Intro

Mike: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, founder of Gluu, and this is episode 70 with Patrick Backman, General Partner, CEO and Co-Founder at OpenOcean, and Co-Founder of MariaDB.

This episode uncharacteristically diverges from the normal format. It’s more of a general interview than a discussion on the business model of a specific company. We recorded it a few weeks back on March 1st. The release was delayed because I wanted to prioritize Kevin Muller’s pitch for attending the Open Source Founder Summit in Paris this coming May.

And if you’re on the fence about the Founder Summit, there’s still time. Last night, I had some barbecue with Frank Karlitschek, founder of NextCloud, and he told me that NextCloud did 80% growth on a revenue base in excess of $10M. So, if you want to find out how we did that, and you have the resources, go hang out with him and lots of other talented founders in Paris at the Open Source Founder Summit.

And, as this is a bit of an unconventional episode, maybe now is a good time to set some expectations for The Underdogs podcast for the next couple of years. My plan is to complete around six episodes per year for the next five years and finish at around 100 episodes.

The 100th episode will be Gluu, and you’ll find out how I was able to put all these years of feedback to work in my own startup.

I’ll be recording in person at FOSDEM, SO-CON and All Things Open. If you feel like your startup should be on the Underdogs podcast, or you have a suggestion for a startup that I should reach out to, send me a message on LinkedIn. I’m always on the lookout.

The other reason I’m slowing down is that Emily Omier’s podcast The Business of Open Source is doing a great job, documenting firsthand accounts from business leaders in the open-source world.

If Emily’s podcast existed in 2018, I might not have even started Underdogs. So, if you haven’t listened to her podcast, you should add it to your queue. And thanks Emily for all the hard work, a lot of logistics preparation and post-production work goes into each episode, so 200 episodes doesn’t just happen without a lot of commitment.

With that lengthy intro behind us, let’s finally get back to the interview with Patrik Backman. He’s a bit of walking internet history. And it was a lot of fun to get an opportunity to chat with him, so here we go. Patrik, thank you so much for joining us today.

Career Overview

Patrik: Yeah, it’s a pleasure, thank you.

Mike: Maybe just for the audience you could tell us a little bit about your background, and how you ended up entering the database business.

Patrik: I started actually out of school, out of university, I got recruited into MySQL, or MySequeL, as they say in the US, in 2003, and then I worked six years as part of MySQL database company. From couple of million in revenue, or almost 100, from 50 people to about 600, and then, in the last couple of years, I was part of the management team, I run a large part of product development, and also some business development.

And then, following the MySQL time, we exited to Sun Microsystems in 2008 for $1 billion – that was a great achievement, at least in the European, so to say, start of ecosystem. Following that, we started exploring how to build a venture-capital business. And parallel with that, we co-founded a company called MariaDB, which is a successor company to MySQL. But since 2011, I’ve been operating as a general partner, together with two other partners with OpenOcean, which does kind of invest in the early-stage data software in Europe.

Years at Sun

Mike: I have a Sun Microsystems’ coffee cup. I’m just curious, as somebody who had actually worked at Sun for a while, if you could talk a little bit about what was Sun like?

Patrik: It was quite a remarkable journey. After being acquired by Sun, I was part of the Sun for almost a year, and also part of the integration kind of tasks force to integrate the MySQL company into Sun Microsystems. But I think there was extraordinary talent around engineering overall in the business – it was of course a huge company – 35,000 people – but extraordinary talent, especially a software team which I met a lot, however, the commercial side was quite awkward to me. At the time, much of the philosophy seemed to be — what I noticed was that software was open-source, and for free. And then, the point was to sell hardware.

So, me coming in, with MySQL and still thinking that, ‘hey, it’s an interesting scaling business, there’s a lot of good ways to make business around open source’, Sun didn’t really have that mentality. And we were quite a lot discussing their how could kind of the commercial side be developed around the open-source products that Sun had and many, many great ones.

But then, I think the business side of that was a bit lacking, and they never really got to build that out – the company almost went into insolvency, or big difficulties, and then Oracle acquired it at a quite low price.

Inevitability of Oracle Owning MySQL

Mike: Do you think it’s somewhat ironic that Oracle, the prototypical commercial database company, ends up owning MySQL in the end?

Patrik: Well, what I’ve heard, and this is just ,of course, a rumor – so, “maybe” what people suspect – but I heard rumors that Larry Ellison always kind of wanted MySQL, to have control of it, because it was so popular and it had such a huge impact in the database industry, in terms of popularity, and in terms of power in the web and internet overall.

So, I think there was even some rumors that Oracle even earlier tried to get their hands on it, so to say, one way or the other, especially Sun Microsystems acquisition. Supposedly, it was much tied to the fact that that way they got control over MySQL.

More restrictive licenses resulting from Foss strip mining

Mike: I want to Pivot to MariaDB. I spoke with Michael Howard in 2018, and he was promoting BSL, or Business Source License, which HashiCorp later adopted also after a billion downloads of Terraform. Do you think that companies moving to these new restrictive licenses is a signal that the industry is standing up for itself, and that it’s sort of growing tired of the exploitive use of its software?

Patrik: Yes, absolutely. I think it’s a clear signal. At MySQL, 15 years ago, there was this — maybe today it seems naive thinking that ‘hey, if AWS, for instance, and Google, and Facebook use a lot of MySQL, somehow it will drive a commercial relationship down the line’, which is kind of beneficial to both parties and grateful for everyone.

However, it never really got there. It turned out that nowadays AWS has millions of these installations for their customers, and making a lot of money on them, but still paying really nothing for it. So, it has been clear that big players out there, they really want to use open source as far as they can for free, but themselves making a lot of money on it.

As this has become very evident that money will easily come to this popular open-source platform, then the restrictive license is what you need to go for, so to say. You need to be smart about your licenses so that it drives things to your business needs. Then, a question comes up, of course, for founders out there: what is the business need and the business ambition that the founder has, and different licenses serve different business models.

What is the best open-source license?

Mike:  So, let’s say I invent a new database called PigeonDB, and I want to license it somehow. Well, MariaDB used BSL licensing. Did that work? Like, what license should I use?

Patrik: As a founder, if you want to build a small kind of services business, you can use a free license as you want, very permissive. In that way, it gets maximum popularity, and spread, and awareness and adoption. Then, you can sell some support, or some fixes, or some advisory, or consultancy to users out there. And that’s a good business. You can even hire a few people, maybe tens of people, making even a few millions a year, and that’s a nice lifestyle business. That is a perfectly safe and good choice to make.

However, if you want to do more of a product-oriented business and earn licenses, or earn kind of product revenue for your product, then you need to have some restrictions on that distribution that you have. And I think that MongoDB is a perfect example of that. In popularity, I think MySQL and even MariaDB might be even more popular than Mongo. However, Mongo is making much more money than MySQL or MariaDB for that matter. So, having a restrictive license that prevents, so to say, kind of AGPL preventing the big player from just kind of hosting their own service database services and taking all the money for it.

Do we need a new open-source movement?

Mike:  Bruce Perens at State of Open mentioned the idea that maybe we need a new category of licenses. Do you have any idea if we did, what that would look like?

Patrik: I don’t know directly. I think there’s a good variety of licenses, and of course, one could always write their own, so to say, business source license is a new one created at MySQL and used at MariaDB. What open-source movement kind of have tried to do, or have done for 30 years, is collaborative work around software – it’s mostly the licenses have focused on one downloadable kind of software package that you take and install, and use kind of standalone, or in a combination with other software.

Now, most companies around open source, and also elsewhere, are making money by providing a service online. So, it’s a software service online, a cloud service. And somehow, it’s interesting that, in my mind, there’s a lot of enterprises combining open-source software, using it in their cloud setting for their own needs, but this glue – how they put things together, how they manage it, and so forth – this glue is typically proprietary.

Either they make it themselves, buy some proprietary by someone else, or buy this glue, so to say, from others, and somehow, an openness on this kind of glue between software and how it’s used in a cloud setting, maybe there could be some open-source movement on that. But that probably requires a whole new way of thinking. This is just an early thought, but something I’ve been pondering about.

Is Open Source a Tragedy of the Commons?

Mike: We have a professor here at UT Austin, who’s compared open-source software to a tragedy of the commons. Typically, in a tragedy of the commons, there’s a “freeloader problem”, where the freeloader is causing the degradation of the resource. I kind of argue that, well, what if the resource here isn’t just the software – because there’s no incremental cost to copying the software – but what if the incremental cost is actually maintenance of the project. Because for infrastructure projects like databases, what people really want is a stream of updates to the dependencies.

So, I’m wondering if you could sort of comment on the idea of like, is this “tragedy of the commons” analogy useful, and how do we avoid freeloaders?

Patrik: I mean, it’s built into the model that is open source. If you provide it with a permissive license, then people can use it for free and take benefit, and even maybe in a business way, in a wrong way so to say, take benefit of it, and so forth. But I think what should be recognized, and understood, and respected is that, indeed, anyone building software, even providing a free and open-source software, they should be allowed to have a credible and sustainable business model in order for them to be able to maintain and further develop it. But, then, it’s about what kind of balance you want to strike with what is free and what is commercial, and that’s where the license comes in.

Can the Government Help Fund Open Source Infrastructure?

Mike: There’s over four million open-source projects now. If you add up all the packages, and the repos, and especially the MPM repositories – excluding GitHub, who knows what it is if you include GitHub – there’s so much diversity in open-source projects. It seems like what you’re really saying is not that open source in general should have a business model, but certain types of infrastructure.

The government, let’s say, was going to fund open-source infrastructure to sort of address this freeloader problem – how would they know which ones to invest in?

Patrik: I don’t really know if that can be steered by government, or by any kind of regulating body, or any smart individual in that sense. I believe in the free market that there’s a lot of people can develop, and release, and provide software under different licenses and commercial models, and that it can be free or commercial, or closed-source or open-source. But in the end, it’s up to anyone in need of a certain solution then to decide what they take and on what premises.

I mean, someone might be okay to take something free and be ready to maintain it themselves, and not care about it if there’s a commercial side to it, or a company behind it, or even a developer behind it. Or vice-versa: someone wants to pay something for strong assurance that it’s managed by a company, and resources, and everything.

Beware VC Advice

Mike: I always caution founders that the advice you will get from venture capitalists is the advice of how do you make this into a really high-growth business.

Patrik: Yes. I could also give advice on how to just get maximum spread in different ways. However, what we, of course, think about as venture capitalists is that we try to find those businesses and help those businesses, or founders, that really want to build something significant in terms of a business and not just in terms of following.

Community Lead Growth?

Mike: What I’ve noticed is a trend towards something called community-led growth, where the company raises a bunch of venture capital. And then, they start an open-source project, and try and find a really devoted group of super fans who love what they’re doing, and then they look for a monetization strategy out of that. Have you been seeing that model more, and do you have any thoughts about is that going to lead to high- growth companies, or is it just a risky investment?

Patrik: Well, it is risky, it can work, but it’s often hard. I think specifically what is hard is that those founders, who are able and skillful enough to create a super-quality software that spreads and becomes open-source kind of very, very popular, the way to make money is often: yes, you can do an open-core model and have some commercial features, so to say.

And there’s a few examples of who have succeeded. I mean, Gitlab, and so forth, have succeeded in building kind of more than 100 million in revenue, but no one has really done with open-core kind of billions in revenue. And today, the way to really make money is by providing a cloud service – that’s what Mongo is doing very successfully, and many others.

And to build the challenge for those founders who create a very popular software distribution, kind of open-source software distribution, the mentality, and mindset, and skill set for building a cloud service is very, very different from building a great piece of software that you provide for downloading open source. So, often, the challenge is, and the risk is, how do you bring in that skill if you want to build a very large business.

Should Governments Use Open Source?

Mike: Patrik, you’re in Helsinki in Europe, and there’s a lot of innovation towards let’s say driving digital public infrastructure in the government. Should the government use open-source software, and how should the government consume and procure open-source software?

Patrik: That’s a good question. I think that open source really matters in infrastructure – to go back to the Oracle example, I think what enterprises, but also governments, should think about when it comes to infrastructure, you don’t really want to rely on something, like, a core piece of your infrastructure, where the provider can come every year and ask for 20% more in pricing, and you have no way to circumvent that.

So, a critical piece of infrastructure is, you shouldn’t have a lock-in closed-source component and the company that can squeeze you behind it. So, for infrastructure, it really matters, and then, how they should procure it – there’s always this software kind of service providers consultancy houses that still are needed to kind of sell it, in this way or another.

Yes, maybe the pieces can be free, but someone needs to help glue it all together, and help serve it, and help support it, and so forth. I think the biggest problem really is not in the nitty-gritty details of how government should buy these things, but actually in having a smart, technical person who is skilled in this kind of software, who knows what they’re doing.

Most things that could go wrong in my mind, when government buys software, be it open-source or closed, is that there’s incredible stupidity in the world – they try to, without really understanding the software, they try to do a long list of requirements. And then, the big software house, with maybe 20-year-old software, is the only one who has the resources to really answer all those zillion questions and come up with a packaging that serves all those needs. And then, it costs a billion to implement. It’s just crazy that these things happen with public money.

How to get the word out that open source isn’t free

Mike: I bet you’re talking about Western governments too, having challenges in operation of IT. How do we help all these other governments who want to implement, and we’re telling them to use open-source, but how do we communicate to them that we also need updates of the software, we need maintenance, and we need innovation in order for them to really make these ecosystems work?

Patrik: I must say I don’t know how to inform them, but this notion of “things should just be free”, yes, it certainly exists out there, and most companies want everything to be free, and the government. However, inside IT people understand that nothing is free – you need maintenance, you need support, you need help, you need people around any software to operate, and run it, and of course, improve it, but how to inform and educate people, it’s a good question that I don’t know how to answer.

Is now a good time to start a software company?

Mike: Last question, is now a good time to launch a software startup?

Patrik: Well, absolutely. It’s just tremendous what opportunities are out there. I think we have only scratched the surface of what data software can do, for instance, in all enterprises, in all businesses, in all functions, and probably in society, there’s processes and functions that can be digitalized, automated, optimized and improved. We’ve only seen the beginning of that. And of course, with hyper on AI, it’s a much broader thing than that.

It’s like everywhere in business, in functioning governments, in society, you can start tracking data, gathering data cheaper than ever before, put it together, build algorithms around it very easily to get intelligence out of it, get predictions out of it, get things optimized and automated – I think it’s very fascinating how the world can be improved in so many ways, using software in the future, and in the near-term actually. I think it’s a great time right now to think about wild ambitious ideas and work to implement them.

Close

Mike:  Patrik, thank you so much for joining and sharing all that experience with us.

Patrik: Thank you so much. It was really a pleasure.

Mike: And thanks to Alexander Izza from Resonance Public Relations. Cool graphics from Kamal Bhattacharjee. Music from Brooke For Free, Chris Zabriskie and Lee Rosevere. Next episodes will be recorded at the All Things Open Conference in downtown Raleigh, October 27th – 29th, 2024. This is one of the best open-source conferences in the US, so please join us if you can.

Until next time, thanks for joining.

The post Episode 70: Early-Stage Venture Capital, OpenOcean, with Patrik Backman first appeared on Open Source Underdogs.

Intro

Mike: Hello, and welcome to Open Source Underdogs! I’m your host, Mike Schwartz, Founder of Gluu, and this is episode 69, with Kevin Mueller, Founder and CEO of Passbolt.

Passbolt helps teams securely share secrets, which could be passwords, API credentials or cryptographic keys. It’s one of the few open-source projects in the privileged access management category.

I had the honor of meeting Kevin at FOSDEM in Brussels, although we recorded this episode remotely on Zencastr, auspiciously on the ides of March. So, without further ado, here’s the interview.

Kevin, thank you so much for joining us today on Open Source Underdogs.

Kevin: My pleasure.

Founder Summit

Mike: Before we start the official podcast, I see that Passbolt is one of the sponsors of the Open Source Founder Summit that’s coming May 2024, in Paris. Can you say a couple of words about the event?

Kevin: Yes, absolutely. This is an event that we are co-organizing with Emily Omier. We decided to co-organize this, and basically, to make this event happen. Because we realize that in the open-source world, a lot of funders are not talking to each other. And we basically go through the same hardships, we have the same difficulties, and some of us have some learnings that others don’t. And very unfortunately, and I don’t know for which reason, open-source funders tend to do their own things and not to speak with each other.

So, this would be a fantastic opportunity to put a bunch of open-source funders in the same room and talk very honestly, transparently, without having the need to sell their business ― it is basically open-source funders with open-source funders ― and talk about the hardships they are going through, talk about the problems, the solutions they found, in a very transparent and good atmosphere.

This is the purpose of the event, and I have to say that it’s going quite well. We have already sold all the early-bird tickets, and the event will be happening in May, in Paris. And from where we are, it looks like there will be at least 50 open-source founders in the room so far. So, it’s quite promising.

FOSDEM

Mike: Awesome. So, pivoting back to the podcast, a question for you: did you attend FOSDEM as a student, or as a young person?

Kevin: Yeah! It’s a really good question! I think the first edition of FOSDEM I participated into was ― let me think, in 2000, and I was still a student back then. And I think FOSDEM for me was like Meka of open source, and it was such a privilege to go there. I remember, when I first presented at FOSDEM, we met with the Richard Stallman, Maddog was also there, so, yes, definitely, I started going there as a student.

Origin Story

Mike: How did you go from an attendee of FOSDEM to a founder of an open-source software start-up, and did giving out free swag at FOSDEM this year bring it full circle for you? Or was it more like the “lunatics are running the asylum now”?

Kevin: That means it is very pleasant now to participate at FOSDEM as a founder of an open-source project. I think we went a long way from an open-source enthusiast, when I was a student, to being an open-source founder. Basically, the story is, I’ve always been an open-source enthusiast, not only me, but me and my co-founders.

And my first open-source project was, I think I made it back then when I was 16 or 17 years old. It was a PHP script to browse a file directory but installed as a web app on a server. And it found a bit of adoption back then, I kind of forgot about it. I started my entrepreneurial journey quite early in my life. It happened that, at 23 years old, I stepped in India for an internship. And then, I didn’t leave India for 15 years. And the reason why I didn’t leave is because, when I stepped there, I realized that there is so much potential in that country – everything had to be done.

And I decided to create my first company over there. My first company was a web agency, and we were basically developing web projects or web-related stuff from India, but for French-speaking companies, because I’m French ― you’ve probably figured it out from my accent. And the point that French-speaking companies had with Indian outsourcing is that in India people don’t speak French, and French people are terrible in English. So, even though there was a lot of hype with outsourcing in India, these two could not collaborate with each other. That was the purpose of my company.

And the positioning was quite spot-on because there was A LOT OF French companies, trying to outsource to India at that point, which means that very quickly, we were able to grow the company, and we went from me alone to Remy, which is my current co-founder at Passbolt, who also joined me in this venture, and we grew all the way to around 75 people in the company.

We ran a bunch of other things in India: we created three companies in total. One was also a product company, where we were teaching French online ―very few people know that, but French is actually the first foreign language that is spoken in India, because English is not a foreign language.

We had launched this platform, it became quite successful – we had a few hundred thousand of students that learned French with our platform. And it kind of gave us the taste for building products.

As you can see, none of the things we are doing are related to open source. But when open source came back in the picture for us was actually when we were growing our web agency. Inside the web agency we were developing, we were working with a lot of different customers, a lot of different projects. And one of the pain points that was occurring all the time was the password pain point. So, typically, whenever we are onboarding a new project, the first thing that the customers would do, would be to give us all the passwords and the credentials that we will need in order to do our job.

And most of these guys would send us these passwords by email, or by Slack, or through other channels, which is quite insecure, but to tell you the truth, we are not that much bothered with security ― we are more bothered about the productivity issues that are related to, okay, the password manager is getting those passwords, then he needs to distribute them to the team. How is he going to do that?

So, we tried a lot of things: we tried spreadsheets obviously, we tried emails, then we tried KeePass. And we really loved KeePass because KeePass is a fantastic open-source software. Very simple to install, all our developers had it, it’s considered secure, it has been audited, it is ANSI compliant, and so we loved it for all these reasons. Also, for the fact that you can organize your credentials, and folders, and subfolders, with granularity. So, you can basically follow the same hierarchy, the same structure as your customer project. But where we were very frustrated with KeePass was with the collaboration – we did not want to share the entire KeePass file with the entire team.

Because this gives security problems, but also it is very difficult to have only one file that scales with different people. What happens in practice is like each person will make a copy of the file and start using it independently, and then you end up having 5 or 6 files that have their own life, with the different set of passwords in it, and you don’t have the source of truth any more.

So, Passbolt was built in this context. We wanted a software that has the same properties as KeePass ― basically, that is open source, that is secure, that provides you granularity in a password organization, but on top of that, we wanted a multi-user/collaboration feature.

Actually, the first version of Passbolt was not called Passbolt. It was called absolutely nothing because it was an internal project, and we built it for ourselves, we started using it, and we were really happy with it. So happy that we started sharing it with the customers, partners that were asking for it. And when we realized that a lot of other companies, or people like us, had the same problem, this is when we decided to make a separate project out of it.

And one of the reasons why Passbolt is open-source today is because, very early on, when people were asking us to share the project with them, we were not sharing it― very naturally, we gave them the source code, we explained them how to install it. And after a few months, we started receiving emails from companies who had never heard of us, people in the US, people at the other end of the world, were pinging us for feature requests, or bug reports, and then we realized, “Okay, my God! There is a bunch of traction behind this thing. People are really talking about it. And because we were already sharing the source code, we decided to keep doing it and keep it open source.

Positioning

Mike: So, there’s a lot of password managers out there in the enterprise space, how do you position Passbolt as a product that’s selling to enterprises against all the other options that are out there?

Kevin: I would say this goes back to the origin of Passbolt. The reason why we built Passbolt the way it is, is because we are a technical team. So, the first version of Passbolt as a password manager was basically the password manager for technical teams first. And even today, the way Passbolt is used it is usually adopted by the technical team first. And they adopted it because of three specific aspects of the solution that are really important to us.

The first aspect is collaboration. In Passbolt, you can share passwords very quickly, instantly. With two clicks, you can share one password with one user, or you can share an entire folder with a group of users.  And then, there is inheritance on the permissions management system, and then you can audit also your permissions, you can see if there is something weird happening with the sharing, or password that has been shared that should not be shared ― all this is what I call the collaboration layer of Passbolt, which goes much further than most of the other solutions in the market.

And actually, technical teams enjoy a lot of these aspects, because technical teams are the ones we need to share passwords on a daily basis. And they need to share passwords because they are managing a large number of systems. And it’s not always possible to create one account per user ― actually, it’s almost never the case. You end up sharing the server accounts, or any type of credential you have with other people from your team. And you need to do it fast, and you need to do it securely. So, this is what Passbolt does for you on the collaboration front.

And the two other pillars of Passbolt are basically security and privacy. One of the problems of the existing solutions in the market is that they were initially built for a consumer. If you look at 1Password, if you look at Bitwarden, if you look at many others, including LastPass, the first version of their software was not for team use, or it was not for enterprise use. It was a consumer application, very monolithic ― basically, how can I help end-user open the vault, put this password in it, close it, and then access their credentials when they need it. And they are doing this extremely well.

But then, later on, they realize that, okay, of course there is a market in the price segment. So, a lot of these solutions built their Enterprise layer/collaboration layer as an afterthought. And the result of that is a clunky synergy between the collaboration and the security part of the software. Most of them had to do trade-off on the security. And because Passbolt was built to be enterprise-ready, from the ground up, we could really give it a lot of thought about the security model.

Typically, one thing we decided from the beginning was that the solution should be fully end-to-end. Another thing that we decided was that it is not enough to have just a username and a password to sign in on the solution, to basically authenticate, or to encrypt data ― we decided that no, we need a private key, we need a separate private key on top of the username and the password. And it’s a bit similar to what the crypto ledger’s solutions are doing. Or for example, MetaMask – if you want to connect to MetaMask, you need to have a separate private key that you import in the extension.

We wanted a similar security model, and this is what we did. The security model of Passbolt right now is based on the private key. This is the second pillar. And by the way, this is why we are getting a lot of traction, with a lot of privacy or security conscious organizations, such as national security agencies, or governments – a lot of them are telling us, “Yes, we are choosing Passbolt because you guys are the only ones with this type of security model that is fully aligned with our enterprise requirements.”

