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What open source startups can learn from Confluent’s success story – TechCrunch

It is common these days to launch a business startup based on an open source project, often where one of the founders was deeply involved in its creation. The beauty of this approach is that if the project starts to gain traction, you have the top of the sales funnel ready and waiting with potential clients when you move to market your business.

In the past, this often meant providing helpdesk-like services to businesses that appreciated what open source software could do, but wanted to have a so-called “choke-hole” when something went wrong. Another way for these companies to make money has been to create an on-premise version with some business functionality, especially when it comes to scale or security, the kind of thing large operations need. as table stakes before using a particular product. Today, customers can typically install on-premise or in the cloud of their choice.

“A key aspect of these kinds of data products for technology developers is that they need to have a combination of bottom-up adoption and top-down SaaS, and you actually need to make those two things work well to be successful. ” Jay kreps

In recent years, the model has shifted to building a SaaS product, where the startup creates a solution that handles all the back-end management and creates something that most businesses can adopt without all the hassle associated with it. installation or trying to figure out. how to use raw open source.

One company that has flirted with these monetization approaches is Confluent, the streaming data company built on the open source Apache Kafka project. The founding team had helped build Kafka within LinkedIn to move massive amounts of user data in real time. They opened the tool in 2011, and CEO and co-founder Jay Kreps helped launch the company in 2014.

It should be noted that Confluent raised $ 450 million as a private company with a final private valuation in April of $ 4.5 billion before going public in June. Today, it has a market cap of over $ 22 billion, not bad for less than six months as a public company.

Last month, during the TC: SaaS sessions, I spoke to Kreps about how he built his open source business and the steps he’s taken to monetize his ideas. There are certainly a lot of things to remember for open source startups getting started today.

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Kreps said that when they started the business in 2014, there were a bunch of enterprise-sized companies that were already using the open source product, and they needed to figure out how to get into Kafka and convert it to something that the fledgling start-up could start to make money on.

“There have been different paths for different companies in this space, and I think it really depends a lot on the type of product. [as to] which makes sense. For us, one of the things we understood early on was that we had to be where our customers had data, ”Kreps said.

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