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October 30, 2006 | Comments: (0)
Moving from open source "project" to "company"
SandHill.com is running an opinion piece I submitted "Launching an Open Source Business" which outlines some of what we went through in our funding process.
It's a decent read despite the fact that I wrote it after a severe bout of food poisoning last week. It includes a short list of things to consider during the funding process. The most important thing is that you must be the expert on your product and your market.
Posted by Dave Rosenberg on October 30, 2006 07:44 PM
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Hi Dave, great post!
The one point that your company may have trouble with is keeping costs down as you grow.
You're correct to suggest "keep keeping costs down" as a key tip. It makes total sense while you're growing. But I think you may find it challenging to keep your sales and marketing costs low as your company grows to compete with commercial products. I looked at what Red Hat was spending on SG&A and compared it to commercial vendors and found that it's about the same. And when you compare what % of Red Hat’s total revenue is spent on SG&A (i.e. 54%), it's almost 2x the similar figures from traditional vendors. I used Red Hat as a proxy for Open Source vendors as they’re really the only ones who have public financials ;-)
So, the moral of the story is, like you said, keep costs down. Being an open-source based company won't magically alter your cost structure in the long run....unless you work at it.
Cheers,
Savio
Posted by: Savio Rodrigues at October 31, 2006 02:55 PM
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