And the third pillar of the solution is privacy. Privacy means a lot of things. And I would say open source is included in this privacy pillar. It is the capability the solution gives you as a user, or a customer, to control your data. So, with Passbolt, you can self-host the software yourself, you can download it, install it fairly easily. We have a lot of Linux native installer packages. Basically, you can install it on Debian with apt-get, we are compatible with RedHat, we are compatible with most of the Linux distros there in the market. We are Kubernetes ready, we are providing Helm charts – we make it very easy for you, as a developer, to install it on your server. Then, obviously, the code is open source. So, no need to mention that, but anyone can audit it.

And this is important for a lot of software. But when it comes to cyber security, this is probably where it’s most important. Because it’s not enough to say, “My software is secure.” You want to make sure of it. There is nothing better than open source to prove that, “Yes, your software is secure”, because it’s not only you auditing it ― the entire community is auditing it. That’s how we ensure the privacy pillar of the solution.

Monetization

Mike: What’s the monetization strategy?

Kevin: We have a several type of customers. And I would say, with Passbolt, everything starts from the community ―we have Passbolt CE, as Community Edition, which is, in a way, Freemium, because in open source, it’s not as simple as that. It’s basically your free software that is, free (as in free beer) and free (as in freedom). So, anyone can download Passbolt CE, install it on their server, and start using it. There is absolutely no tracker, we do not ask any questions, we do not know what people are doing with the software ― we just know that they are using it.

So, as of today, on Passbolt Community Edition, we have around 300,000 daily active users. And that’s all we know about them ― we just know their quantity and nothing else. Basically, what’s happening is, because Passbolt is built for collaboration, the people downloading and using Passbolt Community Edition, they are using it at work, not for personal reasons. Because it is not B2C solution, it’s only B2B, only made for teams and businesses.

What’s happening, very organically, is, that once they install it, they start inviting other users, and very quickly, they go from 5, 10, 20, 50, 100. A lot of them will remain at maximum 5 to 10, or 20 for the small teams, and that’s completely fine. But a bunch of them will actually scale their usage. And once they reach 100, 200, 500 users, then their requirements become a bit more sophisticated.

For example, at 500 users, you might want to have SSO in your solution to a Single Sign-On, because it’s a nightmare for all our users. And it will give you support if you do not have an SSO plug-in, or you really want to connect the solution to an active directory, or to any type of directory, in order to make the provisioning easier for your users in your groups. Or maybe, you will have more need for compliance, in which case, you will need to generate more rapport from the solution, or to export your logs.

So, all these features are basically plugins that we are selling in the paid edition of Passbolt: we have two paid editions, we have Passbolt Pro, which is the paid self-hosted version. It is the same thing as Passbolt CE, but with more features, more enterprise features and also Premium support. Basically, they have someone to talk to in the case things go wrong.

And then, we have Passbolt Cloud. Passbolt Cloud is the same as Passbolt Pro, which is basically Passbolt with more features, but designed for people who do not want to do self-hosted. Or maybe, sometimes they have tried to self-host, and they didn’t manage to do it. Then, they’re asking us to do it for them. So, these are two products. The product currently, the paid product that has the most traction for us, is the Pro Edition.

Open Source vs. Commercial Features

Mike: Well, I think you already covered what’s open source and what’s commercial. But what about in terms of looking at your investment in R&D? At some point, you’ll have to invest R&D hours in building open-source features, and then some of that effort also has to go to the commercial plugins. Let’s say, how do you balance in your organization those investment priorities?

Kevin: Absolutely everything in Passbolt is open source. Even when we build an enterprise plugin and an enterprise feature, it is also distributed under an open-source license. And all license is AGPLV3. That’s the license we use for our source code.

For us, it’s like whatever we do is open source ― it’s not even a question. That’s the philosophy behind the product. And then, how do we decide what goes in the Community Edition, or what goes in the paid editions ― well, we follow a very simple mantra.

We know that people using the Community Edition are usually smaller teams. Because larger teams in larger organizations will want to secure the software from a business standpoint. The way we split the features is very simple: what we put in the Community Edition are features that allow smaller teams to gain productivity in their password management. So, obviously, this includes the security aspects, and security is never a trade-off. It’s available in all additions, but productivity is what we are focusing on in the free edition of the software.

Then, for the Enterprise Edition, we are focusing more on compliance and scalability. So, scalability -typically 500 users. I will need more organizational features because of such a large volume of passwords. For example, I need to be able to tag this password in order to add one more dimension.

Scalability is, as I mentioned, I want to plug it to an active directory, I want to do provisioning, I want more logs. So, this is what we provide in the paid edition. And how we decide to split the features ―whenever we have a request coming from the community, or coming from our existing customers, we just all sit together at Passbolt, and we decide on, “Okay, what problem is it actually fixing? Is it productivity, or is it scalability and compliance?” And this is how we do the splits. And we do it very transparently ― all the time, we have a discussion going on with the community, and we announce things beforehand.

How Does Open Source Add to the Business Model?

Mike: It sounds to me, like, open source for you is a distribution mode:  it gets your software shelf space, it gets your product into the hands of organizations that might need it. And then, you’re creating a funnel from that towards enterprise customers. But do you see open-source contributions from developers? Do you guys write all the code? And am I missing something about how you view the importance of open source in the open-source community to the business?

Kevin: Open source is definitely an alignment that we have with all users. And it’s not always the case for open-source projects. For example, if you build an open-source CRM, the fact that your software is open-source, you will probably not talk to the commercial economic buyer at the other end. But in our case, our person has bits on the economic front, or in the free users front, the community front, they’re all technical.

We are speaking on a daily basis with system administrators, DevOps, head of IT, CEOs―these are type of personas that are very sensitive to open source for all sorts of reasons. Because of control, for some of them. For others, it is because this corresponds to the stack that they are using on a daily basis. They’re already on Linux, they’re already using GitLab. And they consider that open source is a bit like a fair trade of software. It has moral values, and they want to go for it.

For some of them, it’s also because of security reasons. Because they consider that when a software is open source, it has some interesting security attributes. I would say that there was a natural alignment for us to make this open source and to bring the open-source values, as part of the marketing message and the value proposition of the software.

Then, in terms of go-to-market, obviously the same dynamic is happening. Because what we see clearly at Passbolt is, most of the search engines related visits, coming to our website, come because of open-source password manager keyword. It happens that there are a lot of companies that have already detected that they need a password manager, so we do not need to tell them ― they understand their need, they understand that they want to centralize, organize, share their passwords, but they have also identified that they want to do it in an open-source way. Hence, they end up on Google and they type open-source password manager. And then, obviously, the offer is fairly limited right now.

There is like Passbolt and Bitwarden. But if you want another price solution, then you are going to look into the specifics of the solution. And in this case, I would say Bitwarden is probably more oriented towards consumer and we are more oriented towards Enterprise and really privacy conscious organization – that’s where they decide for which one where to go.

Pricing

Mike: It’s one thing to know that people really want your product, and it’s another thing to know how much to charge per it. It’s really hard to get pricing right. I’m wondering if you got it right in the early days. And if you didn’t, how did you finally get enough data to get it right?

Kevin: I think no one gets it right from the first time. Our mistake at Passbolt has been like with many other open-source companies: we priced it too low at the beginning. And by the way, I didn’t mention that, but Passbolt was not supposed to be a commercial product from the beginning. When we started working on it with Remy and Cedric, my co-founders, we were comfortable, we had a bit of money to invest in this, and we wanted to have fun building it and really build a great product. But our idea was, let’s build a great product, put it on GitHub and let’s see. And basically, what happens is, once it was on GitHub, we had a bunch of traction – we had a very good traction, a lot of feedback. Organically, some companies started asking us if we had something to sell.

And they were like, “You know, we are ready to pay for this feature because we really need it. Now that we are scaling, we have 100 people on your software, we need more, we need premium support.” So, people started telling us by themselves what they needed in terms of features and in terms of offering. That’s how we went from being completely free to having a paid version.

And we had no clue about like how much we would charge for it. We asked the people that were asking for features. But people are never going to tell you openly, “This is my maximum budget.” So, they will always tell you ballpark figure, but probably on the website. And when we started charging for Passbolt, initially we charged 1 dollar per user per month. And this was fairly low. And to be honest, I think it played against us in the sense that Passbolt was not really perceived as a high-end solution in the security field.

Because price has an influence on how people position the product in their head, how much value they think your software is going to bring to them. So, obviously pricing it too low doesn’t necessarily play in your favor. And I think this is something we see very often in the open-source world. There are a lot of projects that are pricing their solution extremely low because they think they are competing on the price, while, most likely, they have a lot of other attributes to compete on. And this is something we’ve realized quite long after at Passbolt.

From then, we also followed what our competitors were doing. And obviously, we had less features, but probably stronger foundations in our software ― we knew because people would tell us all the time, like they would adopt Passbolt because of the security reasons, because of the security model, because of the collaboration layer. And we knew that they would consider Passbolt to be mature enough for their use.

From there, we decided to iterate constantly on the pricing. Now, once a year, we are basically changing our pricing, increasing it a bit more every year. And we are being quite vocal about it. It means we are informing our customers in advance. We’re having a discussion with them, with the ones who do not necessarily agree. So far, all our price increments have been received quite positively. Some of our customers have even asked us why we waited for so long to increase the pricing, and congratulated us because we did it. I think it’s a very positive signal from them.

Lead Gen?

Mike: It sounds like you’re in a very horizontal market, like the market for customers and organizations that need passwords is, like, everybody, but do you segment the market at all? And other than, let’s say the open-source channel, are you doing any other lead gen in any other segments of the market?

Kevin: No. All our traction and all our customers, as of today, we have around 1,500 customers, the industries where we have the most traction are basically public institutions, universities, and a lot of IT companies or IT teams – this is definitely the biggest sector for us. They all came organically ― we never had to do marketing, we never had to do outbound sales, and we tried it. Because we are a VC funded company, and when you get VCs on board, one of the first thing they tell you is, “Can you scale this thing?”

And it’s very difficult to scale words of mouth, but you can say you can scale your sales organization by adding a bit more outbound sales here, and some more outbound marketing there ― these are all the things we tried. But what we realized on the line is that the cost of acquisition for outbound sales, or outbound marketing, were through the roof, compared to what we can get organically through word of mouth and people who are really happy about the solution.

So, now we’ve completely stopped doing it. We do not do any artificial lead gen, we don’t do any lead gen campaign. The only thing we do is, we focus on building the greatest product we can, making sure community is happy. And what we see in practice is, whenever we deliver a nice feature, a feature that has been a long demanded, or there was a lot of traction in GitHub, immediately it has an effect on the lead generation and people purchasing the solution.

Supporting Old Versions

Mike: Pivoting back to technical question for a second. You mentioned that you have a Community Edition, and one of the challenges we found at Gluu is managing and patching the old software becomes sort of a drag like ― it’s fun to write the new stuff, but nobody wants to patch your version from like six years ago. What’s your policy on how long you’re going to support and continue to patch these older versions of Community Edition? Is it more aggressive, let’s say, than your policy for enterprise customers, with regard to the length of time of support?

Kevin: It becomes a burden, you’re right. But our policy is to make it work as long as possible. So, sometimes we are very surprised, we jump in support calls and realize that some of our customers, or users, have not upgraded their Passbolt for 3 or 4 years, and it keeps working. It’s a bit bumpy, not everything works, but most of it works. So, obviously it doesn’t really incentivize them to upgrade. And you really have to tell them, like, “Look, you should upgrade it, you’re going to get more stability, but also, you are going to get A LOT OF new features.”

And I think this is the main reason at the end why they are doing it. Currently, we don’t have anything built in the software to push people to upgrade to a newer version. And I would say, obviously it gets complicated. It is the way we develop, because then we had reasons to prepare for so many use-cases and so many versions of the API. But it’s a security software. We have to keep it working. It’s our philosophy―we have decided that we’ll do our best to keep supporting all versions of the software no matter how old they are.

We do not do telemetry at Passbolt, which means, we do not know what is in the park of software. We do not know what versions are running out there. So, then it comes to communication. Before we introduce breaking changes, we get very loud about it. We keep sending emails, we keep sending announcements on the community forum. And we pray that everyone has the information at the end and will decide to upgrade.

Is Cloud Better For Customers?

Mike: Is that sort of an argument for people using the cloud service?

Kevin: Well, obviously it’s easier for them, but then it depends on your requirements. If you really want to have something behind your firewall airgap, then you don’t have the choice: you need to go for self-hosted. I mean, what happens in organizations, what we see a lot is, initially, you have a system administrator who knows very well how to do self-hosting. He has everything on track, he’s doing his job, but then, the team changes, the system administrator changes. And then, there is a new guy that comes that does not know how to maintain the software properly. And this is when it gets complicated. Because it’s probably not on his radar, he needs to upgrade the version to a new one, or even that he has anything to do at all.

I mean, this is where we have to be smart at giving the information and be in touch with them, but obviously it’s not always possible. So, yeah, there’s a bit of complexity here.

Future of Passwords and Passkeys

Mike: I think we all agree that passwords aren’t going away for our generations, but killing passwords has become a meme. Does it feel a little bit weird being in a business, where like the common wisdom is you should be killed?

Kevin: Yes. Obviously, it’s not pleasant. We have this joke internally, where sometimes we are comparing ourselves to floppy making companies. A lot of floppy CDs, they all disappeared, but then, you still had a few vendors providing floppy discs because the demand was always there.

I think password is much bigger than that. We don’t think passwords are going anywhere, at least for core audience, the technical teams. Obviously, for non-technical users, that’s what is at stake―removing the passwords. And if I was the CEO of the company, that’s definitely what I would focus on: how can I remove the passwords from everyone.

In any case, at Passbolt, we do not consider this to be a problem. We’ll keep focusing on main use-case of the solution, which is, managing passwords inside technical teams first. And on top of that, our plans at Passbolt are definitely to go towards the passkeys management, and basically, Passbolt is already really good at managing private keys.

Because, as I mentioned earlier, this is core to our security model. That’s what Passbolt knows how to do: we take a private key, we put it in the browser extension, and then from there, we manage authentication and encryption scenarios. If you look at passkeys, it is not far from this principle. It’s almost exactly this principle.

We are already working on features inside Passbolt to help organizations manage passkeys, and we have a lot of customers that are actually waiting for this feature, how to federate their passkeys and add more permission control on top of it.

So, the conclusion: we do not worry about the future without passwords, passwords will keep being there. And for the ones who want to get rid of their passwords, we will have features for them, to implement passkeys and make sure that those passkeys are working properly and rotated when they have to be rotated, and so on.

Closing Advice For Founders

Mike: Kevin, any final advice for software founders who want to use open-source as part of their business model?

Kevin: Talk to your users. It’s really important. I’m saying this because we are advising a few companies, and obviously, we meet with a lot of other open-source funders. And it is very common to see technical founders just being obsessed with coding and technical performance on the platform, to the point where sometimes they forget the value proposition for their users and customers, and I really think it starts from there. We also did the same mistake. I’m not saying that we are better than them, but if I wanted to help an open-source founder save time, then, it would be, talk to your users and understand their use-cases first. Tech comes next.

Mike: And attend the Open Source Founder Summit in Paris, in May of this year.

Kevin: Absolutely.

Closing

Mike: Kevin, thank you so much for joining us today.

Kevin: Thank you, Mike, my pleasure. Thanks for the invitation.

Mike: Thanks to the Passbolt team for all their collaboration. Cool graphics from Kamal Bhattacharjee. Music from Brooke For Free, Chris Zabriskie and Lee Rosevere. If you are wondering why this episode didn’t feature Patrick Bachmann of Open Ocean, tune in next week. I prioritized this episode because I wanted to get in the reminder about the Open Source Founder Summit. Patrick – next week.

So, until next time, thanks for listening.

The post Episode 69: Kevin Mueller, Co-Founder / CEO Passbolt first appeared on Open Source Underdogs.

Intro

Mike: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, Founder of Gluu, and this is episode 68 with Solomon Hykes, Co-Founder and CEO of Dagger, but also formerly the co-founder and CTO of Docker.

Back in February, I recorded this episode at the Civo Navigate conference in my hometown of Austin, Texas. If you want to hear the latest and greatest cloud native stuff and meet companies like Dagger, you should check out Civo Navigate. It looks like they are planning a US and Europe event each year.

This episode is a little on the long side because we cover some questions, relating both to Dagger and Docker. But if 45 minutes aren’t enough for you, there are a bunch of other interviews with Solomon, so just check the interweb.

And with that said, let’s just cut to the interview, so we can get to the main attraction. Here we go.

Y-Combinator Playbook?

Solomon, thank you so much for joining us on Open Source Underdogs.

Solomon: Thanks for having me.

Mike: I’m just going to dive into this with Dagger. Your approach seems very YC to me – who are the developers in pain that build Dagger?

Solomon: Yeah. Dagger came out of a process of talking to a lot of software teams about their pain, and the pattern we saw emerge was the problem of the deployment pipeline. You know, CICD, everything that happens after your code’s ready. But before your application is live, everything in between is just, painful, painful and complicated. And so, we’re focusing on making it a little less painful, a little less complicated. So, it is very YC, it’s the standard Y-Combinator playbook.

Community Lead Growth

Mike: What is the Daggerverse and Daggernauts, and what do you mean by community-led growth?

Solomon: Daggernauts are people who think of themselves as part of the Dagger community. Community is — I mean, it’s an overused word, but it’s really important to us, community-led growth is our business strategy. And the idea is, if you build a product for developers, and those developers are excited enough about it that they will not only use it, but show up on an online chat server to talk about it, come to meetups to talk about it, write blog posts about it, tell their friends, help each other – they become more than users.

You need a new word for that, so we use the word community, and then we market the product together. Sometimes we sell it together, and we write software for it together, so that that can become a way to grow as a business. It’s hard to do correctly, because you have to be authentic, you can’t fake it. Because a community will only form if there’s actually something in it for them, and it can’t be just transactional – they have to feel valued, respected, but when it does work clicks, then it’s very powerful.

Monetization?

Mike: As I understand it, you have an open-source project under the Dagger GitHub – your trademark – and your strategy is to monetize by selling a maybe cloud-controlled plane or dashboard, where enterprises can really see value. Am I on the right track?

Solomon: Yep, totally. Open-source engine, optional proprietary control plane.

Mike: What is the business value that enterprises are actually seeing, where they decide, “Okay. I want to go with the commercial offering.”

Solomon: Well, first of all, the commercial offering is very new. Our priority is adoption of the engine. If an enterprise can use both, that’s great. If they only use the engine, and they need to take a little more time to evaluate the commercial products, wait for a feature to be available, then, that’s totally fine. We’ve designed it that way.
For example, our cloud product does not have a self-hosted version yet. 

So, some customers do not care, and they’ll buy it today. And others are waiting for this self-hosted version. When we talk about the business value of Dagger, we’ll talk about the whole of the platform, open-source engine cloud for the buyer. Either it solves a business problem for them, as a complete platform, or it doesn’t.

Unique Features

Mike: There’s a number of tools in this area already, who are those super fans who say like, “I know about all that other stuff, but that’s not for me. I really need this Dagger.” Who are those people?

Solomon: Usually, in every software team, there is at least one person who’s the designated DevOps person, they’re the person who will have to fix the build, or make it faster, get the CI pipeline going, sort of support the developers in shipping. And then, over time, as the team grows, you’ll have more than one.

And in larger enterprises, you’ll have entire team, platform team, DevOps team, whatever – those people are typically the people who will get excited about Dagger because it makes their job easier.

Developers we help indirectly, the DevOps people we help directly. The main reason they get excited is because we don’t force them to throw away what they have, will improve the stack they have incrementally their terms – that just makes everything else easier.

Prioritizing Core v. Commercial?

Mike: Is there ever any friction when you’re figuring out how to allocate scarce resources at Dagger, on, “We should work on this core feature that is in the open source, or we should work on some features that improve the cloud offering, which will help us monetize.” And how do you balance those?

Solomon: Yeah, it does happen all the time. In fact, we’re small enough that it happens even within the open-source engine. Also, right now, we’re at an inflection point, where the core product is done – well, it’s not done, but it’s well-defined, and it’s well understood. And we have a community of people who are using it and want to use it more and more, which means they’re reporting bugs, they’re asking for features – there’s an incremental roadmap that we’re executing on.
Meanwhile, we’re building out this commercial product, which is, like I mentioned, it’s much newer, and it needs a lot of work. Resource contention is a problem. I don’t think we’ve found the solution. Honestly, focus is our friend here. For example, I mentioned we’ve prioritized adoption of the open-source engine.

So, to be honest with you, over the last six months, I think we got a little bit too ahead on the commercial products. We approached it like we could build both at full speed in parallel, but then we realized, when we looked at what people were asking for on both sides, we realized, okay, we can build both, but we cannot build both at the same level of priority. So, we’ve changed our text slightly, and we’ve decided to make it clear that we are prioritizing the core open-source engine at the moment.

And with the resources they are left with, we’re developing the commercial product. But we’re narrowing the scope of the features of the commercial product – in practice, that meant going from two flagship features to one flagship feature in the commercial product, for example. I think it’s just mostly being realistic and also being flexible adapting to changing circumstances.

Community v. Monetization?

Mike: I’ve noticed that with a number of start-ups, their initial focus is really on getting adoption and getting those super fans and then figuring out monetization later. I’ve also had guests who said they should have thought of monetization from day one and built around that. Where do you come out on that?

Solomon: I think there’s a balance to be found for sure. For example, I’ve just said, we had to sort of scale back a little bit on developing the commercial product. I’m still very glad we started developing it early, and we’re validating it, whether there is something that anyone is willing to pay for, and also, a million details along the way – how much to charge for it, is it cloud or on-prem, what market are we competing in, who are our competitors.

The clock starts the day you start building it. And I do think completely putting off even thinking about it for potentially years can be a mistake. So, we were pretty deliberate about starting early, but then, once you’ve started, you got to manage your priorities – that’s our approach.At Docker, it was all on community and think about monetization later for sure. And it worked. I’m not surprised when you say some people regret not working on monetization sooner. I completely understand.

Why Trademark is important

Mike: Actually, I would like to dive deeper into the monetization because that’s really interesting, but before we even get there, maybe just any thoughts about the use of the trademark, and how you’re approaching Dagger differently from a trademark perspective.

Solomon: At Docker, we underestimated the importance of protecting your trademark when you’re building an open-source platform. Ironically, the best example of doing that right is also the same company that abused our trademark the most – namely RedHat. RedHat really is a great model for how to be extremely open on your code. Red Hat has always been serious about open-source licenses, opening up even proprietary products from companies that they bought. They would open up the code. They really walked the walk on copyright on the license of the code itself, but the way they made it work is they’ve always been extremely strict and enforcing the use of the RedHat trademark.

It is the best model for an open-source business. The stricter you are on the trademark, the more open you can afford to be on the code. In practice, that means this is open source – you can fork all of it and redistribute it. It’s all fair game. You can take all of it or modify it and redistribute your modified version. But you can’t call it in our case Dagger, you have to call it something else.

Ideal Use of Trademark

Mike: What was the impact on Docker as a result of people, or organizations, using the trademark?

Solomon: The problem was the kleenex problem basically, that Docker washing became the problem. As Docker popularized containers, and containers became the hot new thing, Docker became the hot new thing, and the Docker brand became very valuable. You know, the whale logo, everything associated with it – something new, something exciting. This community that was just blowing up – we had I think 120 meetup groups around the world, hundreds of thousands of people physically coming every week to just show each other a cool stuff they were dealing with Docker.

That brand was basically very valuable, and anyone, any vendor could just take it and say, “Oh, yeah, we do that.” Of course, it meant that Docker as a business did not enjoy as exclusive a competitive advantage as it deserved.
And also, over time, it hurt the quality of the experience, because you could go to a random vendor and they tell you you’re getting Docker. So, you install their thing, and you think you’re getting Docker, but you’re getting some weird Frankenstein product that maybe there’s some Docker inside it somewhere.

But the experience is not up to my standards, or the standards of the Docker team. So, you’re going to walk away disappointed, it didn’t work properly, it wasn’t compatible. They said it would be portable, but it only works on this vendor system, whatever the problem is. And now you’re going to associate that negative experience with the Docker brand. So, losing control of your brand is a really terrible thing to experience. The way to not lose control of it is to enforce your trademark in a very strict way.

