The Open Source Metrics That Grand Ventures Looks For
With the launch of Grand Venture’s 2nd Fund in September, our focus has narrowed to a much smaller set of thematic investment areas, of which, DevOps and more broadly the Developer Toolchain, is where I spend all of my time.
In the world of DevOps and Developer Tools, it’s common to see companies with deep roots in open-source software (OSS). We have made significant investments in this space, including Astronomer (OSS: Apache Airflow), Payload CMS (OSS: Payload), and most recently Tembo (OSS: PostgreSQL). In this post, I’ll detail the OSS metrics we prioritize when considering investments in an open-source company.
First, a disclaimer: When investing in a company, we consider many other important factors such as the team, total addressable market (TAM), vision, etc. However, this blog post specifically focuses on the growth of open-source software (OSS) for startups that are based on or centered around OSS. At a high level, the OSS metrics we prioritize are:
- GitHub stars
- Discord/Slack/Community
- Contributors
- Downloads, inits
- Active Users
- Revenue
GitHub Stars
The number of GitHub stars represents the popularity of a project. GitHub users can “star” repositories, which saves them in a list of Starred Repos. Some users ‘star’ projects to indicate their liking, similar to “liking” a post on Reddit or Instagram. Others star projects as bookmarks to easily track activity or remember them later. All that said, it is important to note that the number of stars is often considered a vanity metric and can be manipulated. Nevertheless, we still consider it; however, we zero in on the GitHub stars growth rate and trajectory of stars over time.
Above you can see the GitHub star history for Payload, which grew from ~1k stars to ~11k over a 12-month period. Payload is a good example of a project that rocketed in popularity (as measured by GitHub stars) over a relatively short period. We like a minimum of 10% MoM growth in this category, and ideally 20% or more.
Discord/Slack/Community
A vibrant, fast-growing Discord, Slack, or GitHub Discussions community is one of the most important metrics for an OSS focused startup. It’s not just the number of active users, it’s also the variety and quality of the conversations occurring within that community. As part of our due diligence, we’ll always join the community and spend a significant amount of time trying to understand developer/user sentiment, interactions by the company itself, excitement about new features, deep thinking about the roadmap, etc. More recently, we’ve even had some of our companies provide updates on the number of concurrent users they’ve had in their Discord/Slack communities. We like to see 10% MoM growth as a positive indicator.
Contributors
Contributors to the project/code base are often an important indicator of the health of an OSS project. When looking at contributors, we are looking at factors such as the number of people on a company’s team who are contributing, what % of the codebase is contributed by company employees, how many contributions are coming from outside the organization, and even if the company has hired people who started as external contributors. It’s important to note that with early-stage OSS companies, there aren’t always external contributors. That said, we like to see evidence that someone outside the company is excited enough about the project to contribute in some way.
In this image above, you’ll see Astronomer’s has contributed over 55%(as of 2022) of code contributed to the Apache Airflow project. It’s a strong sign that they are one of the primary drivers (if not <THE> primary driver) behind a widely used OSS project.
Downloads
The number of downloads of the project is another metric we consider. Some of our portfolio companies track this as ‘Inits’. In the case of Payload a developer can ‘initialize’ a project, which includes downloading but is more than that, through a Java script package manager with the Terminal command:
npx create-payload-app@latestWe aren’t necessarily looking at the sheer number of downloads as we are the velocity/trajectory of downloads over time. We are typically looking for 10% MoM growth, and some of our most successful companies have sustained 20% over extended periods.
Active Users
When I say ‘Active Users’ I mean it somewhat generically. Having <some> users is better than having no users. Having users using the project/product in production is better than having nobody yet running production workloads. Obviously, as you move beyond pre-revenue/pre-seed, the number of paying customers matters. It goes without saying, ‘who’ those users are can matter a lot. Users from Fortune 500 companies might be viewed differently than let’s say users from academia. Again, it’s less about the number of Active users than it is about the growth trajectory of the Active User Count.
When we started talking to Tembo.io, they already had over 100 active Beta customers evaluating their solution, including a number of Fortune 500 companies. Another strong signal.
Revenue
In a perfect world, your company is already generating recurring revenue. It’s going to be highly stage-dependent and is not an absolute requirement, especially at the Pre-seed and Seed Stages, and even occasionally at the Series A stage. That said, we are going to index fairly heavily, in the early stages, on the other OSS metrics listed above, in particular the size, makeup, and growth of your community.
Summary
Above is a brief overview of the metrics Grand Ventures is looking at when evaluating companies that are building on open-source projects. It’s important to remember that the Team and Total Addressable Market (TAM) will always be essential components of evaluating any new investment we make. Those always have to make sense. Assuming they do, we zero in on the metrics detailed above when evaluating open-source companies.
Have questions or want to chat? Follow me on Twitter @nathan_owen.
FAQ
1. How are the different OSS metrics weighed against each other in the evaluation process?
While the blog post outlines the metrics we prioritize, the specific weightage assigned to each metric can vary depending on the individual company and the overall opportunity. We consider a holistic view that factors in not only the OSS metrics but also the team, total addressable market (TAM), and other relevant factors. Therefore, it’s challenging to provide a one-size-fits-all answer on how we weigh each metric. However, we can share that we actively seek companies demonstrating strong community engagement, active development, and a growing user base, as evidenced by the metrics mentioned in the post.
2. Does Grand Ventures have any specific criteria for the types of open-source projects it invests in?
While we are open to evaluating opportunities across various segments of the open-source landscape, we do have a particular interest in certain areas. These include:
- Developer tooling: We believe developer tools are crucial for accelerating innovation and empowering developers to build the future.
- Cloud-native infrastructure: As the cloud continues to be a dominant force, we are interested in projects that enable efficient and scalable infrastructure solutions.
- Data & Analytics: We see immense potential in open-source projects that democratize access to powerful data tools and foster data-driven decision-making.
3. Can you share some examples of how Grand Ventures has used these metrics to successfully invest in open-source companies?
We are proud to have invested in anumber of successful open-source companies. You will see some of their names above. These companies have fostered vibrant communities, attracted talented contributors, and experienced significant growth in terms of downloads, active users, and revenue (where applicable). These factors, combined with strong teams and compelling TAMs, have contributed to our successful investment partnerships with these companies.
We encourage you to explore the websites and communities of our portfolio companies, such as Astronomer (Apache Airflow), Payload CMS (Payload), and Tembo (PostgreSQL), to gain further insights into how open-source projects can achieve success.
