedHat, Couchbase (somewhat related to Apache CouchDB) which are all public companies or subsidiaries. They all offer an enterprise solution on top of an open source project and that professional support and enterprise version is often required in organizations where this is mission critical software. MongoDBs multiple expansion and growth is a really interesting case study here.
Also HashiCorp and Elastic. Important to note the split between on-prem and cloud revenue; MongoDB and Confluent were both primarily on-prem and had decelerating revenue when they first went public but their managed cloud products ended growing like crazy. Both companies have accelerating growth at $200mn+ ARR which is insane.
The business model of monetizing open-source code is called "open-core". Valuing on an ARR multiple is fine. Generally, open-core companies have low CAC but run into the open-source cannibalization problem and the "AWS copied our product exactly" problem, both of which could affect future revenue growth.
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