Mike: Although Dagger is open source, you don’t want anybody doing Dagger hosting, or introducing a Dagger powered product. What about the hosting side? We’ve heard a lot about open-source data. If somebody used just Dagger hosting, we’ve seen WordPress hosting here in Austin – where are the limits, or where are the boundaries?

Solomon: Our approach is, if you think Dagger hosting is a great thing to do, come talk to us, and we’ll partner. Actually, we’re having conversations now that actually becomes forcing function for designing it. Okay, let’s talk about what does Dagger hosting mean actually. What that experience will be is not as straightforward as hosting a database. There are questions of what’s going to run on the client, what’s going to run on the server – those things are still being worked out. So, now we get a chance by forcing people who want to sell hosting for Dagger to come to us.

Now, they’re part of the design conversation, now these potential partners, we are showing them the architecture we have in mind, we’re showing them the feedback we’re getting from our community what they want.

And now, we’re all going to design this together. And if it still makes sense in the end, and they’re still interested, then they’ll get a license to use a trademark. Or they could just say, “You know what? This is great. We don’t need your brand, we just want the code, and we’re just going to do hosting, or something – they change the name, and then they can host it now, they don’t need our permission for that. Keeps us honest at the same time.

Mike: Because they have the right to use the software.

Solomon: Exactly. Because it’s actually open source. There’s no special license or anything.

HashiCorp shows system worked?

Mike: There’s another company I thought you were going to mention when you mentioned RedHat, and I think RedHat’s also underappreciated. But I was thinking of HashiCorp. They actually did and continue to do a very good job of defending their trademark – TerraForm.

However, they did run into some friction with the community. Because, after a billion downloads of their software, they changed to a non-OSI approved license. And there was some blowback from the community. And I think they broke a social contract in a way. By your definition, they did it right, but is there anything they could have done better?

Solomon: I think that episode with HashiCorp was actually very useful for start-ups like Dagger that are earlier in the journey. We’re telling the markets, “Here’s our open-source product, here is our business model around it. And it’s a sound model, and you can trust us that everyone wins.

RedHat was very useful in standardizing part of that model. Okay, RedHat has opened everything, and they’ve been very strict on the trademark. And they’ve been successful, so that helps us make our case. But one question we can’t answer with only that example is, okay, but what if later you change your mind, what if later the founders leave, and the professional CEO takes over? Or, what if you sell? And you can’t say, “No, we won’t.” I mean, because you don’t know. And that’s what happened to HashiCorp.

And what’s wonderful about this example is that it turned out okay for the customers. Because what’s happening now is, there was a fork, it’s run by a foundation. Now, there’s one more option. After HashiCorp made this decision to break the social contract, basically they were punished or rewarded, depending on how you look at it, with a community-run alternative, which customers can now choose to switch to at any time.

Now, I get to say, well, we don’t plan on doing this, there’s no good reason for us to do that, but just in case, a few years in the future we change our mind for whatever reason, here’s what will happen: we’ll get forked, there’ll be a community-run alternative, and you’ll get to use that. So, it’ll be fine.

Mike: So, the system worked.

Solomon: Yeah. I think the system worked. I have no clue if in the end, this is good or bad for HashiCorp, if they made a mistake, or if it’s not that important. I mean, I don’t really have an opinion on that, but I know it helps us make the case for our model now.

Do we need a new OSI model?

Mike: We’ve recently attended SoCon, the State of Open Conference in London, and Bruce Perens gave a talk, where he suggested we need a new open-source definition. And we see open-source companies moving to other types of licenses that are slightly more restrictive. Do you have any thoughts about whether maybe we need some innovation in this area?

Solomon: I think we do. Honestly, the elephant in the room is this battle over what’s open AI – well, there you go [laughing], that’s the problem right now. What does it mean for AI to be open and what happens when the closed vendor has opened in the name, and then you have open-source models that have a closet says, you know, Apple can’t use it, or something. Neither open AI, nor so-called open-source models today, meet the OSI definition of open source. Is that okay or not, that’s the debate. But I think given just the enormous attention on AI right now, if anything causes the state-of-the-art in this area to change, it’s going to be that.

Every other ongoing point of contention is dwarfed by the focus on AI. That’s my opinion. Maybe that’s an opportunity to leverage that attention and that desire for change. And that those tensions channel it into constructive changes to the standard. It’s dangerous, because maybe what ends up happening is the standard shifts in the wrong direction.

It’s possible that we regress, that we actually instead of getting incremental improvement on the current OSI model, maybe we lose benefits of it that we take for granted at the moment. And on top of all of that, even the definition of software itself is called into question. Like, what if all the software is generated by a model anyway.
So, I’m glad it’s not my job to figure that stuff out. I’m glad I’m not the expert.

Does Open Source Pattern Match with a Tragedy of the Commons?

Mike: A professor here at UT, and we’re recording this at University of Texas, Austin, wrote a paper comparing open-source to tragedy of the commons. She asserts that actually open-source economics pattern matches with some of the things that go wrong in a tragedy of the commons and proposes some remedies.

Solomon: I completely agree with that analogy, but I also think it’s getting applied wrong. Because common use of a limited resource – that needs to be replenished, the land. But software doesn’t need to be replenished – it doesn’t matter if one person downloads it, or 10,000 people download it. The bits themselves, once shipped, are not a resource that needs to be replenished. But the maintenance effort, the support burden is. And so, I think the grazing is not when you download the open-source software and then you use it without paying back. I think that the grazing happens when you’re filing a bug on the GitHub repo, and you’re expecting a maintainer to read it and then answer your question.

Or, you are sending a patch that you really need to see merge for your own downstream needs, and you need a maintainer to review it and give you feedback on it, ideally merge it yesterday. That’s grazing.

So, the resource, the equivalent of the land is not the software. I think the equivalent of the land is the people maintaining it. Because those maintainers behind the scenes are burned out. They are holding the world on their shoulders, and a lot of times they’re volunteers. But even if they’re paid, we’ve had people burn out of Docker because the world showed up, and they all wanted the Docker engine, and they wanted this new thing merge, and they needed this bug fixed, and they all needed it yesterday. And some of them were very demanding.

And some of them had millions and millions in contracts on the line, and RedHat was a culprit in that, for example. And we had people burn out not just from Docker, but from tech. Because they just cannot take it. You know, I have great hair now, and I didn’t when I started as a maintainer of the Docker project. We need to solve that. And I think tragedy of the commons is a perfect analogy there.

How to Maintain a Mountain of Open Source?

Mike: You mentioned open AI, and when I look at open AI, I see that it’s built on a mountain of open source. But they have the connection to the customer, which gives them that sort of last mile that enables them to extract value. What I’ve noticed is that there’s an inexorable stream of CVEs. That, because my software is built on a mountain of open source, some of those dependencies are always getting a rear patching once a month, just to keep up with it.

And I think the expectation for an open-source project is not just that it’s open source, but almost like this social contract that you will continue to patch it forever. And when the next log4j happens, we expect you to do it tomorrow.

 Solomon: I agree. Yeah, that’s part of the problem. It’s like an open-source project is a service. The unspoken contract includes everything you’re talking about – ongoing maintenance, ongoing support, ongoing operations of the project itself, running the CI pipelines for it. There’s no system in place for doing that in a sustainable way. I think it’s an unresolved tension in our industry today.

I just think sometimes we go down the wrong rabbit hole, trying to solve it, because we just frame the problem – it’s not a software piracy problem, the problem is not that people are using the software for free to make money because that’s normal, that’s expected. If someone has to wake up at 4:00 a.m. because a really terrible security vulnerability was just discovered and they have to patch it because only they know how. And they were volunteers, and they have billion-dollar companies depending on it, and the billion-dollar companies are the ones calling them – that’s not okay. That’s like fundamental problem for everybody involved. And that’s an actual real-life scenario. That stuff happens. So, yeah, we got to figure that one out.

Lessons from Docker Monetization Battles

Mike: Yeah. This is a global problem, and it’s really hard to solve global problems. I’m going to switch back to Docker, and again, excuse my ignorance, I’m not a Docker expert, about the history either, but one thing I have noticed is that they seem to be doing a little better now.

Solomon: Oh, yeah, yeah.

Mike: And so, monetization and pricing you mentioned, I wasn’t even going to ask you about your price journey for Dagger because it’s too early. Whatever you think of now probably is going to change. But you do have some interesting perspective, I think, on having this incredibly, maybe epically, record-breaking popularity in terms of who loved the software, but then also challenges around monetizing. And then, also now, the ability to see what they’ve done. And I’m just curious if you had any thoughts on what they’re doing now?

Solomon: Of course. A very common thing I hear is, “Docker struggled as a business because they gave too much away for free.” And I really think that’s wrong, meaning Docker was correct to open source, and it never had to be backtracked. Docker never had to change its license and anything while I was there, and after. At no point did Docker have a regret open-sourcing something – there was no temptation to walk it back. I think that’s a victory.

And second thing, there were many, many opportunities to monetize on top of this immensely popular open-source project. And many companies successfully did that, pretty much the whole tech industry made buckets of money off of Docker, except for Docker, for a long time. And that’s not anybody’s fault other than Docker’s.
Docker failed to build a commercial product that was exciting enough for people to buy. That’s the reason Docker struggled. It was purely an execution problem. It was ours to lose, and we screwed it up. And all this typical startup failure ways lack of focus, which comes from an inability to say no to something, so you can actually focus on other things.

And it’s just lack of discipline on hiring and expenditure and strategy. So, ultimately, instead of shipping one great commercial product, we shipped eight average ones. If you look at the numbers, if you go up to the point where Docker got closest to that, and it got recapitalized and split in two, and the commercial part got sold off to Mirantis.

And the core assets, the brand, the open-source tools, the developer tools lived to fight another day. By that point, Docker had spent 300 million dollars to build a 60-million-dollar business. The math doesn’t work out. So, yeah, that was the main reason what caused Docker to be successful now, is a very simple – they had to downsize, sell off that failed enterprise business, they were left with the open-source Docker engine, Docker Hub and Docker for Mac, these desktop apps install Docker on your desktop. The simplest thing in the world. It just so happens that when we shipped that back in 2016, we did not make it open source. So, we have this really easy Mac application: click, click, you got Docker. We bundled that as a binary, and we did not open source it, and nobody cared. And it was free. And then, one day Docker said, “You know what? This application is still free unless you make this much in revenue as a business, and then you have to pay us now.”

And that was it. That turned Docker into a successful business pretty much overnight. So, not sure what lesson to take from that. The product that we ended up monetizing successfully in what, 2020 let’s say. It had been there for four years. You just had to put a price tag on it.

YC Twice?

Mike: So, you’re a new entrepreneur. Are you going to recommend going through the Y- Combinator?

Solomon: Yes. 100%.

Mike: On your second start-up, did you go through YC again?

Solomon: I did.

Mike: Can you talk a little bit about why? Like, you knew everything from the first time around, why did you do it again?

Solomon: It’s a complicated answer. The shorter version is, I joined a little bit later. It’s three of us co-founders at Dagger. My two co-founders, Sam and Andrea, they were first employees at Docker. They left, and they started something new. And I joined a little bit later. The reason I joined later is because I was taking a break, and I was a visiting partner at Y-Combinator for one batch. If you do this thing, they invite entrepreneurs to be a partner for a little while. At the same time, they were asking me the exact same question you asked me, “Hey, should we join YC?”, and I said, “Yeah, you should join YC totally. You’ll meet new people, you’ll get a lot of help.”, because they were first-time founders.

And they ended up assigned to me, so I was their partner, one of their partners. We spent a bunch of time together at YC. I was a partner, they were founders, and we talked about their idea what to do. And then, we got excited about it together. And at the end of the Y-Combinator batch, I joined as a founder, which means that now we’re a YC company, but like technically, I did not go through YC as a founder of the first time, if that makes sense. I did not have the opportunity to make that decision. But if I had had the opportunity, I would have done it.

Because I had been through YC, but my co-founders hasn’t. So, as a group of founders, we had not gone through it together. And that’s very valuable. And also, YC got better over time. New partners, new programs, new resources, and more importantly, more alumni.

So, the other founders in the batch are some of the smartest people you’ll meet. Being surrounded by other founders and talking about your founder problems with them, and then staying in touch and growing your network that way and helping each other after you leave Y-Combinator. That’s incredibly valuable. I always tell everyone, you should join YC if you can. And if you’re an outsider, or a first-timer, then even more so.
And if you say, “Okay. I’m a second-time founder, I’m not going to do it.”, I’ll still say you should do it, but I understand the way you’re not doing it. If you’re a first-time founder, there’s no reason not to go through YC, if you get a chance.

Advice for Open Source Founder?

Mike: Last question. Do you have any final advice for founders who want to use open source as part of their business model? Just some quick advice.

Solomon: Yeah. I would think of it as a tool in your toolbox, as a founder. It can be the perfect tool, or it can be the wrong tool. It really depends on your product, your positioning in the market, your strengths as a founding team. So, I would not blindly apply a playbook. And I would always make sure that if you’re open sourcing something you know why, especially for engineers, engineer founders.

There’s always a pressure to open-source everything, because you want to be loved and respected by your peers, giving things away. Open source is just a shortcut to that. Sometimes, the right answer is to not open source something to withhold it. And sometimes the answer is to open source. It really depends on the situation. So, be strategic about it, my general advice.

Closing Credits

Mike: Solomon, thank you so much for sharing all this with our audience, thank you so much.

Solomon: Thank you.

Mike: Thanks to the Dagger team for volunteering Solomon, to Alex from Resonance Public Relations for suggesting this interview, and to the CIVO Navigate team for the logistical help with the recording schedule.

Don’t forget to check out CIVO Navigate next year if you want to learn more about cloud native technology.

Cool graphics from Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere. 

Next episode, in a slight divergence from the format, we’ll hear from Patrick Bachmann of Open Ocean, in his role as Venture Capitalist that funds high-growth open-source software start-ups, informed by his roles at MySQL and MariaDB.

Until next time, thanks for listening.

The post Episode 68: Solomon Hykes, Co-Founder / CEO Dagger first appeared on Open Source Underdogs.

Intro

Mike: Hello and welcome to Open Source Underdogs. I’m your host Mike Schwartz, founder of Gluu, and this is episode 67 with Peter Farkas, Co-founder and CEO of FerretDB.

Why FerretDB and not PigeonDB? That’s a very good question. Whereas pigeons are underappreciated for their speed and resiliency, ferrets are fierce and furry and loved by everyone, except Rudy Giuliani.

Mike: A MongoDB API, with PostgreSQL storage, Ferret is a database platform that seems to have a similarly wide appeal. I guess, the 800-pound gorilla in this market is MongoDB itself, with around $35 billion in equity market cap. But in addition to MongoDB, Amazon has also implemented a Mongo conformant API that uses some kind of Amazon storage.
Is there a room in this very competitive and well-capitalized Mongo Cloud database ecosystem for a scrappy start-up with a good technical idea and a track record of reliable operation?

I recorded this episode at the State of Open Conference, or SoCon, which is the largest FOSDEM fringe event. If you can make it to SoCon, I highly recommend it. Unlike FOSDEM, it’s a more traditional event with badges and keynotes, and registration, and coffee, or tea, if you’re British, and after the chaos of FOSDEM, it’s a nice change.

So, this year, SoCon rented around five media vans specifically to record podcasts. So, thanks a lot to conference organizers, it was a pretty great idea. And there’s a picture of Peter and I, donning the Underdog’s headsets on the episode website. Well, with that unusually long intro, here’s the interview.

Origin

Mike: FerretDB was founded a little more than two years ago, you were probably thinking about it for a while before that. What was the spark that led you to actually take action and start the thing, and was the plan always to start a business around FerretDB?

Peter: MongoDB decided to leave its open-source roots around 2018, and all of the co-founders of FerretDB have open-source databases for close to a decade. Peter Zaitsev, one of our co-founders, maybe more, maybe 20 years. After MongoDB went public with SSPL and their departure from open source, we’ve been waiting for a couple of years whether there will be a fork, or if the community is going to do something about it, and nothing really happened.

There was no Fork, there was no OpenTofu reaction to MongoDB’s move. And in 2021, we’ve just decided that something needs to be done. That was the time when we started FerretDB as a side project mid-2021.

Project Launch

Mike: FerretDB has over 8K stars on GitHub, which is fantastic, that’s a lot. How did you go about promoting the project to the developer community to build that kind of support?

Peter: That was the beauty of FerretDB. When we started the project, we were not sure whether someone is going to be interested at all. Since there was no OpenTofu like reaction to MongoDB’s departure from open source, we were not sure whether the community even cares.

If you take MongoDB, there’s not a lot of community around the product itself, in a sense that most of the community consists of users rather than developers of the MongoDB codebase. So, we were unsure what will be the reception. And when we started working on FerretDB, again as a side project, we just created a tech demo, we published it on GitHub, and I think, the first 4K stars came in around two days.

So, we did not do promotion, and we did not expect this kind of outpouring interest in FerretDB. And I think part of the reason why the interest was high is because we’re building on Postgres, and the Postgres community really feels strongly about open source and about open-source databases, and they want Postgres to succeed in various different use-cases, such as document database or MongoDB-compatible use-cases. So, I think that most of the support came from the Postgres community initially.

Product Roadmap

Mike: So, what product features do you see as the most strategic to develop this year, or in the near term? And how do you think these features will help the business?

Peter: As much as it sounds crazy from someone who leads a VC-funded start-up, we are not really concentrating on the business part, because we know that the business success comes after strong adoption and ways to utilize FerretDB in meaningful larger use-cases. So, the most important to us is to increase compatibility with MongoDB. We want the user experience to be seamless, in a sense that if you use a certain tool, or framework with MongoDB, you need to be able to use that with FerretDB as well, without modifying anything in your code.

That’s our goal. But this is definitely not easy. There are a lot of features in MongoDB. Some of these features are not used by many, but would still be used by a very popular framework, and then we need to pay attention to that exact framework to make sure that, for example, Meteor utilizes Oplog, which is a duplicated feature in MongoDB itself.

We need to be very conscious about developing features, which would result in many developers being able to use FerretDB in place of MongoDB, through their favorite framework, through their favorite tools. What’s more important for us is to work with the community on establishing an open standard around document databases.

So, we don’t want to chase MongoDB with their features for eternity, that’s impossible. What we want to do is, we want to work with the existing MongoDB alternatives to establish an open standard, similarly to how SQL came to be, where, if you use SQL, you can query a Postgres database, you can query MySQL database, and any other relational database out there.

And when it comes to MongoDB, there’s no such standard – the best you can do is to become MongoDB compatible. But, it’s like saying that MySQL is IBM DB2-compatible. Do we say that ever? No. It supports the SQL standard, implemented it, and that’s why you can use SQL across the board, with relational databases.

So, we want to reach the same situation with document databases, where it’s no longer MongoDB-compatible, it’s compatible with an open standard.

Value Proposition

Mike: Do you actually have customers who’ve raised their hand and said, “I want to pay you guys for your services?”

Peter: Yeah. We were very lucky. I think, right at the second month, we were bringing in revenue, and that was reassuring feeling that this is something which is sustainable.

Mike: What was the value proposition for those customers?

Peter: I think that the value proposition here is that many customers have existing Postgres infrastructure, and they also have MongoDB. And they need to maintain the internal know-how about these very different databases, they need to pay services for both. And they can just combine the two databases into one and care only about Postgres, run FerretDB on top of it, and they end up with a much simpler infrastructure.

Channels

Mike: Is the open source really your only channel? Do you do any other marketing?

Peter: We are, I think, 80% engineering, and then, we pay attention to channel partners – those Postgres providers who are interested in providing further services to their customers. We don’t run an expensive marketing machine. And we feel that we don’t need to, at this point. We have enough on our plate, on our road map to care about.

Priority of FOSS v. Commercial

Mike: It looks like a relatively small team right now. How much of your time does your team spend on R&D, versus providing services to customers? Because there’s always some friction when you’re providing services – are you working on the product or are you helping customers. And those things can collide. How much time do you spend actually on R&D?

Peter: Initially, we signed a contract, which took away some of our focus from R&D itself, because that customer wanted us to develop features which were not on our road map. And right now, what we are focusing on is to team up with customers who need services and features in close connection to what we have on our roadmap.
Meaning that it’s more like a reprioritization of R&D, instead of going entirely different direction with our development efforts. I believe that with this approach we were able to – this is a ballpark number – but I think 80-85% of our time is still spent on developing FerretDB. Sometimes in relation with what our customers would also want us to do.

Community Contributions

Mike: Have you seen any material code contributions from the community?

Peter: Yes. We had a lot of interesting surprises like that. First of all, there are a lot of individual contributors. And we really like them, because they also want FerretDB to succeed, and they are invested. We have four or five new contributors every month.

The most surprising were the likes of SAP, for example. One day, we just woke up to SAP pushing code in our repo, and that was great. Because that meant that it’s not only FerretDB incorporated developing FerretDB, but others who are interested in creating compatibility with their own products and MongoDB using FerretDB. That was also a very reassuring moment that it’s not only us who want to make this happen, but some key players in the industry as well.

Monetization

Mike: I see you’re offering Services, or we talked about that – it sounds a little bit like Percona in a way, which, I guess, makes sense, because I see Peter Zaitsev is also one of the founders. Is Services the main way you intend to monetize? And what are some of the trade-offs you anticipate with this monetization strategy, versus, let’s say, licensing or Cloud, which are the two most common monetization strategies for database vendors?

Peter: We do Services because we know how to do that. I think that’s the short answer. So, working at Percona really taught us how to provide great services to demanding customers. That doesn’t mean that we are not looking at other sources of additional monetization. We are planning to roll out our managed service. So, we will have a cloud-based offering.

The reason why we think that is important is because, if you take a look at the SSPL license, it positions MongoDB Atlas and some of MongoDB partners as the sole providers of services around MongoDB or a MongoDB-compatible database. And we want to challenge that. So, first of all, we want to enable other providers who did not get a seat at the table with MongoDB Inc. to provide services for MongoDB users with FerretDB, but we also want to do our own cloud service offering. And that’s something we are working on, and it’s definitely a challenging task.

Back to your question, Services is just the easiest way of putting an open-source project onto a sustainable trajectory.

Governance

Mike: You say you want to be an open-source alternative to MongoDB, but how do I know you won’t change the license after the project gets some adoption? The project and the trademark is controlled by your for-profit company – why should we trust you?

Peter: So, Mike, would it make any sense to do the same thing as MongoDB? I mean, trust will be required. I’m not going to state, “Hey, trust everyone blindly.” I think whenever you choose a provider for an open-source offering, I think trust is definitely going to be one of the items you need to think about. But doing the same thing as MongoDB in FerretDB situation is just pointless. I don’t think that the market would react in any kind of positive way to that. It’s not something we can afford to do.

Mike: Also, you say that now, but after a billion downloads and you go public, and Pete Farkas is not CEO anymore – the new Pete Farkas might feel differently. Have you considered, for example, Postgres, I believe has a foundation, the Linux foundation is great, there’s several other foundations you could look at – why not contribute the code and make a community governed so that both the trademark and the code are really protected?

Peter: It’s in the works. When we started FerretDB, the traction was not enough to even sit down with the rest of the industry and talk about these things. What I can say at this point is that it’s in the works, so it is going to happen in some shape or form. We don’t expect the market to blindly trust FerretDB, we don’t want to do the same thing as what MongoDB did, we trust the existing mechanism of the open-source community, which is available to us to take care of this. So, we sat down with many in the industry in the MongoDB alternative markets, and we are actively trying to figure out a way on how to increase this trust.

So, FerretDB is not going to be the only company you can get FerretDB from – that’s not our goal. What is going to happen after we do an IPO, for example in 10 years? That’s a question I get surprisingly often. And from my position right now, this is very hard to imagine, but let’s take the example of HashiCorp.

It’s obviously really bad what happened. And the CEO departed shortly after or before, I don’t remember. They did not agree with the direction seemingly. Or just had enough of this whole ordeal of deciding whether HashiCorp is an open-source company or not. But what’s interesting about this situation is that we need to ask the question: Did HashiCorp provide value to the open-source community, or users, in general, in the decade, or I don’t know how long they developed the software?

If you ask me, I think they did. I think they did provide a lot of value and OpenTofu is free to take that over and develop it further. So, it’s not all bad in my opinion. On the other hand, I also would have preferred if they stayed open source and proved the market and proved investors that an open-source company, like HashiCorp, can still exist without changing the license. That would be my preference as well.

Investment

Mike: I have to apologize I haven’t been able to do all my research yet – I heard you mentioned “Venture Capital” – have you raised Venture Capital, and if so, why or why not?

