HashiCorp CEO Predicts OSS-Free Silicon Valley

Don’t ask me how or why but then I went to work at a vendor and encountered similar experiences

Previously, the belief was that you'd open source the software and then sell support since you knew the code the best (even though it's open source, the knowledge in the brains of the developers working on the code was not open, and you could extract value by leveraging that knowledge). That's the RedHat model and... well it's pretty dead. No startups today are predicting that will be the profitability scenario for their company since the paragon of the model, RedHat, had to sell themselves to IBM.

The next profitability model was open core, where you open source the main thing and sell integrated services and closed source enterprise features, etc. This model was more promising but it is squashed by companies like Amazon, or even other startups who can wait to see which open source products win, and then compete on those services etc. The main difficulty here is that open core isn't "commoditizing your complement" it's commoditizing your main thing and then being left with nice-to-haves as your business.

So a startup today has to look at this future and decide "open or closed source?" and if they look down the open source future and see no profitability, they just... never take that path. People are looking at companies switching their licenses today and saying it's greed, etc, but the difference is that those open source products exist at all due to a company building it. In the future, without an answer to open source profitability, there just won't be any companies producing open source software.

Open source software might still come from:

* bigcos with extra cash around commoditizing their complements: open sourcing non-core pieces for the purposes of competitive advantage. (e.g. kubernetes and bazel)

* hobbyists building things they personally enjoy working on. This usually precludes solving gnarly inelegant problem spaces like terraform (keep up with all cloud APIs in near real time... at night after your real job!). It also tends to mean there's no particular plan for maintenance or support. I love hobbyist open source, it's wonderful, but there are definitely things it consistently doesn't do well.

They were given the ability to build out their business.

Companies like Hashicorp and other OSS core companies have revenue numbers roughly comparable to what would give you an IPO even 10 years ago. Mind you, Hashicorp is public, and their YoY revenue is around $520M a year.

The issue was they listed to minimize their IPO listing "Pop" (probably due to pressure from late stage investors IME), and this doomed them as a $70-80 per share value is difficult for any company to hold. Companies like Salesforce ($3.95) and RedHat ($14) listed at much lower share prices.

Lots of companies IPOed/SPACed during that time period as a number of the funds matured and needed to return profits to LPs. I know Social Capital had a similar thing happen due to Chamath's acrimonious divorce leading LPs to call their funds earlier. That's probably the most prominent example, but there were plenty of other funds that had a drawdown during a similar period.