Over the past two weeks we've seen three incredible moments in history - Donald Trump’s debut on the stock market, WeWork's long-awaited IPO, and most importantly - GitLab's public market launch!
While there are plenty of interesting characters behind the scenes with all three of these moments - Trump, Patrick Orlando (DWAC’s CEO), Mayoshi Son, Adam Neumann - let's focus on Sid Sijbrandij (CEO & Co-Founder of GitLab) - the least controversial and perhaps one of the most interesting people in the software development world.
Sid’s path takes us from building recreational submarines (true story!) to cofounding and leading one of the top software development platforms (which has been remote from the very start!). Sid also sought to be fully transparent with his company's plans about their product roadmap and published them directly on their website. GitLab has built a platform that has ambitions to take on over a dozen product categories and when Covid broke out and sent everyone home - his playbook on how to run a remote company became an incredible resource to companies of all sizes.
Check out their “Handbook" for how they run the Company.
This week, we spoke with Joseph Jacks (“JJ”), the Founder and General Partner of OSS Capital, the world’s first and only early-stage COSS company investor and platform. JJ has a deep background in open source having founded some of the seminal conferences (Kubecon and Open Core Summit) and having worked on some of the largest projects (Kubernetes). The interview is a gold mine of great advice for early founders and we really enjoyed the conversation!
[Sneak Peek: We’ll be interviewing Mark Hinkle, CEO and Co-founder of TriggerMesh, in the next Newsletter. TriggerMesh recently announced they were open sourcing their platform and looking forward to a great conversation.]
Happy Halloween!
Private Markets
Plume, building a platform for smart home services, announced their $300M Series F led by SoftBank.
Aiven, combining the best open source technologies with cloud infrastructure, announced their $60M Series C extension at a $2B valuation led by World Innovation Lab and IVP.
Parallel, the NFT sci-fi card game, announced $50M Series A at $500M valuation led by Paradigm. Previous investors include OSS Capital, Chad Hurley, Ram Shriram, and Gabriel Leydon.
vFunction, makers of the platform for cloud native modernization, announced their $26M Series A led by Zeev Ventures.
Vue Storefront, building a frontend platform for headless ecommerce, announced their $17.4M Series A led by Creandum.
Spacelift, building a flexible management platform for Infrastructure as Code, announced their $15M Series B led by Insight Partners.
Open Source Security Foundation, working to secure the open-source ecosystem, announced a $10M annual funding commitment from companies including Amazon, Facebook, Google, Microsoft, Ericsson, JPMorgan Chase, Red Hat, Dell, and Oracle.
Akuity, modernizing the cloud native toolchain with Argo, announced their $4.5M Seed led by Decibel Ventures.
EngFlow, speeding up build times through distributed compiling, announced their $3.7M Seed led by a16z.
Remix, makers of a framework to help you build better websites, announced their $3M Seed led by OSS Capital.
ContainIQ, providing dashboards and monitors for Kubernetes native monitoring and tracing, announced their $2.5M Seed led by Lachy Groom.
Public Markets
To track the performance of COSS companies, we’ve created an equal-weighted index comprised of public names including: Gitlab (NEW!), Kaltura, Couchbase, Confluent, MongoDB, Elastic, Rapid7, Fastly and Jfrog. [Talend and Cloudera have been dropped from the index due to their closed acquisitions]
The COSS Index has been in positive territory over the last eight weeks but continues to lag the major indices this year.
COSS Index +5%
NASDAQ +18%
S&P 500 +22%
The COSS Index jumped above the NASDAQ over the last three years as smaller share gainers Talend and Cloudera were removed and large share gainer Gitlab was added.
COSS Index +206%
NASDAQ +112%
S&P 500 +72%
COSS companies jumped to nearly their highest level on our re-index which dropped Talend and Cloudera and added Gitlab. All three indices continue to trade significantly higher than their rolling five-year average.
COSS Index: Current Multiple 18.3x | Five-Year Mean: 11.5x
Emerging Cloud Index: Current Multiple 13.8x | Five-Year Mean: 9.9x
NASDAQ Composite: Current Multiple 4.3x | Five-Year Mean: 3.3x
Interview with Joseph Jacks, Founder and General Partner of OSS Capital.
OSS:
What’s your background?
JJ:
I was fully homeschooled from age two to 16. I had a pretty unconventional childhood. Initially, I wanted to be a classical guitarist for most of my professional career and my older brother Jeremiah happens to be a programmer, self-taught, known as a white-hat hacker. I learned pretty much everything I know about computers and programming from him. When I started working, I was very interested in explaining things to people, doing sales. So I basically had a career of about a dozen years selling enterprise software and technical products.