Peter: We absolutely did not plan to raise Venture Capital. Because, first of all, all of the co-founders at FerretDB are coming from a bootstrap background, completely opposite of a VC-funded start-up. And then, after the GitHub project became popular, we started getting a lot of offers from investors, and we rejected a lot.
Before talking to our current investors, the reason why we rejected the initial offers of the investors we got in touch with is because they did not understand open source.

For example, some investors were like, “Okay, and when are you going to change the license?” And that’s not a good start. But there are investors who understand open source, and there are investors who are patient enough that they give the chance FerretDB, or some other company in open source, to provide value to the community, they understand that it’s not all about the license. There are successful open-source companies which took VC investment, and they are looking at those examples instead of, “Hey, how many licenses did you sell last month?”

After meeting investors like that, we were confident that this was the way for us to go. We needed a lot of capital to hire our current team – ten people as of now. And we also needed a lot of time. An open-source project, in order to get the necessary amount of traction – and I’m not talking about GitHub stars – I’m talking about real traction, like the number of contributors, that’s a much more meaningful metric here in terms of measuring contribution.

So, in order for that to happen, you can do all kinds of marketing, and outreach, and developer advocacy, but what you need first and foremost is time, time for the market, time for developers to understand what this is, time for them to hear about it, and then, you have real traction. For that, you need runway, we are already two years old, still running on our initial round. And without taking investment, this wouldn’t have been possible.

Partnerships

Mike: Do you see any partnerships with other business, or organizations, as critical to your success?

Peter: Very much so. Because as I mentioned earlier, the whole point of SSPL is to make sure no one provides MongoDB as a service. Since FerretDB can enable cloud providers and Postgres as a service providers to do just that, these partnerships with them are very important to us. And we are working with many of these companies to roll out FerretDB as a service.

If you take a look at our social media, we are full of these articles or videos, where Supabase, or UB cloud, or Scaleway, or CVO, or some others, decided to try out FerretDB, make it part of their offerings maybe and see where that leads to.

Next hire

Mike: It sounds like you’re being rather capital efficient, in terms of hiring and building the team. What do you think are the most important roles for you to fill in the next year or two?

Peter: For the initial years, R&D is the obvious reason why you would want to hire. So, you hire engineers, you hire very capable technical people, but as the product matures and as there are more users, you need more service-oriented people, salespeople, marketing people – and this is what we are seeing as the next evolution of FerretDB as a team, where we have more people who support the business side of things.

And by supporting the business side of things, we increase the sustainability of the project itself. We are really talking about a project and a business next to it. These are really two separate things in my mind: FerretDB as a project and FerretDB as a business. And for the last two years, we were focusing on the project. And as the project evolves, we will need to focus on the business.

Mike: Maybe just to make it a little more specific, what’s the next “hire” you’re looking for in the executive team?

Peter: The next hire would be sales, I believe. Simply because pricing and coming up with terms for a contract is definitely not something which I, as a service-oriented person, or engineers developing the software, should come up with.

Advice for Founders

Mike: You’ve been involved in a couple of start-ups. I saw you founded more than one company. My closing question is, do you have any advice for new entrepreneurs who are launching a business around an open-source software project?

Peter: I think that the best advice I could give, especially talking to some founders just starting out, is to try and solve a problem, rather than to find the technology you fall in love with. Solving a problem is a lot more important than what is going to give you traction, that’s what is going to give you opportunities. If you just find a cool technology you want to play with, let’s say AI. Okay. But what are you going to use AI for? That’s the question. AI – that’s not a product, that’s not something you can do anything with, or your customer would be able to do anything with. What is the problem that AI is going to solve, or your new database is going to solve. I think that’s the real question, and not all founders raised this question initially, I believe.

Why Ferret?

Mike: Okay. I said it was the last question, but I’m going to ask you one more question. Mongooses, they’re kind of badass, they fight cobras, and ferrets are kind of cute and cuddly – are you sure you want to be a ferret?

Peter: The story of ferrets and why ferret, that’s the second most common question I am getting. It’s just insanely hard to find the domain name, let’s face it. We were ferretdb.io, not even .com. Just recently, we’ve been able to get the expired domain ferretdb.com, because there was a database of various kinds of ferrets at ferret db.com. So, it’s insanely hard. I think the naming of the companies by far my least favorite thing, and I would not tell you the truth if I would tell you that we had this concept initially.

Because none of us are native English speakers, but after naming FerretDB FerretDB, we found out that to ferret out is something that exists in the English language, meaning to carefully search for something.
And I think that’s just a great name for a database in the end. Because that’s what the database does. So, FerretDB? FerretDB it is. I don’t think it’s rare to find weird animal names in open-source anyway.

Closing – Credits

Mike: Peter, thank you so much for spending time today. I love what you guys are doing. And thank you for sharing your experience with our audience.

Peter: Thank you so much, Mike. It was an honor to be here and hope to talk to you soon.

Mike: Thanks to the FerretDB team for the cool stickers and the social media retweets. Cool graphics from Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere. Special thanks to Alex Izza from Resonance Public Relations for the logistical help. Actually, Alex has suggested two more interviews, which you’ll hear in the next two weeks: Solomon Hykes, founder of Dagger and formerly co-founder of Docker, and Patrik Backman, one of the co-founders of MariaDB and an original team member of MySQL.
Hopefully, I’ll have that out in the next week or so. Until then, thanks for listening.

The post Episode 67: Document Database FerretDB with Peter Farkas, Co-Founder/CEO first appeared on Open Source Underdogs.

OSFS Website: https://05f5.com/

Intro

Michael: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is a special episode to promote the inaugural Open Source Founder Summit, which is happening in Paris, May 27th and 28th.

Talking about this event is Emily Omier, host of The Business of Open Source Podcast, and along with Luxembourg Passbolt, is providing the initial activation energy to get this new institution of open-source entrepreneurial collaboration off the ground.

If you haven’t heard of Emily’s podcast, you should add the Business of Open Source to your favorites’ list right now. She’s recorded more than 200 episodes in the last 4 years. So, if you listen to all of them, I guarantee you’ll be much more prepared for your start-up journey.

Why Launch the Open Source Founders Summit?

Mike: Okay. Here’s the interview with Emily, so she can fill you in on the rest of the detail and why she’s interested in doing all this work to make this event happen. Emily, thank you so much for joining us on Open Source Underdogs today.

Emily: You’re welcome. Thank you so much for having me, Mike.

Mike: The reason I thought this would be a good idea is because I heard that you’re organizing a new conference. Maybe you can tell us a little bit about why you’re doing this?

Emily: Yeah, that’s an excellent question. So, the conference is called Open Source Founder Summit, and we can also have a long argument about semantics about whether it’s a conference, or a summit, or whatever it is.

A retreat, the rationale, or the motivation behind this event is several fold. I am a positioning consultant for open-source companies. I go to a lot of open-source conferences of all kinds, including actually a couple that are focused on business. And I always felt that there wasn’t any events that sort of represented the entire breadth of open-source businesses.

So, there was actually a specific conversation that I had with somebody before the Heavybit DevGuild’s conference focused on open source last May, and in this conversation, this other person was talking about how there’s no unicorn open-source companies in mainland Europe.

And I said, “Well, what about Odoo?”, which people don’t know about it is an open-source company that’s based in Belgium, that has 2000 employees around, and in fact, actually does have a $2-billion valuation. But anyway, this person I was talking to was like, “Oh, no, no, Odoo is a unicorn.” I actually didn’t have the numbers there with me, so I was like, “Okay, whatever. I’m not sure.” I didn’t argue back.

But it got me thinking about the fact that Odoo, which you may have noticed, is like one of my favorite open source-companies success stories – it’s totally left out of a lot of these conversations because a) they’re in Belgium, which is like fabulously uncool, it’s like as far away from the tech centers as possible. Maybe not quite, but it’s like, they’re in Europe, and they’re not even in Berlin or London – they’re in Belgium.

They’re not Dev tools, they make business applications, or like an open-source SAP, and so because they’re not Dev tools, they’re left out of a lot of the conversations about open source.

They didn’t go public, they did get some venture backing, but most of it was a while ago. They’re a profitable company. Basically, like they’re a company that I think most founders would consider a massive success, and yet, sort of left out of the conversation.

I was feeling like a lot of non-Dev tool open-source companies were left out of the conversation, a lot of non-venture-backed open-source companies were left out of the conversation, and it just seemed like there should be a place to get open-source founders together that was going to represent sort of all the different voices of open-source companies.

I’m going to add one more thing, which is, that, in general, I think a lot of conference talks are not super actionable, and I wanted to create a conference that was going to have content that was really actionable for people.

What is the format?

Mike: I was thinking about this last night, and I was wondering what the format is going to be. Because almost all the founders could probably be speakers. So, what do you envision the format to be, and how do you see this differing from, for example, I interviewed Joe Jacks a couple of years back, when he started, or launched the Open Core Summit – how do you see it being different? And what do you think the format’s going to look like?

Emily: First of all, this is a small event, so, maybe 6 years from now, this will be a bigger event – we’ll see. But we have a maximum of 100 people. So, that, in and of itself, is a different format from a lot of events, but we do have a couple of speakers, we have 10 that we’ve reached out to and are sort of the main speakers in the mornings.

But there’s also going to be lightning talks and breakout workshops. And the hope is that everybody who wants to do either a lightning talk, or to moderate a workshop, a breakout workshop, will be able to do so.

Another thing that’s different about this conference is that it’s invite-only, it’s curated. You can request an invite, BUT that means that only people that we, the organizers, feel like have something to contribute to the conversation are going to even be in the room. And this, I think, is very different from a lot of conferences where anybody can buy a ticket and show up.

Why Paris?

Mike: We didn’t mention the dates. I believe it’s the last week in May, in Paris, but maybe you can tell us a little bit about why Paris, and how’s the weather in May in Paris?

Emily: The dates are May 27th and 28th. I am an American and I do live in Paris, so yes, part of why it’s in Paris is because it’s convenient for me. I am organizing this conference with somebody else – his name is Remi Bertot, he is the founder and CTO of Passbolt, which is a security-first open-source password manager.

They are based in Luxembourg, so Paris isn’t terribly inconvenient for him either, but I actually think doing this conference in Europe is also just in and of itself a good idea. Or I will say, particularly not in Silicon Valley.

I feel like part of the goal is really to create community among open-source founders and have this broader conversation. If you are a founder and you live in San Francisco, it’s much easier to find community and to know other open-source founders, whereas if you live even in a place like London or Berlin, it’s actually quite a bit harder to find that community.

And one of the goals here is to create community among open-source founders. And I should mention that our real hope is that this isn’t just a one-off event, but that it sort of becomes something that’s both an annual event that happens every year, but also that there’s sort of a community that brings people together throughout the entire year.

So, yeah, I think having it in Europe as a way to, again, bring more types of open-source companies, who don’t fit the mold of just like your standard Dev tool venture-backed Silicon Valley company, I think it makes a lot of sense.

Mike: And the food’s going to be really good.

Emily: I didn’t talk about the weather. The weather is usually quite good in Paris in May. Bring your spouse, bring your spouse!

Who can attend?

Mike: Yes, that could be one of the selling points. And a quick pitch. I heard you mention that Remi from Passbolt is going to help you organize this, and Kevin Muller from Passbolt, we’re arranging for him to be on The Underdogs podcast. So, sometime in the next month or so.

That’s another great company that people don’t know, all the time based in Europe in the security space. If you’re not a founder, is there any room for non-founder who else might want to attend this event?

Emily: Yeah. If you’re in a leadership role at an open-source company, you should come. We are calling it Open Source Founder Summit, but basically, if you lead marketing at an open-source company, you lead product at an open-source company. Even if you’re not a founder, this is like a place for you to be.

I just didn’t want it to be like 50% investors, for example, or 50% people who are going to be trying to sell to the founders. You don’t have to just be a founder, we do vet people, so you can’t just go to the website and buy a ticket – you might have to make a case. But, like I said, if you’re in a leadership role, it’s just going to be me, sending you an email with the ticket link.

Takeaways from Podcast

Mike: Some of my listeners might not know that you host a podcast called The Business of Open Source has more than 200 episodes, which is amazing. Can you tell me a little bit about the podcast and sort of your journey with a podcast, what you’ve learned along the way?

Emily: Yeah, sure. I do host the Business of Open Source, I take a pretty broad mandate on talking about the business of open source. So, I talked to founders, but not only founders, I also talked to other people in leadership roles, I talked to investors, I like to talk sometimes to big companies, and there’s actually some interesting things that I’ve learned from having so many conversations with people.

Actually, I think that this is one of the reasons why I’m so excited about having like a slightly wider lens on open-source companies.

First of all, I think there’s more business models for open-source companies and people sort of realize it a lot of times. I almost feel like we talk about open core and SaaS as if they’re the only options, but they’re not. And I think that it’s really interesting to talk with people who are trying to sort of novel ways to monetize open source.

Another takeaway I have is that it’s really good to sell to the government. If you’re an open-source company, governments really like transparency and being able to run their code on-prem, or run their software on-prem and stuff. So, that’s definitely a takeaway.

Some other takeaways — I actually did a talk about this at OpenCore Summit in December — another takeaway that I have is that open-source companies can be really hard mind games. Not just for founders. I think this is really underappreciated actually. Because it can be really hard to hire people who have experience with open-source companies.

If you’re starting an open-source company yourself, you hire a salesperson for example, and that salesperson has never worked in an open-source company, doesn’t really know what process is like.

And it’s different, and they’re going to have more of a learning curve than they expected, and there’s going to be all this weird stuff about like losing deals to your own open-source project that’s going to mess with their head. And it’s just something to be aware of, I think. If you’re running an open-source company, think about, is this a mind game for yourself, but also what about the team.

Still Learning after 200 episodes?

Mike: So, along the way from doing this podcast, what I’ve discovered from doing my own podcasts is that open source is way more nuanced than I thought it was. And did you think you knew a lot going into the podcast about open source, and have you been surprised, and are you still discovering new stuff even after 200 episodes?

Emily: I did not think that I knew a lot about open source when I went into the podcast. I mean, I’m constantly surprised. Sometimes by really dumb stuff, like, somebody mentions a project, and I haven’t heard of it, and later you are like, how the hell did I not hear about this. Like, you really feel like an idiot. That still happens to me. Stuff just like ideas, or concepts, that haven’t come up before. Yeah, I’m always learning. And I would say this, sometimes people have asked me, “What’s your secret for staying up to date?”, or whatever. It’s like the secret is the podcast. I do really enjoy doing the podcasts, and I learn a lot from it.

Focus of Consulting?

Mike: Okay, maybe one last question. Because I think you said you are an open-source positioning consultant, can you tell us a little bit about exactly how you help companies, like what does your consulting work revolve around?

Emily: That’s a really good question. I am a positioning consultant, and I work with open-source companies. And fundamentally, a lot of my work revolves around helping companies a) figure out how to place their entire company in the marketplace and b) figuring out how to manage the relationship between their product and their project. Both things are really critical.

So, a lot of people think about positioning, and they think about marketing. This is actually false, so positioning is fundamentally about understanding your place in the ecosystem you’re working in, even which ecosystem you want to be playing in, and then, understanding the differentiated values of your project and of your product, understanding the difference between the two.

And that is going to have cascading effects through your product roadmap, your project roadmap, your whatever marketing you’re doing for each of those things, and whatever you’re doing for sales for those three things.

So, I think of product sales and marketing as like the pillars of go-to-market, and that’s what I help companies figure out. But because I specialize in open-source companies, it’s largely about being really clear on the nuance difference between project and product.

Final Thoughts

Mike: A lot of people don’t know that the reason I started this podcast was to help other founders not make the mistakes that I made in starting my open source, and getting a lot of the things that you’re talking about confused, or not positioning well. So, I think there’s a lot to learn. I would encourage everyone to think about attending this conference. And with that, Emily, any last words you want to add?

Emily: Come to the conference May 27 – 28. If you want to lead a lightning talk or moderate a workshop, we need to know by March 15th. You still have to buy a ticket if you do so. Because, again, everyone who’s coming, has something to contribute, and we actually hope everybody is either doing a talk or leading a workshop. But we have to have a schedule in place, and it takes some time to do that.

Anyway, we want to know by March 15th if you’re interested in doing that. But, yes, come – Paris is beautiful in May. The event I think is going to be really awesome. There is nothing like it anywhere in the world, so come.

Closing

Mike: Emily, thank you so much for sharing all this info. Best of luck. And I wish I could be there, but I’ll certainly be following online.

Emily: Excellent. Thank you, Mike.

Mike: The website is 05f5.com. May 27th and 28th, in Paris.

If you’re an open-source leader, it’s a great opportunity to learn from and with your peers and have epic bragging rights about being at the first Open Source Founder Summit.

Cool graphics from Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere. 

Next week, Peter Farkas, Co-founder and CEO of FerretDB. Until then, thanks for listening.

The post Episode 66: Open Source Founders Summit 05f524, with Emily Omier, Founder first appeared on Open Source Underdogs.

Intro

Mike Schwartz: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is episode 65 with Nick Schrock, Founder and CTO of Dagster, a platform that helps companies create data pipelines, which is critical to transform and update data in order to make it useful, for example, to generate reports, content, or other actionable information.
Dagster might not be a blueprint you can emulate. Like all start-ups, there are some hard to replicate serendipity that enables Nick and his team to build this amazing company. But as Machiavelli says, “Great leaders need both – fortune and virtue.” In other words, you need to be good at what you do, i.e. virtue, but they also need some good old-fashioned luck.

But what separates a really successful founders, like Nick, is the ability to harness fortune and virtue and combine it with some deep insights about the market, and turn it into a profitable and fast-growing venture not easy to do.

So, with that said, let’s cut to the interview, and let Nick tell you, in his own words, how Dagster evolves.

Early Career

Nick Schrock: Great to be with you.

Mike: Nick, thanks for joining us today.

Mike: Can I just go back a little bit and ask you to share some of your story about how you ended from going from the University of Michigan Computer Science to working at Facebook? So, that early period – how that happened?

Nick: Oh, I wasn’t expecting to talk about the preface book days. I’ll do the quick version of that. I graduated from Michigan in 2003, and I actually went to work at Microsoft, right out of school. And Microsoft’s a great company, and they treated me well, but… 

And actually, the division I was in was the developer division. And I thought that they were just extraordinarily talented, but at that time of my life, that wasn’t for me, in terms of working at a big company.
I wasn’t actually sure if I wanted to do software anymore, so I went to the London School of Economics for a year, because I thought I might want to go more into finance, or even government service – you know, I was a young man kind of searching around.

But I ended up getting back into software. I worked for a healthcare start-up out of Ann Arbor, which is where Michigan is, for what – 2 and a half years.

And then, I went to Chicago to try to do a start-up. That was very quickly spun down because me and a friend, who had worked in the finance industry, we wanted to do it, but then, it was about 6 months before the financial crisis.

So, that was incredibly poor timing. I spun that down, and actually, turns out a friend of mine, who I knew from Microsoft, kind of heard that was on the open market, and he just reached out and was like, “Hey, I’m working at Facebook, it’s really a special place. You should consider looking at it.”

And I was looking at staying in finance in the Chicago area. And I flew out to Facebook, and it’s just the vibe difference between a place like Facebook and a hedge fund in Chicago cannot be overstated.

You know, everyone at Facebook was young, super excited, idealistic, the office was incredible – there was just all this energy versus all these miserable people working in the hedge fund. So, the choice was obvious from there. And then, off to the races after that.

Why was Facebook so innovative in 2009-2015?

Mike: So, what was it about Facebook in 2009 that made it such a hotbed of innovation? Like, what new problems were they trying to solve?

Nick: The engineering-driven culture there, combined with the actual product that was being built. So, the product grew at unprecedented rates, it was used in unprecedented ways and was data intensive also, in kind of an unprecedented way.

We were forced to kind of do a lot of innovation on the fly in incredibly constrained environments actually, both in terms of resources, timing – you know, we had to get stuff to work. And I think that it is true that those constraints do breed innovation.

And that time of period was interesting because in 2009 – how to put this – we weren’t really taken seriously as an engineering organization, I felt. And then, fast forward say 4 to 6 years, and we were taken very seriously as an engineering organization.
It was really cool to participate in that. And in the end, if you look at the output from that eng org at that time, it really is pretty extraordinary in terms of what systems were built internally as well as what was open-sourced.

Technical Origin

Mike: So, few years back in 2018, after being at Facebook for, I guess, maybe 8 or 9 years, you decide to start a company called Elementl, which becomes Dagster Labs. Can you talk a little bit about how that came about?

Nick: Near at the beginning of my tenure at Facebook, I helped create this team called Product Infrastructure, whose mission was to make our application developers more efficient and productive. So, concretely what that meant is that we build internal frameworks and abstractions for the engineers who actually built the site and the mobile apps to build product.

That team did a lot of great work, and we ended up externalizing about a bunch of that work in the form of open source. So, React came out of that group – I had nothing to do with React, but kind of the people across the hall from me, so to speak, produced React. And that obviously went on to be an extremely successful open-source framework. And then, what I’m personally more affiliated with is, I’m one of the co-creators of GraphQL.

I’ve lived and breathed developer tools for a long time and also seen the impact that open-source adoption at scale can have. So, that was definitely on the mind when I left Facebook in 2017, and figuring out what to do next.

And in fact, I was going around the Valley and talking to companies, both inside and outside the Valley actually, about what their biggest technical liabilities were.
And this notion of data, an ML Infrastructure kept on coming up over and over and over. And I decided to dig into this, and very quickly I discovered that this area kind of pattern matched to what I care about and the types of problems I want to work on, typically the things I like to work on is to share a bunch of properties.

One are just engineers in pain. Like their dev workflow is broken, they have bad abstractions, they’re not productive, and purely because of tooling and abstraction reasons – that actually kind of makes me angry and frustrated on their behalf. And on a personal level, I feel that is really motivating.

Second involved finding – yeah, I like to call it like “a problem that matters”. I like working on really broad horizontal problems that could potentially have impact on millions of developers, kind of core essential problems that matter.

I was data engineering adjacent at Facebook, I wasn’t a practitioner. Data pipelining is extraordinarily important actually. People like to dismiss it as data cleaning, or they are kind of data janitor work, but when I looked at it, from kind of fresh perspective and I really thought about it, I was like, listen, data pipeline, they produce these assets, these data assets that drive all analytics, all the dashboards that you work with, all the ML models.
And if you really think about it, these data assets drive a huge proportion of human decision-making and automated decision-making in our entire society. Who gets mortgages or not, how do we price health care, what kind of news do you see – these are fundamental essential things, and it needs to be built on solid foundations.

And the fact that it – in my opinion – like, it was not built on the appropriate tools and processes, and everyone felt it was like chaotic and out of control all the time, was deeply disturbing. So, things were fundamentally, and still, in some ways, are fundamentally broken in data ML engineering. So, that’s really motivating.

Another thing, another property is that I like working on technologies that are sort of a strategic point of leverage in an organization. GraphQL fits that bill. Because if you kind of can intermediate all client-server interactions with a common software layer that has rich scheme information and stuff like that, it’s like an enormous point of leverage for tooling.

And in the data space, I quickly gravitated towards the orchestration layer because I felt it had the same properties. You know, orchestration orchestrates data pipelines. That means, it invokes every single runtime, it touches every single storage system as a result. And then, likewise, any practitioner that wants to put a data asset or pipeline into production has to interact with orchestrator in some way shape or form. So, a strategic point of leverage, I thought that was super, super industry.

And then last, like some feeling that you have a technical insight that’s novel and interesting, and that’s kind of how we got to this notion of — at the beginning we called it Software Structure Data Sets, but now we call it Software-defined Assets in data pipeline.

And the basic idea is that instead of just writing a bunch of imperative tasks to string stuff together, you instead think about it, you write a software representation of the data asset that you end up wanting to ship to production and be consumed by our downstream stakeholders.

So, that was a very long answer, but I found a problem that kind of checked all the boxes, for what I like to work on. And it’s not just checking boxes – if those boxes are checked, I’m like deeplypassionate about it. That’s kind of how I got here.

Business Origin

Mike: You started working on this problem at Facebook, but then you said at some point, you sort of hit this critical mass of like pattern matching, like you said. And you’re like, “Okay. I’m going to start actually a business. Maybe in Silicon Valley, it’s not terrifying, but it’s a big step.” How did that actually work? When did you decide, “I’m going to start a company.”?

