The IT sector is facing some pretty tumultuous times. Across the board, companies have been making layoffs. If you have been personally affected by these losses, then I’ll start by offering my sympathies. However, in the middle of every difficulty lies opportunity.

In this environment, starting your own open source project might seem like it would solve a lot of problems. Work on something you love? Check. Help others that might have the same problem? Check. Maybe even turn it into a business of your own? Check.

However, developing a sustainable business around open source is not easy. Here are some recommendations on how you can plan ahead, think about the help you might need to get there, and have a sustainable model in place from the start.

Developing your approach

Making your software project open source immediately means that more developers can use it. However, sustainability means different things to different people. Is it that a project is supported and kept up to date, or is it that the project scales up to meet different use cases with lots of contributions? Can it keep up with developments in other projects and stay relevant for the community? Ideally, your open source project should cover these areas so that you can keep things moving forward from a technical perspective and avoid any issues around compatibility or security.

If you are more ambitious, you might want to create a bigger project, where sustainability would equate to creating and running a business around that project too. It’s here that we have to talk about money. As software developers, we might want to look at what we do as separate from the technology industry which is driven by profit. We might also look at layoffs that seem to be happening despite the companies involved making millions, if not billions in profit, and claim that we don’t want to be involved in that side of the industry. But as much as we might want to ignore this area, it won’t ignore us.

To be successful around these bigger projects, we have to look at areas like maintaining code, managing contributions and developing a community. All this will take cash, which will mean thinking about how to create a business. More importantly, it involves creating a sustainable business that can exist for years to come, and open source is no exception.

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Building up a company

Building a successful open source company involves offering something besides the project itself. Traditionally, this would involve providing support and services around the project that you created, or developing an open core project and then adding more services and products that you sell instead. Today, you may offer a hosted version of your project delivered as a service out of the cloud too. Each of these models will work, but they are very different ways to run an organisation.

As part of getting started, you will have to think about finances too. You can bootstrap your business based on your own cash reserves, consulting revenue or billable work that you have coming in. Alternatively, you can go after venture capital funding, selling part of your business in return for upfront cash to build the business and aggressively go after growth.

Both of these approaches are valid for open source businesses, but it’s important to know that they have considerations to work through. The bootstrapping approach is hard because you can grow as fast as you can build your community, but that will depend on how quickly you see money coming in through the door to fund your team. On the flip side, this does give you the highest amount of control over your business and the path you want to follow. For companies that have smaller addressable markets, bootstrapping can be a much more sustainable option.

On the other hand, there are plenty of venture capitalists that will support open source projects. To go down this path it’s important to understand what they look for in the companies they support. For instance, do you know how many customers you might be able to acquire and what the total addressable market (TAM) would be for your company? Secondly, are you able to track the number of companies using your project in production?

According to Amanda Robson of Cowboy Ventures, having production deployments is the number one metric that VCs will look at before providing Series A funding aimed at building up your business and achieving full product-market fit. While in the past, companies might have been able to get funding for a great idea and some initial development work, today companies will look for multiple production deployments, particularly in enterprise and mid-market companies, and at least $100,000 annual recurring revenue (ARR) before signing up.

This can be backed up with data on social community growth like GitHub Stars or Discord membership, but the focus is much more on proving that a market exists based on data around production deployments. For many VC firms, that market will have to support companies capable of making $100 million in ARR for them to invest. If you can’t track that success over time, you will find it harder to find support.

So, does this set of questions around production use and addressable market automatically discount raising money? It shouldn’t. However, you should go into this knowing what VC firms are looking for in order to invest, and what they expect in return for their funding once they hand over any cash. They have big ambitions so you will have to think big as well. It’s no longer enough to have a great idea and then iterate once you have cash in the bank - instead, that idea needs to be linked to a sustainable, achievable and proven market opportunity.

In this for the long haul

Depending on the market that you look at and the project you launch, you may end up failing. On the other hand, with the right approach, the right data and the right people involved, you can create a successful project that builds a healthy, engaged and dedicated community, and be able to run a business alongside that project. Ultimately, you may be able to sell on to another business or take your company public. Whatever happens, you will need data on how you are performing and where your users are in order to succeed.

Right now, you might not have a specific goal in mind, but you have to think about how to make your business sustainable for the long term. Without a clear business model - and the data to show that you are following that model successfully - you won’t be able to realise your ideas or support a long-term roadmap.

Thinking about these approaches early on is key to achieving your overall goal. The alternative is to attempt bolting on a business model that doesn’t suit your project, or that doesn’t provide you with the support that you need to create a sustainable platform for the future. If you want to manage your own destiny, create software and keep things open source, the choices you make now will have a major impact on your future.