The first sort of real company I worked for that was like a real job was a French software company called Talend which sold an ETL, the data integration part of data movement. They were one of the early open core companies, like commercial open-source companies. I'd say pretty much everything I'm doing now is inspired and built on randomly happening to take a job at Talend 11 years ago. Over the last six years, I was very lucky to attach myself to the Kubernetes project which ended up becoming a very large open source community and I started the conference around Kubernetes called KubeCon. Over the next few years after that, I continued to have a lot of interest and excitement in open source communities and companies built around open source projects.
I then started blogging a lot about that and scratching my own curiosity, trying to understand how those companies were qualitatively different than traditional, conventional, fully proprietary software companies, technology companies. And then three years ago, I decided to start a venture fund that was focused exclusively on open source companies, companies that are based on a core open source technology and dedicated potentially the rest of my career to doing that. That's the fund called OSS Capital. We're three years old and reasonably stealthy, but pretty active. We also organize a conference called Open Core Summit, which is an annual event and dedicated to educating people about open source company building and entrepreneurship and everything at the intersection of open source technology and commercialization, monetization, and business.
OSS:
Why Open Source?
JJ:
When I first started to really understand open source, it really impressed me at a level of depth that is kind of hard to explain. Open source undergirds kind of everything in the technology industry. It's the reason we have the most impactful and transformative technology companies in the world. It is the fundamental reason why those companies exist. I don't believe Google would exist without open-source before it. I don't think Facebook would exist. I don't think Twitter would exist. I don't think the biggest internet platforms, perhaps even Amazon would exist without open source. Before, open source was called free software. I really don't think that those things would exist. I guess the realization of the fact that open source is so hugely impactful and has been hugely impactful to the creation of the entire technology industry is probably the main reason that I've been such a massive open-source advocate and fan and believer.
OSS:
What’s important for young open-source companies to focus on and what's less important?
JJ:
I think founders should spend most of their time at the early stages in open source, specifically, building open source companies, commercial open source companies. Building a technology that will solve really large and painful problems and subsequently finding large communities that can be nurtured as a result of solving the problems. That might sound really abstract and kind of obvious, but I think that that's kind of the best way to spend your time at the early stages is by building some technology that solves really hard and valuable problems.
And then once that technology is built, really just finding the communities that care about it and growing those communities. At the stage that we invest, that's really all we tend to see are very sharp, talented, and authentic founders and building technology that solves big problems. Maybe they have a community, maybe their community is already forming, maybe they don't have a community, but there's a high level of probability that because the technology is addressing some set of problems or a core problem that is big enough that big communities can be built and focusing on the energy needed to build those communities tends to be the primary focus area.
A couple of things that are the inverse of that with the sort of what to not spend your time on. Don't spend your time trying to convince people that you have a solution to a problem that doesn't exist or that is such a small problem that can't really engender a large community or support a large business. You'll just waste a lot of your time doing that. Maybe you're better off working as part of a larger team or working as part of a bigger company or working as an employee or a team member somewhere. When you're building a company and you're a founder of some new technology company or a new technology startup, you tend to want to swing for the fences and build something really large. At least, that's what I think most people aspire to do. The technologies and teams that end up succeeding there, either intentionally or accidentally just because of pure luck and happenstance and the right place and right time, solve really huge problems that either the world doesn't realize need to be solved or the world realizes they need to be solved and the best technology comes along and solves those problems.
Sometimes it's not the best technology. Sometimes it's the communities that form around projects that really make a huge difference in the world. For whatever reason, third-party validation, external contribution by some large internet company, or maybe some distribution mechanism like a partnership or some integration that pulls your particular implementation of a project further ahead than other competitors. Maybe you're not the right technology, or you're not the best technology, but you happen to be the most successful, most widely adopted for whatever other random reasons helped you get there.
Iterating too slowly is also a big mistake that a lot of founders make. I think in open source in particular, it's probably the biggest mistake. That's a huge mistake when you have an open-source community and a project that is very transparent to the public. You're almost inherently incentivized to iterate very fast and so if you iterate slowly, that's an easy way to lose a huge amount of momentum and lose a huge amount of opportunity.
OSS:
What’s the best way to build a community?
JJ:
I get this question asked of me a lot and I've recently started to think that it's indistinguishable from the question, "How do I get a lot of adoption in the most efficient way," because building communities are essentially... communities are basically your first end-users, your early fans, contributors, people who care about your movement, people who are interested in what you're building, and they can, eventually over time, become super valuable either as potential hires, potential customers, potential investors. There are a lot of synergistic things that come from the community.
I think the best ways that communities are built efficiently and quickly are fundamentally when the technology behind the community is very exciting for the world, is timed well and is addressing a huge set of problems that are very relevant, which related to the timing question. These are kind of indirect ways of answering the question "How do you build great communities?" Frankly, I don't know how to build great communities for bad technologies. The technologies have to actually be really great and solve a range of really critical problems before you can actually consider the question of how do you effectively build a great community.