Nick: It’s funny. I’m struggling to recall exactly when it happened, but I knew founding company was definitely something I was very interested in doing. Both in terms of working on a product, but also building a culture, and especially engineering culture.

In terms of company building, that part was very motivating. In a lot of ways, I was talking about how I thought the kind of the output and culture of early Facebook engineering was pretty extraordinary. And replicating the good parts of that in an independent organization was super appealing to me as well.

I think I just started talking to people and my message and the problem I identified really resonated. And then, I was talking to some investors, actually not with the goal of doing a fund raise – it’s kind of funny how it works like that – but there was like, “Nick, you want to look at data pipelining, with your background and, you know, work on something, that we should really think about formalizing this with some capital and a company, so you can accelerate your progress.”

It’s one of those things that almost just kind of happened. And I’m a big fan of, “Be an opportunistic.” It’s also true that from the time I left Facebook, I knew that founding a company had a lot of appeal to me.

Transition to new CEO

Mike: One of the podcasts previous guests, Sytse Sijbrandij, once asked me, “Do you love the product, or do you love the business?” And it’s an interesting question. I think I know were you following that spectrum. And can you talk a little bit about how you came to work with Pete Hunt, the current CEO, and do you have any advice for founders on how to navigate when there’s a pivot in the leadership?

Nick: I might like the business more than you would expect. I obviously – I don’t want to put words in your mouth – but I’m assuming you think I like the product more than the business. Actually, I did a bunch of economics and business in college and then the grad year in LUC, and I thought about doing MBA, so I’m definitely a business-minded. I imagine I annoy our FinOps people because I always like dig in about all the financial metrics and whatnot.

Yeah, we can get to Pete. I knew Pete from the Facebook days. He was one of the co-creators of React. We didn’t work really in-depth with each other then, but we met each other socially and through each other’s work, and really kept in touch for a long time after Facebook.

He wrote a small seed check into the company. We also collaborated actually on some podcasts because we were kind of obsessed with this Facebook engineering culture, and we actually put together a podcast series, Software Engineering Daily, with like 15 ex Facebookers, and we learned a lot about each other during that process.

Pete had started a start-up and sold it to Twitter, and he was working on Twitter. And I was also talking to him on and off about the business. And I was in the market for a head of engineering in early 2022, and Pete and I discussed it. And I was privileged enough to bring him on board. And given his experience, formerly being a CEO of a Dev tools company, he had built a marketing organization, and the sales organization and scaled to $5 million ARR.

I knew he was going to be much more than a head of engineering – I even had super high expectations for that – but he really dramatically exceeded those expectations. And I think, it became very obvious to me that he was just way better operationally than I was, in terms of like the mechanics of management, organization building, managing marketing, managing sales – he had done it before, and it was pretty clear.

I, at the time – just to be transparent – I was solo founder CEO, I moved around the country a couple times, I had 2 little kids. Now they’re 2 and 4, but I’ve also started a family during the course of this journey – I just needed like a co-founder figure to share the load.

Because I didn’t have the time to work on what my superpowers are, which is kind of this cross-product of Engineering, Dev Rel and Marketing I think is where I excel. And the other stuff is like, he could do a much better job with that. So, it just made a ton of sense.

I think I’m very lucky in that I don’t think it’s a repeatable process for a lot of founders to do what I did. Because you need that other human, who you know well, who would have been I think if Pete had his own company at the time, we might have just co-founded something from day one, and had like enormous trust context in – like, the transition to bring him in and then move him to the CEO position was like super smooth. I think it was like super obvious to everyone they knew it wasn’t going to be like this massive culture shift. Because like Pete and I are still aligned on so many issues.

I think the entire team was super excited about it, and the transition was really smooth – no leadership changes, no attrition, the company started performing better. I think it was obvious pretty quickly that that is the right move.

Monetization

Mike: So, diving into the business a little bit, how does Dagster monetize? I see a cloud offering, is there also a license enterprise distribution?

Nick: No. We only do a cloud product. So, just for context for the audience, Dagster is a data orchestration platform. And you can think about it like, you write data pipelines in this Python framework for building data pipelines and orchestrating, meaning, ordering computations and modeling the assets that get produced by those computations.

You can install it open source, and people have deployed that to production – a ton of people, I should say we have thousands and thousands of users – but the cloud product allows us to do a ton of the hosting on your behalf.

Most of our enterprise customers have this hybrid product, where we host the control plane, which you think about it like everything is complicated – the metadata database and long-running processes that monitor things and whatnot. Then, they run their actual compute, it’s their data pipelines and their infrastructure.

So, yeah, there’s a cloud product you sign up for, we can host a bunch or all of the compute. And then, also, we add enterprise features on top of it – SSO, alerting, gobs and gobs of features that generally deal with complexity in the Enterprise that companies typically pay for.

So, that’s our primary business model: you sign up for Dagster cloud, you swipe your credit card or talk to our sales people, and you can have the best experience of a data orchestration platform in the world in our opinion.

Why sell small customers?

Mike: I noticed that Dagster sells to small teams – like you said, you can sign up for like 100 bucks – and also to large enterprise. I’m wondering does the small teams’ business actually add up to real revenue, or is it just a pipeline for enterprise customer?

Nick: I think in terms of what investors care about, and what the long-term trajectory of the business is, we certainly conceptualize it as mostly a driver of pipeline – yes – but a broader adoption as well. So, there’s tons of users that use our hosted product that wouldn’t use our open-source product. And simply because they don’t want to host their own computing infrastructure, which is totally reasonable.
So, I guess, if you kind of boil everything on the business, yes, there is – it is a source of enterprise leads, for sure, but it’s also a source of more adoption, which means more people talking about the product. More people having being passionate about the product.

Because an underlying flywheel adoption is also essential for the long-term commercial success of the company.

I think like that’s the most interesting component of it. It used to be, say 10 years ago, that you’d have an open-source product and you’d be like really pulling teeth to use the commercial or the hosted product.

I think the pendulum is really shifted now, where tons of people wouldn’t consider adopting an open-source technology if it didn’t have hosting options. Just because of the way that the entire world has shifted towards more hosted services, which is I think a win-win for everyone involved.

Pricing

Mike: One of the underappreciated challenges of a tech start-up is how to price your offering. I saw a note on the pricing page about an old plan and a new plan. The new plan’s a little complex – not being an expert, I couldn’t really quite follow it. Can you talk a little bit about the pricing journey and where and why you ended up where you are?

Nick: Totally. I like to say, if building an infrastructure company were a video game, pricing is the final boss. And that actually even undersells it. Because iterating on your pricing model is a continuous process, where you have to make sure that it’s working for everyone involved, that we can run a healthy business and that the customers feel like they’re getting a fair deal in terms of — because in the end, they need to get more value than they paid for.

You are correct to point out that the initial pricing was simpler than the current model. Initially, we started out where we wanted to have like no seats limit and just charge on consumption. I felt that a very fair way of doing consumption was to just charge on the number of minutes your pipelines run.

So, the issue with that – and I think this is a good takeaway for your audience – is that customers have to morally accept the pricing plan. Like, it has to make sense to the underlying way that they think. And the problem in a data pipeline solution, if you’re charging by, say by runtime, is that frequently what you’re doing in orchestration is that you are like calling out to Snowflake or Databricks or some other heavyweight computational system that does all the heavy lifting of the compute.
So, from the standpoint of the customer they’re paying us just to kind of wait for an API call to complete. That shifts the mind of the customer to think of us as just a compute hosting service.
And if you’re just doing that, the value proposition of our product doesn’t make sense.

So, the pricing impacts the way that the customer perceives the value of the product, which is obvious when you say it out loud, but isn’t obvious when you’re kind of in it.

We’ve really stepped back and looked at this – the real value in an orchestration system is in the kind of the control signals and the metadata. Like, concretely, you open up a orchestrator, or our orchestrator, and you see all these fancy Gantt charts of what’s going on, you have a ton of visibility, and then the words that our users often use is, “Ugh! Dagster is like the single pane of glass that consolidates my entire data platform, I have visibility into all this stuff.”

So, that’s where they perceive the value. They do not perceive the value like it’s a hosted compute service. That had the benefit of being simple, but didn’t actually align with the product value that the users perceived.

We switched to charging based on metadata and control plane events that drive our UI. I think the other thing is that for founders in the audience is that you have to have a pricing model that works for sales. And early on, you don’t have enough data to know how much consumption there’s going to be for a customer, for like say the next 12 months. And with the way sellers work, they have to hit their ARR number ― that adds up to their quota, that determines whether they can feed their children or not. So, it’s very important to the sales team.

We had to also add sort of a per seat component that effectively acts as a platform fee for our enterprise customers that allows us to kind of project and forecast ARR that would be appropriate to the value it’s going to deliver to the customer.

You also have to think about the internal incentives and how it’s going to work for sales people, who are reliant on selling your product in order to send their kids to college.

Why Audience Selection is Important?

Mike: I am going to pivot a little bit back to tech for a second, but really more to talk about the open-source community. What’s interesting about Dagster is that it reminds me a little bit about the battle between Perl and Python. They were open-source tools in your area that existed before, but they were a little bit hacky or more challenging.

Can you talk about what are some of the challenges of building an open-source community in an already competitive market, where you needed a lot of features just to get the baseline of functionality? And then, how did you focus on either getting new, or getting some of the developers to switch into your platform?

Nick: You need to make sure that you have an audience that cares about what you care about, and it is very differentiated on that dimension, to the point, where they are willing to take a risk to bet on you, to work around missing features or missing integrations that might exist in a more mature solution. So, identifying that small subset I think is extremely critical.

There’s now, I think, a kind of standard reading for Silicon Valley founders, which is Peter Thiel’s book Zero to One. And he talks about how you start with a small market and then dominate it, and then move on to progressively larger markets. And I think that really, really resonates with me, especially in developer tools.

One kind of approach – and this is kind of the nature of tools that I like to work on too – is that what you can do is pick the audience that you think has the most leverage in the organization. And for us, it’s like the data platform engineer. Like, there’s engineers whose entire job in life is to serve stakeholders who build data pipelines on top of a data platform that they build.

And a huge part of that is setting up a great developer workflow with CICD and testing, so you can actually maybe know if you’re going to break something before you push to production, which is very frequently not the case in data pipeline.

I think our early audience was really people who really got it that testing, and fast feedback loops, and developer life cycles, is like the baseline foundation of productivity. And productivity is just huge in working in the software. Because productivity is not just about doing tasks more efficiently, it’s about making an entirely new things possible.

So, yeah, I guess I kind of went for a field there, but to circle back to the beginning of the question, I think it’s audience selection and being deliberate about that, it’s really what’s important.

Governance

Mike: Recently HashiCorp has changed their license, and I see that Dagster’s published in its own GitHub repo, so you’re under the Dagster repo. Dagster is your trademark. How can you assure the community that if the board decides to sell the company to Oracle, for example, that they won’t change the license immediately? And have you considered moving the Dagster open-source project to community governance and making it safer to use for the future?

Nick: As someone who’s gone through a foundation process for another technology, we moved GraphQL to its own open-source foundation with community governance. I have a pretty deep understanding of the trade-offs here. I think it’s a question of maturity and life cycle. The risk that you said exists. There could be a boardroom coup, and I’m out and Pete’s out, and then, we’re sold to Oracle or something.

By the way, the probability of that is approximately zero, but let’s theoretically do it. And then, Oracle could change the license―that is possible. I don’t think that’s a realistic risk in any sort of near-term.
So, if we had community governance, it would eliminate that risk. However, community has a ton of it overhead. And where does the beginning of our journey for innovating, and we want to be able to move quickly and respond to feedback quickly, build features, have complete control in that way.

And that’s definitely the right trade-off for us right now. Compare and contrast that to the GraphQL story, with GraphQL, we open source the spec, a document that was meant to be very stable from day one, and evolved pretty slowly over time. So, in terms of the technical artifact there, it actually matched like having a foundation process and governance over it made a ton of sense. But for Dagster and the immediate future, we’re having more centralized control, and increased pace of execution definitely makes the most sense to us.

2023

Mike: I’m going to move to a temporal question about 2023. A lot of tech companies struggled in 2023. The Times reported that 3,200 venture-backed tech companies went out of business in 2023. Of course, I don’t know how many normally go out of business, but still it seems like a lot. I was wondering, was 2023 a good or a bad year for Dagster? Did you buck the trend and grow 100%, or did you also feel pressures on budgets from enterprise customers?

Nick: We had a great year. So, not only did we grow 100%, we grew 400%, and our NDR was north of 150%, which means, our existing customers were also increasing their contract sizes. I feel great about the business, especially being able to grow this quickly in this environment. I am also grateful that we didn’t raise round of financing in a wildly inflated valuation, with too much capital in the FED bubble in 2021.

Because, at the time, certainly, it was frustrating – a bunch of my peers were  — you know, all of a sudden, the CEO has a billion-dollar company, even though they in reality weren’t that far along in the journey.

Now, I think a lot of those people kind of are in a pretty tough spot, and they’ve had to do layoffs, and it’s painful. We kind of stuck to our fundamentals there, so, I feel very good about it.

I still think the pain is going to be very real for the industry through 2024, maybe even into ’25. Because, yes, there’s an advantage to raising a bunch of capital too, in that you have a long runway. A bunch of these companies, they have so much cash on the balance sheet, and the interest rates have gone up that their interest is actually a meaningful source of income too.

There are more waves of company death coming in ‘24 and ’25, I guess I’ll put it that way.

But we’re in a great trajectory, and I think we’ve raised an appropriate capital to the progress in the business. And we were able to raise a B in 2023, which was a very challenging process, but it felt great to be able to do that. Not many of the companies were able to do that.

Open Source R&D v. Commercial R&D

Mike: Here’s a question, and it’s a little bit about engineering priorities: you have an open-source project of which your team contributes a lot of code to, and you also have a commercial cloud product. Can you just talk sort of at a high level, from an R&D perspective, like how much of your budget gets invested into your product versus how much gets invested into the open source? And how do you balance those priorities?

Nick: It’s actually hard to tease apart. Because, if you’re an engineer who is working on a feature that will have manifestation in cloud, often you’re kind of spanning the entire stack and like working on the open source, but then also working with some proprietary features. So, it’s difficult to cleave it that way.

The other thing is that we reorganized the engineering, the R&D organization around company objectives fairly frequently. I actually can’t give you a precise number at any point, or historically/cumulatively, about how much we’ve devoted to both open source and the cloud product specifically.

I guess what I’ll say is that we still invest a ton of our eng resources. I would say like 40% of engineers effectively work exclusively on the open source, and then there’s another tranche that kind of spans the entire stack, and then there’s another tranche, like people who work on our cloud platform, and all the DevOps and SRS work around keeping that alive and operational.

I don’t know, I guess you can call 50/50, but it’s actually really difficult to put it even semi-processed number on it.

Dog Years

Mike: Well, it sounds like it’s really been an amazing journey. And I’d like to remind you that it really hasn’t been that long either. Only 2018 doesn’t seem that long ago to me.

Nick: Well, it seems like a long time to me, man! That’s the old joke. It’s like dog years in a start-up, one year feels like seven. I have to pinch myself. I only moved away from the CEO seat like 15 months ago or something. And it feels like a lifetime.

Founder Advice

Mike: We covered a lot of topics, but I guess, my last question is, is there any advice you have for entrepreneurs, who are launching a business around an open-source software, product or project?

Nick: I think one of the things that founders need to think about — I mean, this could be an entire hour podcast about all the advice that I would say, but couple things to think about: one is, know when to go slow and know when to go fast, especially when you’re talking about so-called “one-way doors” in Jeff Bezos speak, where you’re making decisions that are either extremely costly or impossible to undo. Company branding is challenging to change in terms of the specifics of open source and dev tools, API decisions, especially in open source, last forever. You need to be deliberate on that.

And a commercial product, you can actually iterate extremely quickly. So, I think it actually is important to kind of have two cultural muscles. One is much more upfront design-oriented and collaborative with community, and deliberate and thoughtful on API design, but you still want to have that super-fast feedback and development when you’re developing the commercial components to your product that are hosted.

The other thing I would optimize for – if I was traveling back in time and talked to myself – is optimize for getting yourself into a situation where you can have a super-fast feedback loop, with early users and customers, where you still have the opportunity to change things, and do so quickly.

If you’re in a super-fast feedback loop with a single customer, you can make API changes much more easily. And the ideal situation still is, if you are working on a technology internally at a company, where you have access to all the code that uses it, that is just super valuable.

You’re also basically getting a seed round for free, because, often you’ll have people around you, and you’ll be working on it.

So, I don’t think I truly internalize what an advantage that was, to have it done the core R&D internal at a company. Yeah, I think like there’s a little more resistance now to open source the internal tech with kind of — it’s a less idealistic environment these days. But those are kind of the top-level things that come to mind.

Closing Notes

Mike: Well, great. Thank you so much for taking time out of your day, Nick, and best of luck with Dagster Lab.

Nick: Thanks. It was really a joy to be on this podcast. Thanks, Mike.

Mike: Special thanks to the Dagster PR team for reaching out and helping with logistics. Cool graphics from Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere. Next episode recorded at the State of Open Conference. Peter Farkas, Co-founder and CEO of FerretDB. Hopefully, I’ll have that out in the next week or so. So, until then, thanks for listening.

The post Episode 65: Scaling Data Pipelines with Nick Schrock, Founder/CTO of Dagster Labs first appeared on Open Source Underdogs.

Intro

Mike: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is episode 64 with Idit Levine, Founder and CEO of Solo.io, an API Gateway and Service Mesh company with a product called Gloo – not to be confused with Gluu – the company that I lead, who sponsors this podcast.
I’ve been trying to get Idit on the podcast for many years ever since I spoke with her at an Open Source Conference in 2019, and finally, her PR agent reached out to me a few months back, and, of course, I agreed immediately.

Solo is not your typical startup journey, it’s sort of a miracle it got off the ground, but once it did, they didn’t waste any time – they’re already breaking 10 million in sales.

To avoid spoiling the story, I should just stop here, so let’s cut to the interview.
Idit, thank you so much for joining us today.

Idit: Thank you so much for having me, Mike.

Did Solo Join an Incubator?

Mike: My first question, and this is sort of a different one, but it’s something I’ve been thinking about, is when you first started Solo.io – which was not that long ago, I think five or six years ago – did you join an incubator and why or why not?

Idit: I did not. I wasn’t even aware that they exist, honestly. When I started the company, what I knew is that I had some “technical” friends that I knew that I can start it, and basically started doing this – the software was more about the technology. So, I needed to learn that while I was raising money, and so on.
Honestly, Mike, I think the first VC that I met, they asked me about a pitch, and I asked, “What is a pitch, what am I supposed to do?” I really didn’t know much, I needed to learn.
I wasn’t aware of a long incubation, definitely not in those days, because it’s not very popular.
I just basically started the company around software and just tried to get some money in order to kind of like bootstrap the company. But that’s basically the things I would do. Honestly, mainly because I wasn’t aware of it.

Mike: Do you think if you could do it again, you’d use an incubator?

Idit: No. Now, I feel that they learn so much from those processes. I think it’s very good if a first founder maybe is not aware of a lot of stuff, that’s really helpful to be kind of like protected by team that has done it before and knows how to help you and guide you.

Today, I think I learned enough of the process, and I’m doing it for a while right now. I made a mistake, I learn from them, so now, I’m feeling that I’m more free to actually do it myself again, if I need to.

State of Company at Seed Funding

Mike: At the time you raise your seed funding, was the open-source project started, did you have any technology, did you have any initial customers or team? Like, what was the state of the business when you closed, let’s say, that seed round?

Idit:  No, there was nothing, honestly. Before that, I worked in the EMC. Part of the EMC, my job was to basically do cool stuff on open source. I was in business, I was in the city office, and my job was to basically, if I had a new technology and we had to figure out how we can play that. Basically, we did a lot of open source and invent development. We immediately knew that we were playing back then, in Kubernetes, Mesosphere and Mesos, and all that great kind of technology. Docker was just a new thing back then, so, again, playing in that ecosystem was immediately a thing that we’ve done.

When I started the company, there were two things that I started pitching in the beginning. The first thing that I was pitching was unikernel. It took me a few months to understand that that’s something that I would not be able to ever raise money on. Probably for good reasons.

By the time we were at home, I was pretty bored, so I built another open-source project called Squash. And that was an open-source project that related to debug microservices in Kubernetes.

And that was relatively successful project, but mainly, as I said, I think that there is a good money on it because the work that I was doing before in the open-source, I literally built a reputation of someone who is capable of doing a cool project.

How Many VC’s Pitched?

Mike: How many VC’s did you pitch in your initial seed funding round?

Idit: Oh, man, a lot. I mean, as I’ve said, again, you remember, I was on the east coast, but once I decided to do it seriously, I left the EMC, and then, I basically went to the west coast, where there is VC that is more in that space and that, yeah, I got a lot of those, a lot. I think like every founder as well.

Products?

Mike: I don’t want to go too deep into the tech, but when I look at the Solo website, I see there are a few products. I am wondering if there’s like an 80/20 rule here, where one of the products accounts for 80% of the revenues?

Idit: We don’t have 20/80, actually, that’s interesting. I think it’s probably 50/50. And the reason is because of the packages, a lot of time we’re selling them together. If you look at all the projects, the main two markets that we’re going after is, the Gateway and the Mesh market. We started with a Gateway mainly because the Mesh wasn’t — you know, we couldn’t sell it.

So, we started from the Gateway, and we knew that this is kind of like an entry point and kind of like a stepping stone to a Service Mesh, so that felt very in the area. And I believe that in the future the Mesh will grow more.

First Customer

Mike:  So, one of the challenges of a start-up is always the first customer, especially if you’re selling in the Enterprise space. How did you convince this customer to be first? What did they actually buy? And whatever they bought, does that resemble your current offering today?

Idit: Yes, actually, as I said, we started selling the Gateway, and that was a flagship product of the company. When we started, basically what we did is, we had three design patterns in a way. I didn’t do it the regular way, we did it from open source. We didn’t go and talk to customers and say, “What do you want us to build?” And then, we built it. We were more like, we’re in the open-source and kind of like say, “Okay, that seems like the right thing to do.”

Kubernetes came, you needed a new API Gateway, you wanted probably an Envoy – that’s what we believed people wanted – and then, we went to pitch.  And a lot of those customers came to us from the open-source community.

So, we learned a lot from that process. What we did, and we did it differently, because we are coming from open source, we basically managed all our relationships with our customers through Slack. Then, understood what we need to do in order to make that very, very successful in their infrastructure. And we basically got all those requirements and built them into the product. It’s very different to build an open-source project versus an Enterprise environment.

Value Prop

Mike: So, what would you say is the most important thing that motivates your customers to buy your product?

Idit: I think that today Solo is kind of like three things that we are very good at. Number one is, we really, really understand the marketing really, really well, and the technology in it, so we know what’s coming up. We know what is 20 and what is not, we’re looking at adoption – we really understand that very well.

So, we always compromise with the customer that we will bring them to the edge of the technology. If there is a new technology that is relevant, we’ll probably put it in our product. I think that’s one thing that customers like, so the perception of Solo is that it is an innovative company, which it is – it’s what we are.

The second one I think is customers in sales, which was always one of the things that is the most important to us. This work with Slack, when I started it, everybody told me that’s not going to scale. And surprisingly today, when we have hundreds of customers, it is still scaling, and the technology itself, if you look at it right now, there was a lot of shifts in the market in terms of the infrastructure that you’re running, most likely running in something like Kubernetes.

So, it makes sense that you would have a Cloud native Gateway, and when you start scaling and scaling and scaling, it makes sense that you will take care of something like MPLS and Security and Zero-Trust and Observability, and all those microservices – it’s just that this is the needed technology when you are going to scale. And that’s where the market of microservices like Kubernetes is right now.

Is Solo a Distribution of existing Open-Source Components?

Mike: Solo is an interesting company in that, in a way, you write software, you write a lot of software. But you also have a curated distribution of open-source components that you give your customers a control plane to manage and take advantage of. So, it’s not just the software that you’re writing, but without Envoy and without Kubernetes and without Cilium, you really maybe couldn’t even build a product. So, do you think that maybe this is a new model, where you add a little software on top of this huge curated distribution of other very complicated components?

