This document discusses alternative business models for open source projects including crowd funding and tokenization. It provides examples of open source business models like enterprise support and open core. It discusses license choices for open source projects and stages of funding for open source startups. It then summarizes the story of Nginx, an open source web server, and its acquisition by F5. It discusses crowd funding models and examples like Fetch.ai which raised funds through an initial coin offering. It also discusses topics like tokenization, control in decentralized systems, and the impact of publicly traded token-based businesses.

1. Cambridge Product Management Network
Alternative business models:
open-source, crowd funding and tokenisation
Liam Crilly & Arthur Meadows
26th April 2021
Thanks to our sponsors

2. LIAM CRILLY
Writing simple web applications since 1993
Sr Director, Product Management, NGINX (Part of F5)
WFH since 2015
Previously in Cambridge
 Velocix (aka Alcatel-Lucent, aka Nokia)
 Signify
 ElectricMail (aka Net Connect)

3. SO, YOU WANT AN OPEN SOURCE
BUSINESS…

4. OPEN SOURCE MONETIZATION
By Accident On Purpose

5. OPEN SOURCE BUSINESS MODELS

6. OPEN SOURCE BUSINESS MODELS
Enterprise Support
•Not only available to the
original creator
•Scales with people
•Little need for funding
•Perfect lifestyle business
•Example: cURL
Open Core
•Project + Product
•Hold some features back
for paying customers
•Knife-edge balance of
adoption vs value
•Example: Docker (Mirantis)

7. LICENSE CHOICES
Permissive vs Restrictive
 Do what you like, but give credit
 Use in your similarly-licensed project
Notable licenses
 BSD (2-clause, 3-clause)
 Apache 2.0
 GPL
 SSPL
Two choices for monetization
 Fully permissive
 SSPL (if your service doesn’t need an
ecosystem)

8. OPEN SOURCE STARTUP FUNDING
Friends, Family &
Fools (pre-seed)
Seed Series A Series B≥ Public / IPO
Maturity
Concepts /
Ideas
MVP /
Prototypes
Product-
Market Fit
Scaling /
Growth
Multiple
Products
/Revenue
Streams
Typical
Raise
<£1M £150k - £2M £3-12M >£10M >£100M
Typical
Valuatio
n
£1-3M £3-10M £10-30M >£30M
>£500M
Market Cap

9. THE NGINX STORY

10. 10
“... when I started NGINX,
I focused on a very specific
problem – how to handle
more customers per a single
server.”
- Igor Sysoev, NGINX creator and founder

11. THE NGINX STORY
2001
• Original
idea
2004
• NGINX
0.1
2007
• "Viable"
2011
• NGINX,
Inc.
• NGINX
1.0
• Series A
$3M
2013
• NGINX
Plus
• Series B1
$10M
2014
•Series B2
$20M
2015
• Series B3
$8M
2018
• NGINX
Unit
• NGINX
Controlle
r
• Series C
$43M
2019
• Acquired
by F5
$670M

12. WEB
SERVERS:
MARKET
SHARE OF ALL
SITES
First appearance 2008
NGINX Inc. formed at “Z”
Takes market share from
Apache and Microsoft IIS
No.1 web server April 2019
Cloudflare stop emitting
“nginx” Server header
NGINX Inc. never sold a web
server
Source: Netcraft Web Server Survey
https://news.netcraft.com/archives/category/web-server-survey/

13. Q&A: OPEN SOURCE

14. Intro to Arthur
•Product management & marketing for 20 years.
•Founding member of Fetch.ai, AI + ML + crypto-
currency start-up at St John's Innovation Centre in
2017.
•Led an Initial Coin Offering (ICO) of $6m on a crowd-
funding platform which sold out in 22 seconds.

15. Crowd funding

16. Some History
•Business loans have been around since 2,000BC
•Milestone in Renaissance Italy in the 14th century:
• Double-entry book keeping
• Concept of shareholding / equity
• Renaissance mercantile trading / exploration
•Pulses of innovation:
• Italy
• British Empire
• Expansion of America
Arthur Joseph Meadows
Venice
on
the
flood
tide

17. Crowd funding – non-financial
returns
• Donation
• Continuous (eg to church, school, charity etc)
• Project-based
• Philanthropic (eg Save the Pig, build a park bench, run a marathon)
• Rewards-based
• T-shirt – I helped!
• The promised unit (of many)
• Tickets to the opening night
Marillion fans raised $60k to tour US in 1997