I think the biggest abstract detail that I've learned from interviewing a lot of different founders who've built huge communities early on and that specific action that caused the sort of snowball to roll down the hill and communities to form and grow over time exponentially larger is having a very low response time average to any activity or any interaction in your community and being really valuable and really value-added in the response. For example, if someone comes by your project, asks a question, wants to debug something, requests some bug to be fixed, asks for a specific feature, responding either within five minutes or five days, in my opinion, will be a critical determinant for how your external users, your community, your potential community, perceives the liveliness of the project and of the technology.
Initially, your community is exactly a community of one. You have one person behind the technology. The principle is responding very quickly to any activity that occurs, whether it's a question about how to do something, a request to make something better, a request to add a new capability, or a new feature. Being extremely responsive, literally within five minutes, at the most an hour. It sounds simple, but I have heard this time and time again from pretty much everybody I've interviewed which is, I don't know, hundreds of people that have built like large open source technologies and products and companies, that in the very early days, being extremely disciplined for the first year or two years, at least, of providing very fast response times happens to be one technique that can actually engender a lot of excitement and interest in people, encouraging more and more people to come into your community.
That's just one particular thing, one particular technique. I think there's a lot of other things that you can do, like great documentation is another thing that a lot of people talk about a lot, which is I think just an indirect way of saying making it really easy for people to be productive with what you're building. Open source oftentimes it's very complex and technical and difficult to run and difficult to deploy, so if you have documentation that makes it a lot easier for people to really understand how to be successful across a set of use cases, that's another really good thing that you can do. If it's possible for you to explain how other people are actually using your technology, using your project, in a way that is impactful and generating benefits for them... for example, use cases or case studies and illustrating those in detailed ways. "We have Coca-Cola using our open-source database to improve the response time of remediating defects in their supply chain," for example. Then you explain how all that actually works.
There are so few open source projects that include case studies and use cases in their documentation. One company that I know that does this with their open-source projects really well, that I always point to, is HashiCorp. HashiCorp has pages and pages of case studies of companies that use Terraform and Consul and Vault and Nomad in a lot of different scenarios. They basically explain in detail how those companies are getting a ton of value and benefiting hugely from using their technology. If earlier stage open source maintainers and engineers included a lot of similar marketing material if you want, or documentation, I think that would be another way that you could make the communities grow.
One thing that I remember from the Kubernetes community early on is that there was a lot of end-user celebration. Whenever anyone was able to somehow get Kubernetes up and running to solve some problem, I remember I would personally always... I was one very small contributor to evangelism and community building and Kubernetes early on, but there was always this huge amount of excitement when you would discover someone out in the wild, in the world, running Kubernetes in some real production way and people were actually doing something real with it. There was always this intense interest in actually understanding how they got there and how they actually ran the thing and how they deployed it and how they configured it and what other systems did it touch and how hard it was to deploy and what the specifics of their particular installation exactly were and how to learn from those and what bugs they encountered.
Just creating content around all those details became super valuable. I guess that's kind of the final thing that I would say. If you can somehow figure out a way to create a lot of content continuously about how people are doing productive and interesting things, impactful things with your project and your technology, that is an incredibly effective way of producing basically feedback mechanisms that allow you to build community more efficiently.
OSS:
What is the Open Core Summit and how can people get involved?
JJ:
Just attend and learn and engage with people. This year we're doing a kind of fun, interesting promotion. 2021 is the year of the NFT. Time Magazine creates a "What the hell 2021 was about" poster. It's going to be 2021 was the year of the NFT, so we actually created unique NFTs with different scarcity levels for every single open source funding round in 2021. There are about 180 companies that raised and announced venture funding for their businesses and every commercial opensource startup from small companies like Strapi to the Databricks billion-dollar series G. We're also celebrating all the IPOs like GitLab, Confluent, Kaltura, a bunch of others, and also all the acquisitions. Each NFT has a decal front and back basically explaining the information behind the events and for everyone who registers at Open Core Summit, we're actually randomly giving these away for every attendee. It's just a collectible NFT that memorializes all the economic activity in the commercial open source category this year.
Yeah. On the attendees’ side, there's a lot of open-source developers. There are executives, there are venture capitalists, there are enterprises, there are cloud providers. I'd say the largest attendee cohort is probably developers, open-source creators, open-source maintainers. We're really happy to see that because more people learning about how to create businesses for their open-source technologies is really awesome. That's kind of our primary objective. On the speaker side, this year we have really high-level speakers like the president of VMware, the head of cloud and board member at Accenture, chairwoman of the Linux Foundation Nithya Ruff, to Mark Shuttleworth, the founder and CEO of Canonical, on up and coming next generation startups and building new companies. We have younger founders that are still starting their journeys that raised their Seed or series A or series B, talking about how they got there, how they raised capital, how they're hiring the teams, how they're building products, how they go to market.