Idit: Instead of creating the open-source project – we do have one, for instance, Gloo Edge is a technology that is an API Gateway based on our technology, and it is based on Envoy. I think that what we were good at was identifying, pretty much at the beginning, which of those technology would be better on Envoy, when honestly Envoy was relatively a very small community no one really knew about it, and NGINX was the chosen proxy.
We chose Istio, even though we could have competed like everybody else and tried to build a better service mesh, but I knew that that will be the choosing mesh, even though when we looked at it, it was pretty messy, and we knew that it would take you a while to get there.

I was very, very aggressive to my team saying we are not going to be competitive, we are going to use that.

And the reason is because the software that wins is not always the best software. It is the software that most people are leaning to because they will make it eventually the best software. And I think that that was something that Solo has recognized very well. All that technology, all those products that we are doing is basically we are building – and I will not say a little – we are building quite a lot of logic, ease of use and enhanced technologies on top of those — let’s call it basic component that you need.

There is a lot of complexity actually in the control plane, way more than in the data plane, for instance. But, yeah, as I said to you, this is my model, hopefully sellers will succeed with it, but yeah, I believe that open source is building an amazing technology, and that we should leverage the best.

We are also contributing a lot of those technologies. I mean, if you look at the Istio right now, the new thing that we did with Ambient that we and Google contributed to it, it’s mainly we are the main contributor to it. And Istio, we are contributing a lot to it, we have a full team that is responsible to contribute to it. If you look at this, probably I think the most engineers that are working today on Istio are coming from Solo.

How to Decide What Features Are Open Source?

Mike: I was looking at the open-core model, but I’m actually more curious about, there’s always this friction between what do we put in the community version and what do we open-source. What’s the decision process behind deciding whether a plug-in will be commercial or non-commercial?

Idit: In the beginning when we started, we had nothing, we put everything in the open source, but then at one point, we understood that that’s a problem. Because eventually, somehow, you’re not going to exist as a company if you are not going to make a little bit money at least. So, we needed to figure out that what we’re putting on to double it will make sense, we are not hard to open source because it’s very important to us that open source will be successful.

It’s why we continue contributing constantly to the open source, but we also need to make sure that we will have something that differentiates it on top of it. And the decision in the beginning when we thought about it, the Enterprise feature that people actually really, really wanted to have a provider helping them was security or stuff that will let that do. You know, Enterprise feature like HA.

So, that’s the stuff that we put in Enterprise. The question is, you are usually around technology, would it make sense to be in the core open-source project because that is where it belongs. It’s kind of like a core feature, or it’s actually an extension to that open-source project.
And therefore, it’s going to be that Enterprise edition. To us, it was very important that the core should be open. That’s the way we’re doing it.

Pricing

Mike: I always worn entrepreneurs that pricing is one of the most challenging aspects of a tech start-up in particular. Can you share maybe some of the lessons you learned about how to price in the first few years, did you get pricing right initially, did you have to do a major pivot – what was your experience there, and do you have any lessons learned in pricing?

Idit: As I said to myself, okay, maybe the real unit of contribute for instance in the Gateway is supposed to be the API call, but honestly, that will take a lot of time for me, and it’s also going to be a pain for my customers, so how can I still value how much they use it, without actually interfering too much with the customer and with my engineering team.

And what I came with in the beginning is that the data plane is usually a good assumption, because if you have a lot of call, you’d probably want to scale that data plane. And in the data plane, it’s easy to call, the customer tells me I have five clusters, this is a data plane I am using – it is very easy to measure it and if people use it more, that’s fine.

So, that was the beginning. When we added the service mesh, there was a way more data plane and there was also a way more potentially change. Because you have cycles, and the cycle is basically going directly with the application, the microservices. The microservices going up and down, so very hard to basically figure it out. We needed to change that model and we went to the cluster model.

We said, just let’s keep it simple, we don’t want it – again, it’s all about keeping it simple. That’s what was important to me. I don’t want my customer to need to have a PhD in order to understand the way we were pricing.

That’s what I did. And again, it’s probably cost me some money. I probably left some money on the table and that was fine. But again, it was all about and it is still all about Solo as the partnership. It’s all about the relationship that we have with our customers, it is a real partnership, we are seriously the extension of their team.

But, you know, stuff changing all the time, so you always need to adjust. And honestly, you are learning that from your customer. So, for instance, what we saw right now is that some of the customers that are basically using us, it is more like advanced development center kind of thing.

Innovation centers like city offices or the innovation center on the ITN, and when they are starting, usually what they want, their job is to basically build something to offer to the businessmen. So, the question is, the money is not going to come from them, you cannot expect them to have tons of budget to pay you to run it.

So, what they really want is more of the consumption model. What they want is to create something and get the platform available everywhere, without paying millions of dollars, but then, they will basically enable teams to come after. And that’s different. The model should be different, it can be how much clusters you’re running. Because it could be that you’re running an empty cluster in the beginning. So, we needed to adjust based on the customers. So, it’s always moving kind of like we are learning from the customer how we can make it better.

But again, to me, the way I’m looking at this and that’s always my motto – whether it is truthful building, writing software or selling product – I want to take the challenges on my team. For instance, I prefer right now to build a sophisticated metering that will make the best customer end-user experience for my customer, even if it’s harder.

How to Maintain High Growth

Mike: You know, I was reading an article, and it said that you were projecting five to six times growth for the next year, what is a key to obtaining this high rate of growth? How is that possible?

Idit: First of all, the market – and that’s very, very important. Like for instance, when we started, we had the Gateway that was very popular and everybody needed it, and then the Mesh came, but it took us a while until Mesh would be everywhere. Right now, there is a lot of stuff that is going really, really well for us, and that’s what is allowing us to go.

What number one is, for instance, that is still going to the graduation. So, we actually choose the right service mesh, and not only this, it is going right now to graduation which has shown maturity.
So, that by itself means that there is more demand from the market. You just need to have the right market product to sell, and when a customer wants it, it would be really lazy to grow. But I’m not going to say that there are no challenges, in economy, it could be that we have an amazing product, we have tons of money – that’s not really helpful if our customer doesn’t have money. They’re not going to buy it. Again, that point – you need to make sure that the product is a necessary, that people will need to spend money for it.

Just, again, listen to the market, make sure that you have the right market fit, which I think is the most important, thinking about the packaging, make it very, very easy for people to consume your product.

Metrics and Data?

Mike: You’ve mentioned that you’re data-oriented, and I’m wondering, what are some of the most important metrics that you track?

Idit: This is a good question. I mean, if you ask my CFO, who is a very, very data-oriented person, a lot of the metrics that is running is metrics is numbers – how many VCs we are doing, how much of it is in production and that kind of stuff. Data that I’m looking at is different than the data that my CFO, the metrics that they’re looking at. I think in every business, it’s all about people, it’s all about the people in the business, it is all about the people in the market. Why has AWS decided to do this, why has Google decided to do this, what’s going on inside this organization – all this information is not metrics, but it’s data that you need to collect in order to make the right decision.

How do I predict it five or six years ago that there is going to be a lot of clusters and that people will need a service mesh for each and Istio will be that service mesh. That was pretty crazy to do five years ago.

But I had enough data that would lead me to believe, a lot of data that would lead me to believe that this is the direction that we need to go. So, we do have the metrics of how many customer success, otherwise you cannot scale – you need to know when something is wrong and, you know, big enough organization right now that “I’m not everywhere and I don’t know everything anymore.”

What Gives You Joy as CEO?

Mike: What gives you the most joy as a CEO?

Idit: It is always your job to basically kind of like try to cover the gap that you have in the company. As in the beginning, we had engineers, but we didn’t have anybody to do evangelism, and kind of like after that, we grow, and then we got that evangelism, so I’m not doing evangelism anymore. You are always doing more stuff, and to me, the way I’m looking at this, honestly, when I’m waking up in the morning is, what is the next fire that I need to put off, like where do I have a problem with, what is not working well the way it is working right. It is seriously like that’s how you should think about it – where is the next fire will come from and how am I covering it.

And to me, I’m a person that is easily being bored, so, I like learning, I like seeing what the problem is, I’m dangerous in every position in the company, potentially. I’m dangerous enough now after six years that I learned all of those.

So, I think that, the fact that it’s never boring, but I wish it was a little bit more boring. I mean, I heard a joke from someone that said, “A founder that started a company in the last five years, what did they need to overcome?” We needed to overcome Covid, we needed to overcome the SVB with the Silicon Valley Bank fall, we needed to overcome the fact that all our competitors suddenly could have raised 100 million dollars, you know, like crazy variations with seed money.

And so, there was a lot to overcome since then and it is never boring. And I think that as someone that likes challenges, that drive “I want to be the best, I want to win.”, so, that’s what I’m enjoying.

And I’ve got an advice from Diane Greene, who was the founder of VMware. And she was one of the people that started Google Cloud, so, one of the feedbacks that she gave me when I started. She basically said to me, “You can decide which type of CEO you should be.” Keep the stuff that you really like to do or you really feel that you’re a huge differentiator. And my guess is, it is that technology is the strategic, that is my strength.

And bring strong people next to you to cover the stuff that you can give away. So, my advice is to go to market. That to me is kind of like the way I’m looking at this, but honestly as a CEO, you really do a lot of the stuff that you don’t want. I mean, your job is to fix the problem or to cover stuff and to enable the other teams. If I need to help my engineers, I will do that if I need. You know what I mean? I will do everything I need to enable the team base. That is I think very important.

What Advice Would You Give Yourself If You Could Go Back in Time?

Mike: If you could go back five years or six years and give Idit some advice, what would that advice be? It doesn’t have to be at the very founding, it could be in the early stages too.

Idit: Wow. I learned so much. It’s very challenging to run a big team and make everybody aligned. As the company’s growing more and more and more – that’s become more than another. I think that the advice that I would tell my younger Idit is basically, just follow your instincts, listen to people, but eventually, make your own decision. I think the thing that I was doing wrong in the company was, a lot of times, I’d hire a leader for market and he’d go to market. And I knew that this is not my strength.

So, even though I didn’t believe always that what they thought were doing is wrong, I let them do it because I said, “Look, they are the expert. I’m not an expert in marketing, so let them do this.” I paid a big price for it because I felt that actually a lot of times, they were wrong and it’s within the company.
So, I think that what I learned today and why I think that I would be a better leader than I was back then is because I’m going to die or succeed on my mistake, honestly. Because there’s nothing faster than us to come and take responsibility for someone else’s mistake.

Again, it doesn’t mean that you’re not going to listen, but after all the data at the beginning, if you believe, like trust your instincts, don’t assume that someone else knows your business better than you. I think that this is something that I made a mistake a lot of time, actually multiply times. Before I said, “Okay, that’s it.”

Close

Mike: Idit, thank you so much for sharing all that experience and know-how and best of luck with Solo. Although it doesn’t look like you need it, you look like you’re doing amazing, so, congrats.

Idit: You always need more luck, but thanks.

Mike: Special thanks to Idit and the Solo team for reaching out. Cool graphics from Kamal Bhattacharjee. Music from Broke for Free, Chris Zabriskie and Lee Rosevere.

Next episode’s expected Jan of 2024, an interview with Nick Schrock of Dagster. I’m slowing down a little bit, but I’m still trying to do four episodes a year.
Don’t forget the State of Open Conference is returning to London, Feb 6th and 7th. So, until next time, this is Mike Schwartz, and thanks for listening to Open Source Underdogs.

The post Episode 64: API Service Mesh with Idit Levine, CEO and Founder of Solo.io first appeared on Open Source Underdogs.

Intro

Mike: Hello and welcome to Open Source Underdogs! I’m your host, Mike Schwartz, and this is episode 63, with Liz Rice, Chief Open Source Officer at Isovalent, the software startup behind Cilium, an eBPF-based Networking, Security and Observability project. 

This episode was recorded in early February at the inaugural State of Open Source Conference or SoCon, which was held in London at the QEII Center in Parliament Square. The force of nature behind SoCon was Amanda Brock, CEO of Open UK and editor of the essential book Open Source Law, Policy and Practice, 2nd edition. Check it out on Amazon if you’re an open-source founder. Don’t miss SoCon next year in 2024, especially if you’re already in Europe for FOSDEM.

If you think eBPF or enhanced Berkeley Packet Filter sounds like a geeky low-level technology that you don’t need to know about – well, you’d probably be wrong. It enables developers to safely write code that runs in the Linux kernel. And safely is the key word here, because if you crash the Linux kernel, everything on the whole server goes down, all the containers, and everything else running on that server.

However, by exposing the power of the Linux kernel, developers can write code that runs faster and consumes less energy, and faster and cheaper has always been an attractive feature. Cilium combines three products into one. It’s like an old-fashioned firewall, an API Gateway and Wireshark, and it’s Kubernetes pod aware. It’s used by a number of successful products like Teleport for access management or Solo.io Service Mesh.
Simply said, eBPF is going to fundamentally change our infrastructure.

I met Liz at the SoCon conference, and after learning a little about Cilium, I was really impressed, and I asked her if she would come on the podcast, and luckily, she said yes. So, here we are with the interview.

Mike: Liz, thank you so much for joining me today.

Liz: Thanks for inviting me.

Tech Overview

Mike: As I understand it, Isovalent leverage’s a kernel technology to build a product called Cilium Enterprise. The upstream Cilium project on GitHub has over 22,000 commits and 14,000 stars – these are really impressive numbers for a project that started in 2016. How did this happen and how does this relate to the origin story of Isovalent?

Liz: Yeah. So, Cilium is built on a platform called eBPF, which is the kernel technology that you referred to. And eBPF allows us to run programs that are triggered by events that happen in the kernel, and those events could be Network packets, they could be a system call being made by user application – pretty much any sort of event in the kernel can be used to trigger an eBPF program.

Cilium was the first networking project to take advantage of eBPF. And it was always designed with the idea of container networking in mind. And the folks who started it are the founders of Isovalent, as well as being the originators of the Cilium project. So, Thomas Graf, Daniel Borkmann, who’s a kernel maintainer looking after eBPF, within the kernel.

And eBPF and Cilium, particularly eBPF in Networking and Cilium, kind of grew hand in hand since 2016 thereabouts, as we – the many, many contributors to the Cilium project – as it grew and as it gained functionality, sometimes that’s required additional capabilities in eBPF.

So, it’s been really almost like a long game. I think when Daniel and Thomas and Dan, the CEO, when they were first thinking about using eBPF, it was such a cutting-edge kernel technology – nobody was using it in production.

You know, when we add something to the kernel today, people won’t be using it in production for probably three, four, five years to come, so really, anticipating what the future was going to be.

I first saw Thomas presenting Cilium and the underlying eBPF technology back in 2017, and at the time I thought, “Well, this is revolutionary, this can change so many things.” Because not only can we see Network packets being manipulated by eBPF programs, we’ve also got this incredibly performant way of observing those Network packets and reporting on them that we can use for observability tooling. And like you mentioned network policy – we can implement network policy in eBPF.
Just making policy decisions about whether an individual Network packet is permitted or denied by policy, based on Kubernetes identities – this is the other real strength of Cilium.

It knows the Kubernetes identities, the labels of every pod. And so, you’re no longer just looking at network flows in terms of IP addresses and the port numbers you’re actually looking at them in terms of “this is a flow between service X and service Y.” It is so much more meaningful for a Kubernetes’ user.

Why the name Cilium

Mike: Just out of curiosity, do you know what Cilium means?

Liz: I think they’re little hairs in the inner ear – I’m not entirely sure why that was used as the name for the project.

Origin

Mike: I understand the eBPF technology is mind-blowing – Cilium is quite a project as I said. I mean, you’re not one of the co-founders, but do you know anything about how did it become actually a business?

Liz: I think pretty early on, as Cilium, the project, was getting established, and this sort of understanding that eBPF was going to be a really great foundation for efficient networking. That idea of building a company around this technology was probably in Thomas’s mind right from the get-go – I don’t know that for sure, but I imagine it was. And he and Dan Wendlandt, who I mentioned earlier – this is Thomas Graf and Dan Wendlandt – Dan had the background in software-defined networking, he’d worked at Nicira.

And I think they really saw the future of container networking being built on eBPF, so it was kind of natural to build a company. But, for the first few years, really the focus was on building the Cilium open-source projects, getting that really well-established and really well-known in the Kubernetes community.

It’s now been adopted by the CNCF, so we’ve actually contributed the project to CNCF, we’ve recently applied for graduation status there. It’s probably the most widely adopted in production networking plugin for Kubernetes now.

That kind of path from open-source projects, we really need to see this widely adopted, and then, a business that can provide, not just support, but also some Enterprise features that really large adopter is going to need. And just makes a lot of sense.

What does a Chief Open Source Officer do?

Mike: Your title is Chief Open Source Officer, and that’s a title I’ve never actually heard before. How is that role defined at Isovalent and why were you so excited to take on this mission?

Liz: It’s a particularly interesting title in a company where the vast majority of the engineering is open-source engineering, but I don’t run the engineering teams. My role is much more about how do we continue adoption of the open-source project, and how do we interface with the foundations, the community – I do a lot of work with the CNCF as well. How do we both act as good citizens towards that community and do the right thing in the open-source world. But also make sure that we’re taking advantage of everything we can.

You know, foundations like this offer us a lot of roots to speak to people who might become users and how we can do that in a way that is beneficial for people who want to learn about Cilium, or who want to learn about eBPF. So, that kind of educational role also falls within my team.

Open source v. Enterprise

Mike: This may sound like a silly question because Cilium was so powerful, but from a business perspective, what would you say are the main value propositions of the software?

Liz: So, from the open-source perspective, it’s a highly performant networking solution with built-in observability and security features. And we could dive into more details on what those are. From our perspective, it’s fantastic. If people are satisfied using the open-source version of the code – that’s great – we never want to make it such that — we don’t want to curtail the functionality, so that it always wants to be useful to open-source users.

That said, there are some features that particularly larger Enterprises are particularly interested in that you won’t need if you’re not a big Enterprise. So, for example, integrating with Legacy workloads. Some high availability features that you don’t really need unless you’re at a certain scale – those are the kind of features that we provide in the Enterprise distribution at Cilium.

Isovalent v. Sysdig?

Mike: Do you see yourselves competing with a company like Sysdig?

Liz: On the security front – yes. There is an element of competition there. I think we’re sort of speaking with slightly different customers there. Because, to my understanding, Sysdig is very much a security focused solution, whereas Cilium really applies more to a platform team who’s establishing, I would say Networking first, with this incredible set of security capabilities that you can then show to the security team, these amazing capabilities that they’ll get all that they already have by using Cilium.

I think we’re probably talking to different people within our respective customer organizations, but there is a certain amount of overlap around particularly the kind of runtime security, which we have a sub-project of Cilium called Cilium Tetragon. And there’s the ability to create profiles for the kind of things like accessing sensitive files or running certain executables, privilege escalation, suspicious network activity – these are the kind of things that we can detect at runtime using eBPF.

Why contribute project to the CNCF?

Mike: You mentioned that Cilium was contributed to the CNCF. What was the reason you brought the project to the CNCF? Also, what does that mean for the governance of the project?

Liz: It’s a big step to contribute a project. Because we hand over the intellectual property to the CNCF. That is something that Isovalent used to own and no longer owns. And the governance of the project really needs to be in the hands of the community. So, Isovalent remains the most prolific contributor, but – and this is again part of my role – encouraging more people and more organizations to get involved in not just code contributions and not just documentation contributions, but also the kind of broader evangelism of what Cilium is and the advantages of Cilium.

So, yeah, we’ve really embraced that community. And I think the phrase that we’ve used internally is “paved the world with Cilium”.

And the best way to pave the world with Cilium is to give it to as many people as possible, and the CNCF gives us a really great route to reaching all those people who are using Kubernetes. It gives those people confidence that it doesn’t matter what happens to Isovalent, the Cilium project is in the hands of a much, much bigger organization at this point.

And then, you know, that subset of people who are using Cilium, but then, find themselves needing Enterprise features. We won’t necessarily be the only Enterprise distribution, but there’s no doubt in my mind that we have the greatest expertise. So, hopefully, we will be the obvious choice for someone looking for Enterprise features or Enterprise support agreements around Cilium.

Trademark

Mike: This actually leads into my next question, which is that CNCF actually owns the trademark for Cilium, but your product, the Isovalent product is called Cilium Enterprise. And so, hypothetically, another company could make a product called Cilium Pro. I mean, I looked at the contributors and I went down eight contributors, they all work for Isovalent, I didn’t have time to go any further, but, obviously, your company has a lot of expertise, but still, the prospect that company spent a lot of money defending their trademarks, I almost never heard of anything like that – is it sort of terrifying, though?

Liz: I mean, at one level, yes, it is kind of terrifying. And Cilium is a brand name that is better recognized today than Isovalent is. And that’s a challenge that we have to embrace. And there are rules around what you can and can’t use – I think that there are probably still a few instances of documentation and use of the word Cilium, which we’re not really allowed to do any more, that we haven’t managed to tidy up everything.

There’s limitations on what you can and can’t use around a name based on what is now a Linux Foundation trademark. But everybody understands there’s a transition between us having a trademark and then giving it to the foundation. It obviously takes a little while to tidy up all that options around that, yeah. So, Isovalent Cilium Enterprise is the Isovalent distribution of what is a CNCF-owned community project.

Outside Contributors

Mike: I mentioned that there’s a lot of Isovalent engineers who are contributing code, but are there other engineers who are also contributing?

Liz: Absolutely! Google is quite a prolific contributor, Cilium is actually used in Google’s Dataplane V2, we have maintainers from Datadog, again a huge adopter who has been using it. Enormous scale – there’s some really good talks from Datadog talking about the scale of which they’ve deployed Cilium, we have contributors from Palantir.
Yeah, there’s several what we call committees, so maintainers of the project, who come from lots of different organizations. And then we have – I think it’s around 700 contributors in total. Isovalent today is just over a hundred people. The contributor base is much, much wider than just Isovalent. That said, we probably have the largest group of people working full-time at Cilium.

Market Segmentation?

Mike: On the commercial side, for infrastructure, the marketing is very horizontal, but have some natural segments worked out in terms of the customers who convert from open source to a commercial relationship with Isovalent? And are you figuring out that there’s any ways to segment the market here or the messaging?

Liz: I think that’s something we’re learning – I have just mentioned that we’re about a hundred people now, so we’re growing in our capabilities for how we target different customers and different verticals. We’ve had a lot of success in financial verticals media, quite a few transport, strangely enough. Yeah, so there’s a pretty wide breadth of Enterprises who have adopted this. I guess, the prerequisite for nearly all cases is that there are Cloud Native Kubernetes users, or that we do have some users who are using Cilium in a standalone load balancer scenario.

Have we figured out how to market to all of these different types of businesses? We’re absolutely still evolving and learning. But I think the fact that we’ve for many years had this very community-based focus, a very community-based approach, means that we can establish relationships and have trusted sharing expertise on a technical level that then encourages those engineering teams to recommend us internally.

And when it comes to making a choice about an Enterprise product or whether they need commercial support, those engineering teams already know who the experts are, and have potentially already had help from our team through the open-source community.

Team Location

Mike: Is there an Isovalent headquarters office where engineers go in, or is everyone like spread around the world?

Riz: We are fully distributed. We do have offices in Zurich, where Thomas is based, and in the Bay Area, where Dan is based. And I think that the timing, you know, really around the pandemic, just at the point as Isovalent was growing was sort of around the same time as the pandemic hit. So, inevitable that we were going to be remote based.

And as people have joined, they joined from countries all around the world. We have people from as far as long as Japan, or Alaska, Australia, throughout Europe and across the U.S. So, our team is really now fully distributed, and the culture has to embrace that. So, we’re very much focused on being remote first.

We do get the team together, and we try to get the whole company together, at least once a year. And we have a lot of encouragement around getting teams together in what we call hive time. Because we’re all about kind of bee-related metaphors.

Monetization: What features are enterprise?

Mike: I’m curious about monetization. It sounds like it’s open core, and what are the extra bits that you’re offering, I guess, in the Enterprise? And how do you decide what to make open source and what to add as an extra feature in the Enterprise distribution?

Riz: I see that the term open-core can sometimes come with a bit of a negative connotation. Sometimes people think of it as an open-source software that’s got some kind of, you know, been cut off at the knees, and that’s absolutely not what we believe in.

We absolutely believe in the open-source product being genuinely usable, and there are some pretty large organizations who continue to use just the open-source version. The kind of things that people will come to us for will be — there are some high availability features, there are things like BGP support for connecting into your legacy data center workloads, some Telco specific protocols that we’ve worked on – we very much don’t want people to feel that there’s something that’s core to their basic use case that they can’t do with Cilium.