18. Crowd funding – financial returns
Businesses
Individuals
Debt Equity
Secured and
Unsecured
Few (legal)
examples!
P2P
P2B
(marketplace lending)
(*) Examples only
Justin Wilson
(racing driver)

19. Start-up funding – equity-based
Project
• Write a business plan,
assemble team
• Do the financial model
• Define funding requirements
(and how much equity will be
given away)
• Add to platform
• Market, market, MARKET
Platform
Marketplace
• Easy communication to the
crowd
Legals
• Identity
• KYC / AML
• Payment Processing

20. Crowd funding – Scope ‘n’ Scale in
UK
Largest campaign by
capital raised:
£11m
Largest campaign by
number of investors:
16,735
crowdfunders
Largest campaign by pre-
money valuation:
£150m valuation
Data from

21. Why use Crowd funding
•Pros
• More control for the entrepreneur
• Lower expectation of financial returns than venture capital
• Engaging with the public before the product is built
•Cons
• A lot of marketing needed – even before the product is
built. Need to have your ducks in a row.

22. Early stage investing?
Angel Investing / Venture Capital Crowd funding
Complex offerings
• B2B
• Lots of due diligence & market knowledge
Simple to Understand
• B2C
• Shorter decision timeframe
Prior failure not necessarily at disadvantage Failure definitely a black mark
Will invest in:
• Someone’s crystal ball
• The germ of an idea
Will invest in
• Evidence of initial success
• Green shoots of an idea
More disclosure about the magic sauce Less disclosure about the magic sauce
Few, highly demanding shareholders
(who have significant control)
LOTS of shareholders
(noise rather than voting rights)
Negotiated terms Take-it-or-leave terms + momentum!
10x returns in a diversified, professional portfolio <10x returns in a ‘unprofessional’ portfolio
Product-Market fit not achieved Funding appetite == Product-Market fit

23. Tokenisation

24. The Problem
What happens when:
•you know that there is network value,
•but the value derived by the innumerable services that
sit on top of the network far, FAR exceeds the value
that you (as the original generator of the network) can
extract from it?
•Massive impediment to the initial construction
• Traditionally, overcome with consortia and standards

25. Formula
Tokenised
Business
Model
Open Source
Crowd
Funding
Cryptography
Distributed
Replication

26. Tokenised Business Model
• You give me real $$$ to build it
• In return, you get credits to be used on the network (aka ‘utility tokens’)
• Example of a telephone network
• Premise
• The network grows, the value increases, the value of the token increases (because each token
does more)
• Mandates Token  Fiat exchange mechanism
• So, if you have invested in tokens you can use the network for cheap OR realise
returns by selling the tokens
• How entrepreneurs make out
• They are gifted some of the tokens
• Tokens = share options, except that they are immediately tradeable – and you have to pay tax
and NI on them.

27. Control - No-one & Everyone!
•Compute / network / network credits
•Perils of an open-sourced banking systems
• Bad actors can change the balance in their own account
• Solved by consensus: if 51% agree that this is the truth,
then the majority rules.
• Example of going down a dark alleyway
• Proof of Stake vs Proof of Work (used by Bitcoin)
• Best explanation of cryptocurrencies:
https://www.bbc.co.uk/news/av/technology-43026143

28. The impact of publicly traded
businesses
•MARKETING
•Community Support
•Fetch.ai example
•Continuous sale of tokens – zero bank balance
•Insider trading + continuous forensic accounting
•Volatility & paying to dampen it

29. Fetch.ai - the Crazy Sh*t

30. Fetch.ai – The fund raising
•The big idea: autonomous AI-driven agents that
operate on your behalf solving life’s challenges.
•Pivoted into tokenised business model
•Raised $15m in pre-sale (ie Series A)
•Raised $6m at Initial Coin Offering (ICO) on crowd-
funding platform
• All over in 22 seconds
• Max individual contribution $3k = 2.8k investors

31. Fetch.ai – Token price rollercoaster
Feb 2019 Mar 2020 Apr 2021
Sold at
8¢
First
morning
49¢
0.735¢
88¢ =
$1b valuation
37¢
0
100¢

32. KYC in Crypto
•Some interesting investment offers
•Some interesting verification techniques

33. Final Question
•If Tim Berners-Lee came to you with the idea of a
web server + client browser, would you advise
him to open-source or tokenise it?
•Fibre / 5G network?

34. Q&A