Unless they are big enough that they’re the kind of organization that wants to pay anyway. You get to a certain size of organization, where you really don’t want to be just relying on open source with no sense of who’s going to support it when anything goes wrong. And they may come to us for features, they may come to us because they just want to know that somebody will be there to help them, you know, with a contract in place, should anything be needed.

Features for Growth

Mike: We mentioned that Cilium is a really broad product. Is there one particular product feature that you see driving the most growth, going forward in the next couple of years?

Liz: That’s a really great question, because we do have you know really, really powerful features in a number of different axes. So, for example, we just did a partnership with Griffon, where we’re building some really great dashboards, again a big part of this is available, completely open source.

There are also going to be some additional Enterprise features here. Perhaps the thing that strikes people is that they get this amazing visibility. And you know, that could be the moment when they realize, “Huh, look at the power of Cilium!” And the fact that we can see all these latency metrics or security information being shown in a visual way. So, that could be one thing that really drives growth.

It could be Service Mesh. We have a very efficient approach to doing sidecars Service Mesh in Kubernetes. Service mesh is one of those features that when it first started being talked about in probably 2018 – huge hype, huge excitement – the reality of people adopting Service Mesh, they found that it’s actually quite resource-heavy, there are issues, instrumenting all your workloads with these Service Mesh sidecars.

I think some of the realities of deploying Service Mesh had not quite lived up to the initial expectations. And then, last year, we announced the sidecarless approach that Cilium can bring. And mostly through the power of eBPF, it’s incredibly efficient. We can shortcut a lot of the path that a network packet has to take through the Service Mesh.

So, I think that’s another area that can be a real driver for growth, as people realize they can get all the benefits of Service Mesh, but without the overhead that they’ve come to associate with it.

And then, finally – security. I think I mentioned earlier the runtime security tooling that we’re able to provide through eBPF and through the Tetragon project, combining in a really performant, efficient security tooling. At the moment, everybody’s focus in security seems to be on supply chain, but they also still have firewalls. I’m quite a big believer that we have runtime security, everybody has runtime security in the form of firewalls.

We just were on the cusp of people understanding how powerful this new generation of runtime security tools can be to essentially firewall, not just Network packets, but things like bad executables or unexpected privilege escalations, that kind of thing.

Mike: Does the breadth of the product ever feel like a curse? Wouldn’t it be so much easier if there was just one application, and we can focus the marketing message and the sales, and all is just this one thing?

Liz: I’m sure the marketing team tasked with coming up with a tagline would find it a curse, yes.

Lessons for Open Source Startups?

Mike: So you’ve been in the techs business for a long time, taking off your Isovalent hat for a second and just as an observer of the startup scene, and other than the open-source scene in, do you have any advice for particularly entrepreneurs? Because this podcast is really designed first for founders, any advice for founders?

Liz: Yeah. This is actually something I’m getting increasingly interested in and I’m working with the CNCF on how we can encourage businesses on how to operate and be successful with open-source based businesses. There’s two sets of vendors who I would say have quite a lot to learn, particularly if they come into like a Cloud Native community audience.

There’s one class of vendor who is open-source based, they have an open-source project that they’re building their business around. The second class is people who are not open-source, but they have a product that they want to sell into the primarily open-source based Cloud Native community.

I think for both those sets of people, really understanding how powerful community is, Cloud Native community is kind of where I’ve lived for the last, I don’t know, half a dozen years. And it’s incredibly powerful, the relationships that you can build up – not just between individuals, between organizations, can be a really solid foundation for the business relationships that you then build on top of that.

And I think the real lesson for a lot of vendors is: don’t just expect to turn up at an event, pay for a booth or a table, and expect people to come and buy your software. Invest in time as well, invest in contributing, get involved in our project, get involved in the cigs and tags.

Don’t just expect people to immediately think that your open-source project is the one true amazing solution. Take the time to learn what other people are doing around that, and then, have those conversations about why your solution is great and what its strengths and potentially weaknesses might be. Learning to get involved in a community is really, really important.

Closing Notes

Mike: Well, I think that brings us to a close. Liz, thank you so much for sharing and best of luck with Isovalent and Cilium.

Liz: Thank you so much.

Mike: Again, special thank you to Amanda Brock and the whole open UK team for launching the State of Open Conference, where we recorded this episode. Cool graphics from Kamal Bhattacharjee, music from Broke For Free, Chris Zabriskie and Lee Rosevere.

Remember how Liz said that eBPF and Cilium are really good for Service Mesh? Well, remember that, because next week’s guest is Idit Levine the founder of Solo.io.

Until next time, this is Mike Schwartz, and thanks for listening to Open Source Underdogs.

The post Episode 63: EBPF Networking Isovalent with Liz Rice – Chief Open Source Officer first appeared on Open Source Underdogs.

Intro

Mike: Hello, and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is episode 62 with Amandine Le Pape, Co-Founder and COO of Element, the software startup behind Matrix, an open standard for secure, decentralized real-time communication, which you can learn more about at Matrix.org.

This episode was recorded in early February at the inaugural State of Open Conference or SoCon, which was held in London at the QEII Center in Parliament Square.

SoCon was made possible by the inexorable tenacity of Amanda Brock, who leads an organization called OpenUK and is the editor of the 2022 Oxford University press book, Open Source, Law, Policy and Practice, (2nd edition).

If you’re an open-source founder and you haven’t read this book, go to Amazon right now and order it. If you can travel to London next year, I hope to see you at SoCon 2024. If it’s half as fabulous as this year’s event, you definitely should not miss it. I guess that’s enough gushing about SoCon, let’s get on with the interview with Amandine.

Origin of Idea

Michael: Amandine, thank you so much for joining us.

Amandine: Thank you for having me.

Michael: As one of the founders, I have to ask what’s the origin story of Element? And at what point did you think about starting Matrix, the open-source repository and Matrix of protocol?

Amandine: So, it goes back to almost 9 years now, in 2014, where we were a team selling commercial messaging apps to Telco’s, incubated in a big corporation called Amdocs. After a while, we were really annoyed by the fact the whatever we did with our apps, WhatsApp would always win. WhatsApp would always be on the front page of the Telco’s website, next to the app we were building for them.

And this fragmentation even from a user perspective is really bad. For email, I can talk to anyone with my phone, and can send SMS and call people whatever phone they use, whatever network they are on, while on chat I have to actually install a new app every time someone wants to use a new one. So, we came to Amdocs and proposed them to actually try to fix this by creating an open standard for communication.

Having built on top of all the other existing standards before, we had learned a lot and thought that with the professional team, we would be able to truly bring something to the world, which was able to answer the needs that we had of interoperability for chat and messaging voice over IP.

Origin of Company / Project

Michael: That sort of answers my question, but you’re working at Amdocs and you’re thinking, “Well, wouldn’t it be great if we could federate these chat servers,”, but how does that lead to actually starting an open-source project and the founding of the company?

Amandine: So, what we do actually is create the open standard and open protocol – we set it up as an open-source project. So, within Amdocs, we set up completely something independent with a new brand, completely open-source. And we started working on it for three years, actually building the reference implementations, defining the spec, etc.

After three years, there were other companies building on top of Matrix and monetizing it, like Erickson for example, selling communication systems for banks in Sweden. Whilst the core team, we were still building the project and not funding it.

So, based on that, we thought that it would be better to actually set up an independent company and try to monetize Matrix on the side. So, that’s when we actually spent out of Amdocs, set up Element as the commercial company, which builds the flagship app itself – called Element – and selling services and proprietary product on top of Matrix. And we also set up the Matrix Foundation as an independent nonprofit, which is the custodian of the standard itself.

Project Contributions

Michael: The Matrix Foundation governs the protocol, but it also has some software in there. There’s a reference implementation, I think, in Python. Who contributes the code to that software project? Is it mostly Element or, are there community contributions?

Amandine:  Basically, Element contributes a lot of code towards reference implementations of servers and SDKs and some of the application services. And it’s literally donating the IP to the foundation, so that it’s completely independent from the commercial entity. But beyond that, Element contributes the reference implementation server Synapse, we also have another server called Dendrite – all the various SDKs for iOS, Android, etc.

But then, the community, on the other side, is actually building their own projects and building their own reference implementation servers, their own SDKs, Bridges, etc.

So, whilst Element contributes a lot to some of these projects, which are the ones which are often used in production by governments or enterprises. The community is very vibrant, and I think we’re close to 5,000 contributors across the entire Matrix project and the different repos.

Value Prop

Michael: So, there are a number of communications platforms out there, we’ve actually had Ian Ten from Mattermost and Gabriel Engel from Rocket. And there’s Slack, of course, is out there. What makes the Element commercial offering different, and why do we need another communication platform?

Amandine: So, if you’re just trying to have your own communication system that you can run yourself, then yes, you may want to just go to Mattermost or Rocket.chat. The difference with Element is the fact it’s built on the open standard – it means that once you run your Element and Matrix deployment, you can communicate to any other deployments out there. The same way that when you deploy your mail server, it federates with all the other email servers out there.

And actually, Rocket.chat built a bridge to Matrix, so now, Rocket.chat can communicate with Element without a problem. And the interesting thing is that was under the impression of the Swedish government, which brought all its vendors into one room and said, “Guys, we cannot use SaaS solutions for communications – we don’t want to designate one vendor for all the government, ministries should be able to choose the app they want to use. So, you have to federate, you have to interoperate – figure it out, find something.”

By the way, there is this standard called Matrix that should do the job, but that means that today, if you use Rocket.chat, you are able to participate in the Matrix network. So, the interesting thing is also that when you use Matrix for your communication, as for a government for example, it really solves the political problem.

Because different ministries will own their own communication, they will deploy their own servers, they run it wherever they want, under the security they want, but yet, they are able to participate in the wider network and the ownership of the discussion is shared between the two. So, you completely skip over the “Shall we use your system or my system” to come to work together on this project.

Building Matrix v. Element Brand?

Michael: So, here at the conference, I noticed that there’s a Matrix booth, but there’s no Element booth. Why did you feel that it was the right thing to do to promote Matrix and not the commercial company here?

Amandine: It felt more aligned with the idea of OpenUK in terms of building open source in the community side of things. Basically, the same way, this weekend we had the Matrix. It’s Matrix which is being most represented – we don’t even have an Element sticker or an Element banner out there. Even if Element is open source too, but really trying to grow the ecosystem in the community for Matrix.

Technical inspiration

Michael: This is a little bit of ancient history – but do you remember a platform called Diaspora? Were you thinking about Diaspora at all when you started Matrix?

Amandine: So, the thing is that we’re addressing very much the social network side of things whilst we wanted to go for the full communication, real-time communication system. In terms of whether we thought about them when we chose the decentralized structure, actually it’s more inspired from Git, and basically the idea of replicating the content of the conversation and the history of the conversation on every server.

Community Contributions

Michael: Let’s talk a little more about the community. What areas do you think the community makes the most contributions? Is it in Bridges, Bots or Widgets, which is, like how you extend the functionality? Or is it in the core server? Where do you see the most activity from the community?

Amandine: So, the way we built Matrix is to make sure that the development of clients was super easy. Because what we saw in the past is every time people wanting to add chat in their communication systems, everyone thinks it’s easy – it’s just sending a message. And then, if you want the actual features of history, etc., it’s tough. So, we wanted to provide an easy way for any web developer to add chat to their system.

So, all the complicated stuff is in the server with a very simple client-server API, just HTTP/API that anyone can use. It means that we have a lot of contribution for clients, a ton of clients out there – all sorts of clients, from common line to mobile, etc. We even have clients running on Nintendo DS for example. And a lot of Bridges as well because people want to connect to existing networks out there, so they tend to build their own Bridges. There is also contribution to the core, to Synapse itself, and we actually have the rest SDK as a new core project, which is led a lot by the community. I think it’s a quarter or a third of the developers actually are not employed by Element. And it’s like the core contributors on this project, and it doesn’t even have an internal room -everything is really in the open for the rest SDK.

Monetization

Michael: So, Element is very transparent about the monetization strategy. It’s fairly simple, it’s based on monthly active users, and it looks like it’s the same price whether you host it yourself or whether it’s SaaS – can you talk a little bit about the logic behind the pricing model? How did you get here and were there other pricing models? And did you get it right the first time?

Amandine: All those are complicated. So, when we started, we thought that the easiest way to get going would be to provide it as a SaaS platform, because it’s end-to-end encrypted and based on an open standard. So, even if we run it for people, it means we don’t see what’s inside, what’s happening on the platform due to their encryption, and people can take the data and move it to their own server later on if they want.
The fact is, our customers actually want to self-host – be it on-premise or in a cloud – so, we had to basically make sure that the on-premise hosting was actually served very well. That’s why we ended up, this is — I don’t know which alteration of pricing model it is, but it’s definitely not the first one. And yet, the idea was like, okay, let’s try to simplify one single price in the cloud or on-premise, it should be the same, because in the end it’s pretty much the same service.
I think we are about to release unless we released a couple of weeks ago – I can’t remember – a new pricing model, which is a bit like a more integrated basically. Here, we had, I think it was a three- or four-dollar user a month. And then, you can add add-ons on top of it. But we’re trying to build packages where basically the add-ons are included, but the total price may be higher, so have more of a split like this.

Sales Motion

Michael: So, what does the sales motion look like? Do people download one of the open-source and find you? Is it more an inbound motion or, are you out there, trying to find like who wants a service – like what is the sales, how have you built the sales team?

Amandine: We hired our first salesperson three years after starting the company because everything was coming inbound. Basically, it’s very much the community being here and enthusiastic, and then, you have people who tried on personally or investigated, and then bring it in-house and suggest it to their governments or their enterprise as something that would be useful.

The community has very much been our main source of leads, and so many times you have a first customer called, and then you see one guy sitting at the back of the room with the Matrix hoodie, and it’s the one who doesn’t say anything. But you know it’s the guy that people actually listen to and trust because, from technical perspective, they are the expert. So, we now have a sales team, and we’ve focused a lot on making sure we have content and marketing, etc. do a bit of outbound, but yes, the fact that our tech is good and take his, “No, it is good.”, is our best-selling point and our visibility as Matrix as well.

Market Segmentation

Michael: Have you found that there’s some natural segmentation in the market, either vertical or by application, like how does it breakdown? It seems like it can be used by so many organizations, so does that drive your marketing department crazy?

Amandine: Yeah, it’s tough to focus when you can be used by anyone, basically you can solve pretty anyone’s problem. When we started, before setting up Element, we looked at the different business model to figure out how are we going to monetize it to actually fund the development. We ended up with 72 business models. We went for one which we thought would be pretty easy, which is enterprise collaboration and starting on SaaS, etc.

We looked at one of them was public sector communications, and we were like, “Huh, that’s a good match!” But oh, my God, no way we’re getting into this, it’s going to be endless sales cycle tenders – no way! Guess who knocked at the door? It was the French government! Because in the end, it’s such a good product market fit in terms of no vendor lock-in because it’s open-source and open standard, ability to run yourself, end-to-end encrypted, decentralized, so it matches the organization, and each ministry can have their own deployment.

So, we have really seen a good product market fit there as either generic collaboration tool, like French government for example uses very much as with team’s replacement, or also, for specific use-cases like defense. Because you can take Matrix into extreme environments, you can use it peer-to-peer, in a mesh network, you can use it low-bandwidth on ships. So, the US Navy is trialing it on ships. Their ship has their own server, and if your submarine is actually going down, loses contact with the network, they still can talk locally. And when they come up, then it merges the history, and they can get back in contact and see what has been happening with the rest of the fleet.

So, all sorts of very specific use-cases, which I’ve been working on. But overall, it’s very merged, we need sovereign communication, end-to-end encrypted, we need to replace WhatsApp because it’s not compliant and it’s centralized, and we need to replace teams because it’s not even encrypted and centralized.

Partnerships

Michael: You’re still a pretty young company. When was the company actually founded?

Amandine: Element was founded in 2017.

Michael: Okay. So, have you built out the partner network at all? And are partners helping you deliver or have partners become a distribution channel for you at all yet?

Amandine: We’re just starting. Literally, we’re still building up offers, contracts, etc., because we’re seeing a lot of companies who are actually helping institutions deploy their own NextCloud or LibreOffice and this sort of things. And now, they’re coming to this guy saying, “Can I have my Element deployment as well please?” So, there’s this sort of partnerships that we’re looking at, but it’s very, very much the beginning.

Trust Management

Michael: Maybe I can degress back into the tech, or maybe this is a tech / business question, but it seems to me like one of the challenges around a federated system would be trust. “Yes, I could connect to anybody, but if I’m a submarine, how do I know I’m not connecting to an enemy’s ship? Yes, I can connect to anyone, but how do you know who you can trust?”

Amandine: You can set up securable gateways, for example, which are going to give you an opportunity to apply business logic to it. Like, for example in the French deployment, you don’t necessarily want anyone to be able to message the top layers of the government. You want to put like civil servants in the government, can invite external people civilians into a discussion, but the other way around is not true. So, you have tools like this which says, “Oh, your server can connect to anyone, or, your server can only connect to this subset of domains,” and this sort of thing. So, we rely on additional tools around it to do that.

Ecosystem

Michael: What are your plans to foster growth in the ecosystem? So, not just the open-source contributors, but also sort of other companies who maybe have a commercial interest in working with either the Matrix protocol or the core Matrix open-source project?

Amandine: The idea from the start was to create Matrix as big as the biggest ecosystem as possible. And Element being the leader of it, but maybe like ten percent market share, the same way as Google is probably the leader of the web market, but it’s like tiny market share in corporate reason – it’s just a very big market. We are trying to encourage companies to build on top of it and support them.

Within the foundation, we want to set up at some point the ability to provide grants. We’re setting up a membership model within the foundation and then the ability to actually be able to fund all this money to other people contributing to the ecosystem. So, that’s the kind of things were trying to do. But we are very, very conscious about making sure that others have the space to grow within the Matrix ecosystem, so that it’s basically rising up the sea for everyone.

Commoditization

Michael: One of the key differentiators for Element is this aspect of decentralization and federation between servers, but that’s not proprietary. Are you ever concerned that maybe your key differentiator is also open and maybe, overtime, not unique?

Amandine: So, the beauty of an open ecosystem is that people will complete a value, so it’s up to everyone to find where the best value lies and bring their own expertise. So far, we have been relying a lot on the fact that we’ve been the expert in Matrix, having created it. So, we are the best to run servers at scale and this sort of thing. So, people come to us. We are at the point where other companies are now competing with us at that level, providing hosting.

So, we need to bring our expertise into more specific use-cases, and maybe it’s this specific property product for use-cases like around security, and that sort of things that we can build proprietary, and we can license, because we know best how the protocol works and we can go around these things. So, yeah, it’s up to us to be creative.

Another thing is that the vision is that everyone would be communicating via Matrix in a few years from now. And some of them will be using Element, some of them would be using all their applications out there. But we do provide today as an Element’s kind of app store, where you can install an integration to GitHub or Bridge to Slack, etc. One idea is that this App Store would be available to any other applications out there and can become one of the main points of monetization potentially for Element in the long term.

Product Roadmap

Michael: On the product side, which product are you the most excited about do you think has the most growth potential? And were you’re investing – perhaps more in R&D?

Amandine: Right now, we are rewriting the Element application, especially on mobile, based on the rest SDKs. So far, we had an IOS and Android SDKs. We are rewriting it from scratch using a Swift and Kotlin for Android. Basically, trying to get to a point where Element is as performant and fast as Telegram, with a user interface which is super simple. Because that’s been our biggest problem so far. Element has been very slow and bloated, and that’s really hindered the growth of Matrix as a whole.

This is the thing where we are investing a lot, and it should be out in the public test flight for iOS next week or in the couple next few weeks. And it’s really exciting because it’s like you started with some of the biggest accounts, and it’s like 100 milliseconds start – it is really nice.

Europe tech startup challenges?

Michael:  We’re here in Europe, and the founders are European – do you think that there are any challenges about being in Europe versus Silicon Valley, and what’s it been your experience of tech startup in Europe?

Amandine: Our market is very much around privacy data sovereignty and this sort of things – which is huge in Europe – so, somehow, it’s probably easier for us to be based in Europe because we have Germany, we have France, and they’re all so advanced on this angle of data sovereignty and privacy. I think that was really good for us. And it’s now a real challenge to cross the Atlantic and see on the other side if we can address this market as well. Because in the US, as far as I see it, the clouds seem to be pretty much the default and it’s less questioned than here.

Advice for entrepreneurs?

Michael: So, every startup is kind of a marathon and an emotional roller-coaster – do you have any advice for entrepreneurs, especially entrepreneurs who are looking to use open source as part of their business model?

Amandine: We just had an interesting panel around the community side of things, so one of my advices would be if you are actually wanting to do it, think about why. If you want to do it right, really take care of your community. Because the open-source company without a community, it’s missing the point of doing the open source. So, make sure you manage to grow a nice community because this will help you so much. It really makes the experience something different, and you know, otherwise, it’s just usual tech entrepreneur, in terms of make sure you stay alive because if you don’t, then you cannot take care of the rest of them.

Advice for women founders?

Michael: I have a related question for you: we need more women founder role models for the next generation of open-source founders. Do you have any advice for women founders?

Amandine: It’s always hard for me to talk about this, because I’ve never felt that I’ve been hindered as a woman. I have the feeling that the problem is more that, early on, it’s like the work needs to be done at school level. It feels like it’s education, from young kids to understand that no, tech is not just for boys, and yes, everyone can be involved. And as a woman founder, I think we always tend to – it’s the things we hear quite a lot – but tend to not push and not take the seat at the table. I think we need to be careful about that as women. We tend to just like intervene when we think it’s necessary, but we need to be a bit more outspoken and push it a bit more. Because, otherwise, people around us who are just more pushy will just walk over basically, even if they’re less competent.

Credits

Michael:  Amandine, thank you so much for joining me today. I know you have a busy schedule, probably flights to catch, so thank you so much for sharing your experiences on the podcast.

Amandine: Thank you for having me.

Michael: Special thanks to Amanda Brock and the whole OpenUK team for working so hard to launch the State of Open Conference. It was really amazing – thank you. Cool graphics from Kemal Bhattacharjee, music from Broke For Free, Chris Zabriskie and Lee Rosovere.

Next week, as I promised, Liz Rice from Isovalent, who’s going to tell us about the Cilium project and all the cool things they’re doing.

Until next time, this is Mike Schwartz, and thanks for listening to Open Source Underdogs.

The post Episode 62: Amandine Le Pape, Element CO-Founder / COO, Messaging and Collaboration first appeared on Open Source Underdogs.

Intro

Mike Schwartz: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is episode 61, with guest Nauren Batjargal, Co-Founder and COO of Erxes, a firm based in Mongolia that produces an open-source CRM and Customer Experience Platform. It is the first crowdfunded startup I’ve interviewed in the series. So, without further ado, let’s cut to the interview.

Mike: Nauren, thank you so much for joining us today.

Nauren Batjargal: Thank you for having me today.

Mongolia

Mike: You are the first open-source founder I’ve spoken with from Mongolia – is there something special about Mongolia that led to the development of this open-source platform?

Nauren: It’s minus 40 degrees right now, Celsius degrees, in Mongolia right now. It’s actually some of the coldest places in the world right now, so…yeah, here we are. Just doing the things that we do every day. Except the cold.

Mike: Where is the team located? Is there a critical mass there in Mongolia, or you are globally spread out.

Nauren: Yeah, we’re globally spread out, but the majority of the team and the development team is based in Mongolia.

Why position directly against Hubspot?

Mike: So, I liked the description of Erxes on GitHub. It says, “The open-source HubSpot alternative enables SaaS providers and digital marketing agencies/ developers to create unique experiences for their entire business.” I’m curious, why did you choose to position yourselves there versus HubSpot?

Nauren: We started the whole business, I mean, substituting the HubSpot, because, basically, we started the Erxes when we were the marketing agency. Then, like, while we’ve been marketing agency, and that we had to obviously generate some leads. And then, at the same time, looking after some of the existing clients as well as nurturing and implementing the project, at the same time with the limited human resources we had. And we’ve been using Intercom and HubSpot, Pipedrive, I think. You could name most of the marketing tech tools we’ve been using.

Partially because the single tool can only fill the part of the business life cycle. There was a lot of manual work behind using those several tools, as a small company. Most of the time, only four or five people are using four or five different tools, but then, there’s so manual work at the back. But then, on the other hand, it was too expensive for us.

So, that’s how we started. The main plug-ins, what we call it now, the main features that we have is what really HubSpot does. And also, explaining this kind of tool is really difficult. I use HubSpot to give an idea for everyone, like it’s an easiest and quickest way. So, that’s how the name came up.

Value Prop

Mike: What are the most important value propositions for your customer?

Nauren: There’s so many tools out there, and an average company uses at least 5 to 10, some like more than 10 tools they use in their everyday operation. Just using those so many different tools can lead so many ineffective and manual work. And also, eventually, it makes each team start talking in different languages – purely because the database they’re using is not the same. And those tools don’t often talk to each other, which directly affects the costs as well as the growth of the company.

The biggest value proposition that Erxes offers is, make the entire company talk in the same language. Because, the open-source, you can customize it entirely to fit to your business. And it has more than 48 plug-ins that can fit into every single of your different field, or different teams that you have. And even if Erxes doesn’t have any of the tools that you require, maybe you can develop one, or maybe you can integrate it because it’s open-source. You can actually do that. Plus, it’s open-source, and compared to some of the closed tools, it offers fairly sustainable price-friendly options.  As long as you could manage maintaining, and configure, and all those technical work that you can manage doing it, yeah, you can have better pricing options that can have you grow better.

Technical Skill Required

Mike: There’s a funny saying that I always think about, which is that open source is only free if you don’t value your time. Because there is a care and feeding aspect to operations.

Nauren: We have a service that we provide to save our customers’ time, to help to set up all those technical work. I know when you start a new tool, it’s a lot of work – especially with the tools like Erxes or HubSpot. It’s a lot of time, but once you get to know this value proposition and once you decide to move forward to this, there is a lot that you can benefit from.

Monetization

Mike: Which actually brings us to a good question about monetization. How do you monetize a SaaS license, plug-ins, APIs, and which monetization strategies are actually the most important to the company in terms of both current revenue and growth?

Nauren: Because we started and we had to bootstrap, we’ve had a number of enterprises which have like a large number of customers. Most of them operate in highly regulated industries. We offered them a tailored solution and like a dedicated support. What we aim in the future is to support partner companies as well as developers, independent developers, who can benefit from us, so then, we can earn from our support, as well as from the percentage from their revenue.

That’s one way of revenue-generating. And also, some of the plug-ins that we have are paid plugins – that’s the other revenue-generating plan that we have.

Moving from Enterprise to SMB?

Mike: So, you are really looking to figure out how can you really grow into the SMB space, which maybe would have better growth for you.

Nauren: That’s right, that’s right. That’s the biggest challenge that we have. Last year, we prepared our technology to be ready for this growth and resistant. But then, this year, we go into purely focusing on building the community and supporting those developers within our community, and make sure our tool is now developer first, shifting from an enterprise first to a developer first, I would say.

Product Focus

Mike: You mentioned that, perhaps, you’re going to introduce commercial plug-ins – which area do you see contributing to the most growth in the future?

Nauren: Yes, we already have a number of commercial plug-ins. This year and the next couple of years, we really purely focus on developers building the great developer roadmap and supporting them. And whichever way this will lead us, we will follow it. Because we started listening to the developers, and yeah, making the whole road to be smooth and easiest as possible.

Segmentation?

Mike: So, with regard to your business plan going forward, marketing technology – it’s a very horizontal market, which makes it very challenging, as you know as a marketing expert. What is your plan to segment the market? Is developers your segment? Or is there any other way that you’re looking to segment the market going forward?

Nauren: You are right. We’ve been doing marketing ourselves for the last 10 years. One thing that we know is, depending on who they are, and even though the companies operating in the same place and doing exactly the same thing, in the same industry, when it comes to marketing, they all require completely different thing from one another. Building a tool for them – it just doesn’t work if it’s just one SaaS tool. And that’s why we started this open source.

And the biggest advantage Erxes has is, whoever doing marketing is using Erxes can make the tool fits completely entirely for themselves, just like Lego. So, you could just make little changes within the plugin, and also you can add additional little bits and pieces to make it fit entirely, especially all those additional tools that communicate within the organization as well – you can sync it all together, sync the data all together, and eventually work as one.

So, in that way, anyone who uses marketing, whether it’s different or the same, you could have your own tool. Because we made a mistake over the years.

Like in the past, we were trying to segment the market, and then, we build something and then the next thing we jump in, and it turns out to be completely different. And then, we create another plug-in, and we create another plug-in. That’s how we already have 48 – like, so many plug-ins we already created. Even in the same industry, they require completely different tools. I mean, being open-source, it just helps make this tool to be suitable for everyone really.

Product Best Positioned for Growth

Mike: And in your marketing strategy, do you see your cloud-hosted offering as being a bigger driver for growth or the plug-in license revenue?

Nauren:
We always believe in open source. And we believe that the open-source plug-in is the biggest growth potential that we have.

Origin

Mike: When was Erxes actually started exactly – what year?

Nauren: The idea was initiated in 2016, but officially started in 2018. So, it’s six years.

Challenges of Mongolia

Mike: Just getting back to Mongolia for a second, because it is a very remote place. Have there any challenges from being in Mongolia?

Nauren: In terms of being an entrepreneur, being a developer, it’s the same – we are just using the computer and talking to you at the midnight in Mongolia. It’s normal, just like any other entrepreneur on a daily basis – it is the same. Except the weather and the atmosphere. Mongolia is based in Central Asia, and the Covid and all these political and economic challenges that we’re facing – it affects some of the members of our team. Otherwise, it’s just pretty much the same, you know.

Mike: Interesting. Yeah, thank you for sharing. Any advice for entrepreneurs who are launching a business around an open-source product?

Nauren: I mean, it’s the same. Whether it’s open-source or SaaS, you got to be really tough, stick to your decision and to make sure you love it. And then, to be persistent in challenges that you would face along the roads. Starting the business is not easy. Whether it’s related to technology or any other industry, it is the same. It’s challenging. So, you just make sure you be prepared.

Mike: Nauren, thank you so much for joining us today, and best of luck with the Erxes.

Nauren: Oh, thank you very much.

Mike: And thanks to the Erxes team for reaching out. Cool graphics from Kemal Bhattacharjee. Music from Broke For Free and Chris Zabriskie and Lee Rosevere.

Sorry for the long delays in releasing episodes. Being CEO of Gluu has been keeping me busy. But I’ll have two more episodes in the next few weeks: Liz Rice from Isovalent and Amandine Le Pape from Element. So, until next time, this is Mike Schwartz and thanks for listening to Open Source Underdogs.

The post Episode 61: Interview with Nauren Batjargal, Co-Founder & COO of Erxes, a Leading Open -Source Customer Experience Platform first appeared on Open Source Underdogs.

Intro

Michael: Hello and welcome to Open Source Underdogs! I’m your host Mike Schwartz, and this is episode 60 with guest, Antti Karjalainen, a co-founder and CEO of RoboCorp.

RoboCorp is a vendor in the RPA or Robotic Process Automation software market. It’s a type of software that allows businesses to automate repetitive and routine tasks typically done by humans through the use of software bots or robots. These tasks can include things like data entry or customer service interactions. If you’ve ever gone to a website and a chatbot pops up – that might be powered by RPA.

As you can imagine this software market is growing rapidly as more businesses are looking to automate their processes and improve efficiency. RoboCorp is a newer business than I thought at first, given how thoroughly they’ve established a leadership position in this very competitive market. Antti has a lot of great insights, so without further ado, let’s cut to the interview. Antti, welcome to the Underdogs podcast.

Antti: Thank you, Mike.

Origin

Michael: So, no founder interview is complete unless we hear the origin story. I take it as a young undergraduate student, you probably didn’t predict your career in RPA. So, how did you get into the industry and how did RoboCorp get its activation energy?

Antti: Yeah. I mean, that’s a long path obviously when we talk about these kind of founding stories. It all started with me just by doing software engineering work after graduating. And I ran a small consulting company around software engineering. And with that, we used to do a lot of Q&A test automation with a project called Robot Framework. It is a python-based keyword-driven test automation framework. I got into that community while using it. It is based out of – well, the project came out of Nokia, so that’s why the Finnish roots.

I got into the community, started doing things around the open-source project, hosting events, stuff like that, and then, I bumped into RPA, which is starting to emerge and take off around 2016 and 2017. And I thought immediately that that has a lot of commonalities with the test automation. In test automation, you obviously drive a system to validate it, and in RPA, you drive a system to perform a business process. So, I thought that maybe Robot Framework could become the leading open-source community for RPA and started on that path eventually after my first company got acquired.

So, a few years later, I’m looking at the market and there’s this big competition emerged, raised a bunch of money, started growing really rapidly, and RPA was the fastest growing segment and Enterprise software for like three years in consecutive.

So, I thought that somebody needs to build an open-source solution for that, and I didn’t see any other person having the right connections to do it, so I decided to start on that path myself and that sort of lead into RoboCorp. I felt that I had to do it in a way.

Product

Michael:  What are the products that RoboCorp sells?

Antti: We sell one product, which is the Control Room. That’s the proprietary component in the stack. That’s the orchestration platform as we call it in RPA. That’s how you deploy the bots, manage them, govern them and manage user rights and so forth. So, it’s really a central piece in how RPA works and how the bots actually get to execute work.

And then, we have a bunch of other components in the stack. You know, namely the code open-source stack, which allows you to build a bot and run it. And then, obviously all the automation libraries that enable you to connect to various applications, from browsers to mainframes, to ERP systems. And then, we have the developer tooling on top of that which creates a good developer experience. So, anything really outside of the core control room platform is open source with us.

Low Code Strategy

Michael: One way that RoboCorp has been innovative I think is through the use of Low Code. And why do you think that Low Code is so critical in your market?

Antti: In RPA, you deal with different sorts of developer personas. Some are very technical, come from a developer background, others might come from a accounting background for instance. So, when RPA got popular, it was marketed as something that anyone can really use to build these bots. But then, as it got adopted into the Enterprise, it sort of went into more complex use cases, more mission-critical use cases. So, it became a automation professional domain.

We started out with the automation professional in mind and built this Robot Framework and Python-based tools for them and got initial success with them, but we soon realized that it’s too different for the developer persona to be targeting.

They expected to have a drag-and-drop interface in front of them. So, we started thinking, okay, how can we innovate and create something that’s actually meaningfully different in that space. And so, we built a local layer on top of our open-source stack, which allows you to create a local solution, but it generates code in the back end. So, we call it “Code Native Low-Code”.

So, you work on this drag-and-drop interface, you build the automation from individual steps, which might be like opening browser, clicking elements, etc., and in the backend it’s converting that real-time in the code. And back, if you edit the code, you’ll see it in the local as well.

So, that was just the market expectation, and we wanted to sort of not be an outlier there to be perceived as more difficult than the competition, while in real life it really isn’t.

But coming from a background where RPA developer might not have actually written a line of code, presenting them with a VS code editor is just too jarring of an experience. But I think we balanced it the right way, where we can still keep the both worlds next to each other, low-code and then pro-code, as we call it here.

And it has been a pretty interesting journey to build something that hasn’t been built before that way.

Community

Michael: Can you tell us a little bit about the community? You mentioned you started with an open-source project in Python – were you able to bootstrap that community into the RoboCorp community? And how is it going building that community out?

Antti: The Robot Framework Community is pretty extensive. I think the project gets around 1.5 million downloads a month from Python package index. So, it’s used extensively in end-to-end testing in Q&A. And initially, what we took out of that was all the integrations that had been built over the years.

So, we get to leverage this massive base of all these libraries that integrate into various systems that Robot Framework was used to test, started out building our own tooling. And sometimes, the test automation community doesn’t really overlap with the RPA community, so we had to start building our own community as well. Sometimes they do overlap. We have customers who are now consolidating their test automation engineering, first with the RPA engineering, for instance.

We have customers who are coming into our products because they know Robot Framework already, and so they’re experienced with the tech and have confidence in it. So, to a decree, this overlap in those communities, it feels like we are building these two parallel communities that overlap in parts – it’s like a Venn diagram in a way.

How Low-Code Impacts Onboarding

Michael: One of the areas I feel RoboCorp is doing a really good job is by reducing the friction to onboard people into both your community and also into the commercial engagement with RoboCorp. And I wonder if low-code is maybe a gateway for people who go into the pro-code area. But can you talk a little bit about how that journey works from getting newbies and getting them in to be RPA professionals and customers?

Antti: Yeah. For sure, low-code isn’t a big enabler there. You’re not staring at like a blank screen, but you have all these capabilities listed as actions that you can start dragging on a canvas. So, it’s something that pretty much anyone can start doing, and you don’t have to have an in-depth tutorial or training to be able to do that. So, it’s a big enabler.

And also, by the way, we see the test automation community now starting to leverage the automation studio, the local tool as well. It is definitely excitement – low-code. And for good reasons. I mean, you can frame out some solution that you have in mind in minutes rather than learning the syntax from scratch.

And then, when you want to refine the solution, you can go into the code and start customizing it, maybe building custom Python in the creations, Python keywords and so forth. It is actually something that I prefer to use even with my developer background. If I start a new project, I start it with the low-code tools frame it out, get the structure right, and then might go in the VS code and I finish it up. But it’s such a big step up in the ease of getting started that you don’t really need to install Python, bunch of libraries, figure out your Dev environment, all of that – that just goes away. That just gets easy, but both sides of the community, pro-code people and the local enthusiasts like to use it.

Cloud Native Impact

Michael: So, one last technology question. Cloud Native has been a really – I mean, for me at least, it’s felt like a monumental shift in sort of how the customers deploy and operate. And I’m wondering if you’ve seen something similar in the RPA market, where Cloud Native has impacted or open new opportunities for delivery?

Antti: Yeah, definitely that’s a big part of what we do. The Control Room itself that the orchestration platform does, some Cloud Native SaaS solution – that’s something that you can just few minutes click into it and get an account going. That’s a great way to deploy RPA across a number of organizations, a number of different companies if you are a service provider, for instance. Building obvious solutions, you sort of have this single pane of glass that you can operate across.

Now, with RPA is also a double-edged sword. It sort of comes with benefits and the negatives as well. RPA is typically something that you do with applications that might be inside corporate firewalls, inside private Cloud environment. So, the bots actually need to operate typically in on-prem environments. And still, we use a Cloud Native solution to deploy them. And there’s a lot of architecture and engineering questions that we had to solve to make it as secure and robust as possible, to make it happen and be seamless for even the largest Enterprises to be able to adopt it.

Obviously, the benefit is that you get a single version deployment, you don’t have to go through installing a lot of infrastructure to get it started. You don’t have to update versions, you don’t have to maintain databases and so forth, but I think, especially with RPA, since it’s dealing with quite sensitive business processes typically, it deals with sensitive data as well user information, healthcare information, financial information, the security questions around that information are significant, and also compliance. So, that’s one key part of how we architected the Cloud Native products from the beginning, to be able to service on-premise use-cases.

Customers

Michael:  Who are the customers of RoboCorp today?

Antti: We serve a number of different types of customers. First, starting with the Enterprise, we have a number of large Fortune 500s and Global 2000s in the customer base. Some of the public references are companies like Emerson Electric, Ally Financial in the US, and there’s a lot of Enterprise customers that are still not public referenceable. But then, additionally, we have a large base of implementation partners – they have different business models, so they might offer a managed service on top of RoboCorp, where they build business process automation and deploy that across customers. It might be healthcare specific automations, it might be insurance – really any vertical, you name it – and then, there’s the system that created community who offer services on and around RPA.

We cover from mid-market customer base, in broad range of verticals and geographies and all the way to the highest Enterprise tears.

Segmentation

Michael: It’s interesting to hear you say that you had partners who are maybe developing business specific vertical solution and then marketing them – is that a strategy for segmentation or are you trying to identify, my guess, markets that you can deliver business value into and partners who can deliver that?

Antti: Really, it boils down to direct Enterprise customers, and we do get some mid-market customers that are good with us. But then, the partner strategy is really in the core of the company. The opportunity with RPA is so vast, so you can basically imagine any kind of company and they will have use cases for RPA. So, it comes down to whether the customer has a team of their own around business process automation. They might be using API-based solutions, all kinds of intelligence document processing, and together with RPA, to build end-to-end solutions inside a corporation.

Or then, when we go into the mid-market and below, it becomes a use-case driven segment. So, that’s where you need to know the specific ins and outs of, let’s say, mortgage origination. Their partners are better off to serve their own sort of expertise area. It is basically we sell directly to sort of teams inside Enterprise, and then, we have the partner ecosystem to serve on a use-case basis. That’s how we think about it.

Partners

Michael: Are these partners globally distributed?

Antti: Yes, definitely. We basically have partners across all the continents. It is really distributed right now, and there’s different categories of partners as well. Some of them might offer business process outsourcing services, some of them are automation pure-play vendors as we call them. So, they specifically focus on automation services. And then, they are the big force, the accounting companies, so they will typically also deploy RPA with their customer base.

It’s really wide range of different kinds of partners. And within that base, there’s different kinds of business models that they deploy. Everything from reselling into consulting, into system integrator work, into managed services.

Team

Pricing

Michael: Is the RoboCorp team similarly globally distributed?

Antti: Oh, yeah, for sure. We are right now, I think, in nine different countries, about 50 or so people at the moment, adding headcount right now. But we are fully remote company and we’ve been like that from the beginning. So, engineering, typically, is around Europe. And we do have a big base in Finland for engineering, but it is also distributed as a product engineering design. And then, our partner operations are right now led from Europe, and then, the broader go-to-market team is in the U.S. so, sales marketing customer success.

Michael: I always warn founders about how hard pricing is. There are a number of strategies to price I saw in the RPA market – what is a RoboCorp strategy and how long did it take you to get there? Did you get it right the first time and where are you today?

Antti: Oh, man. I mean, pricing is really difficult, it goes across everything really. When I got started with RoboCorp, I started kind of building the vision for the company. Now, we knew that we wanted to be the open-source standard for RPA for sure. We wanted to innovate around how do you build bots, how do you operate and manage them at scale, deploy them at scale, all of that stuff, make it more robust and resilient and faster, all of the technical attributes that you want to have for solution like this.

But then, the second big innovation there was around pricing itself and the business model. RPA traditionally has been really complex in license, and you can imagine this like a large Enterprise pricing scheme, every item has their own price tag, starting from a developer license to a test license, to an orchestrator, to a bot license, to an attended bot license, and you name it.

We wanted to make it really simple. We sort of went back to first principles and started thinking about, “Okay, what is the best proxy for value in RPA?” Traditional RPA will be pricing bot licenses.

So, essentially, you have a bot license that allows you to run one bot at a time. If you want to run two bots at a time, you purchase another license or so forth. And if the bot isn’t doing anything, you are still paying for the license. We thought that the better capture for value is going to be around consumption, and namely the working time of the bot. So, whenever your bot is working, you’re producing value, and so that’s the proxy.

We were the first one to build a consumption-based pricing model. And we did it from the beginning and started building the whole platform with that in mind, that we wanted to get rid of the concept of a bot license and go to consumption. And that still works, people love it. And they like the sort of flexibility of it, they don’t need to know how many licenses they need to purchase in advance. People will have peak demand loads at the end of the month or end of the year, end of the quarter, they will run reports that the bots will do. And those can demand hundreds of these bots working at the same time.

So, it really allows them to think of the processes from the best engineering perspective rather than thinking from a licensing perspective. That was my good starting point, but then comes all the details, like all the small details. Okay, you’re running a bot that needs to work 24/7 with a minute best price that becomes really expensive. So, we needed to add billing caps on a process-by-process level to cap the value at some point.

You want to do parallel execution, these kind of things – there’s different ways to really make it work. When you go into the Enterprise, you get into these conversations of, you know, we are ramping up, we have all these plans for RoboCorp, but we don’t know how much we’re actually going to consume.

If they’re coming from a legacy RPA platform, we are typically two to three times faster to execute, but they really cannot know in advance. So, we need to make provisions for first year, onboarding, ramp up, all that stuff. So, pricing is really, really difficult even though we try to come up with the most simple and elegant pricing scheme possible. And it’s still an ongoing process – we are actually redoing some of the pricing right now as we speak.

Value Prop Evolution

Michael: From the day you started, you had a certain value proposition in mind. And what are the most important parts of that value proposition today that maybe differ from where you originally started?

Antti: You know, we thought out that we will have this more of a bottom-up approach to RPA, where you can simply just download tools, explore them, build something, and then get it into use, into production as a self-service motion. And we thought that that would take us into a growth path.

So, we built the product in a way which allows you to do like full self-service, but then, over time, we realized that in RPA, you typically have a different buyer than the technical user is. And the buyer is very non-technical. So, we needed to start adding a lot of this sort of top-down aspect to the product itself and into the selling motion itself.

You know, in the recent years, I realized aspects of the value prop that we even didn’t fully understand ourselves, things around being able to store the bot code in GitLab and GitHub and user version control, now, the typical low-code solution doesn’t do that for you – it is all a proprietary XML-based model that you operate with, so that really isn’t a facilitate versioning.

When we went in first time and did like larger financial institutions, they told us that, “Hey, we chose you for one reason: because we can actually audit the bots, we can put code review processes around these bots.” And not for the reason of validating that the code is good quality, but actually, validating that the digital worker doesn’t go rogue, doesn’t do things it wasn’t intended to do.

So, the fact that we can do proper version control actually meant proper governance and controls and compliance for our customers – that was a new thing that we discovered some time ago. As we’ve gone into the Enterprise, and we got really good success stories there, things like reusable components across the bots, so you can share code between the bots and build asset libraries that you can leverage in future bots that you build. You don’t need to re-implement all the functionality again and again, like you would do in a more traditional local platform. You know, these things have become more and more valuable over time to ask on the customers.

Advice For Open-Source Entrepreneurs

Michael: I guess, as we tie this interview up, I wanted to get your thoughts on the open-source industry maybe more head large. As a successful founder, what do you think are some of the challenges that other entrepreneurs who want to use open source as part of their business model are facing today?

Antti: Yeah, that’s an interesting question. Now, open source does have many different kinds of business models around it, I think. First of all, understanding what you can do around whether it’s an open core model, whether it’s a support model, or Cloud-enabled model. That’s the choice that you have to make kind of early on as you start building.

Sometimes, open source can be a one-way door. You put something out there in the public domain, you don’t get it back. So, realizing that and being mindful of what you actually put in the open-source side of your business – what’s proprietary, how do you monetize, how do you do that, it’s an important decision. And you know, we’ve seen companies in the last decade or so, going to open source and potentially give out too much of the value prop.

I think Docker has been a good example of that. Now, they’ve actually turned around and doing great, but for a while, insiders I’ve heard saying that we gave out too much, that we didn’t capture the value. So, being mindful of what the customer wants to pay and trying to make it meaningful. You don’t want to build artificial gates.

For instance, whenever somebody’s using our purely open-source stack in a large Enterprise, we’re super happy about it because that’s still using us instead of the competition.

I encourage everyone to use RoboCorp even though you wouldn’t be paying for us – that’s all-net positive to us – but just being kind of mindful of where are the gates around paid, what the value is that you’re delivering. It might be things that are sort of not obvious for technical people, like myself, where it’s around governance and compliance, which is a huge hassle for a larger Enterprise customer.

So, understanding what the intended buyer is willing to pay for is one key part of it. And second is, is there really a open-source flywheel that you can leverage, is there a community building on top of your product committing directly to your product, are you willing to take in those contributions as they come in, how do you control a community roadmap for instance? Or is it more like building a component that then gets integrated into other open-source – I mean, there’s so many different pathways that you can explore and kind of plan for us as you go forward.

Closing

Michael: Antti, thank you so much for sharing these thoughts with our audience, and I wish you guys the best of luck in the future.

Antti: Thank you. It was great being here.

Michael: Thanks to RoboCorp for reaching out and the Gluu team for helping me pull this episode together. Cool graphics from Kamal Bhattacharjee. Music from Broke For Free, Chris Zabriskie and Lee Rosevere.

If you’re interested in open source, especially if you are based in Europe, you should check out the State of Open Source Conference in London, February 7th and 8th – I’ll be there. I’m even recording a podcast live at the event.

So, until next time, this is Mike Schwartz. You are listening to Open Source Underdogs. Thanks for listening.

The post Episode 60 – Robotic Process Automation with Antti Karjalainen, Founder / CEO of RoboCorp first appeared on Open Source Underdogs.