How Open-Source alternatives are challenging great startups
The Open-Source market is currently booming.
While in early 2010, very few great businesses emerged from Open Source (only one Open-Source unicorn in 2010), the generalization of the Open-Core business model coupled with SaaS offerings has allowed the emergence of a new generation of Open-Source companies (more than 70 Open-Source unicorns in 2022).
These companies take advantage of the incredible network effects underlying open-source businesses while now monetizing as well as closed-source businesses (to learn more about those trends and business models, don’t hesitate to read my previous article on the subject).
Now, a new wave of open-source businesses is emerging, shaking the foundations of some of the greatest closed-source startups built in the past decade: Open-Source alternatives.
🚀 Zapier, Airtable, Slack, Firebase, Calendly, etc. now all have an Open-Source alternative that was financed by VCs, has some great traction, and might steal a huge part of their businesses in the future.
But why are these alternatives working? Could they become bigger than the companies they are challenging? Are they good investment opportunities? And is it really new?
That’s the questions I’ll try to answer in this article!
What are Open-Source alternatives?
Open-source alternatives frequently emerge as substitutes inspired by existing startups or proprietary software. Unlike their closed-source inspirations, these alternatives are more than just duplicates.
They’re freely accessible to the public, not only for use but also for adaptation, allowing developers, technical teams, and tech enthusiasts to contribute to the software and tailor it to their needs.
By being open-source, these tools invite users to dive deep into their foundations, offering the option to download, inspect, and modify the very code that powers them. This fosters a dynamic ecosystem where both developers and users collaborate, ensuring the software evolves in response to genuine user needs.
Despite this trend seeing huge success recently (with alternatives to Zapier, Airtable, Figma, etc. emerging); it’s actually not new and has been going on for a while, Linux was created as an alternative to Windows and Firefox to Internet Explorer.
Open Source emerged to prevent the core building blocks of the internet from being controlled exclusively by single big corporations like Oracle or Windows. In the 1990s Open Source projects were often started by people who wanted to go back to the initial “spirit” of the internet. Some great products emerged from that trend like PostgreSQL which “stole” most OracleDB users.
And now that we have seen a huge rise in SaaS companies in the last decade, it’s their turn to be disrupted. But unlike 30 years ago, with the Open-Core and SaaS business models, open-source alternatives can now monetize much more easily, and I believe many more will emerge.
In the mapping above, you can see some great examples of Open-Source alternatives to popular software. I’ve classified them into 5 different categories, which can all benefit from open-source, but on different aspects.
Developer tools: Historically Open-Source businesses focused mainly on developer tools, infrastructures, and data. If your clients are developers, I believe, Open-Source is today the best way to build your business, as it will allow you to create a great community of … developers, so basically your target clients 🙂 It allows you to prioritize features that developers want, benefit from their contribution to build faster better products, and much more.
Cybersecurity: What could be more crucial in cybersecurity software than trustworthiness? Open-source cybersecurity software stands out in this regard due to its code transparency. This transparency bolsters trust and security, as the open code is subject to public examination. These software also benefit from community-driven development, leading to quicker identification and resolution of security issues. Finally, as most of them address developers, they are able to create bigger and more engaged communities of potential customers.
Application Layer: While not so common some years ago, more and more open-source companies are building applications that are not natively made for developers like CRMs, Calendars, Design Systems, etc. Open-sourcing these types of software allows for more trust, flexibility, and above all, integrations. An open-source project could be more sectorial agnostic as it allows the team to focus on building the barebone of the product while the community will be able to create specialized features from it. For example, a team building an Open-Source CRM doesn’t have to adapt their CRM to all the potential use cases of specific clients. They can leverage their community which can then adapt it for restaurants, doctors, VCs, etc.
Artificial Intelligence: In the past months, we have seen a huge surge of Open-Source AI models and tools. They offer transparency in their algorithms and training data, fostering trust and facilitating a deeper understanding of their inner workings. They benefit from the collective expertise of a global community, accelerating innovation and problem-solving. Besides, they are often more flexible and customizable, allowing researchers and developers to tailor them to specific needs. AI initially comes from research which is quite open by nature, thus contributors are quite used to peer reviews which makes Open-Source quite natural in this world. I for once, believe Open-Source is not just the past but also the future of AI, and certainly hope so, because otherwise, it would be putting too much power in the hands of single corporations.
No-code / Low-code applications: Over the last decade, we’ve witnessed the rise of numerous low-code/no-code platforms like Airtable, Bubble, and n8n. However, these tools often fall short in terms of flexibility, scalability, and transparency, making them less appealing to large organizations. Open-sourcing these applications can address these challenges effectively. With open-source access, users gain the ability to modify the code, enhancing flexibility and resolving vendor lock-in issues. Scalability improves as users can host and adjust the infrastructure to their needs. Moreover, open-source code offers transparency and builds trust. A lot of open-source challengers are being created in this category, and I believe way more will emerge shortly.
You can search for Open-Source alternatives to your favorite software from this great website: https://www.opensourcealternative.to/
If you can’t find any, maybe they don’t exist yet, and it could mean there is an opportunity for a great business. I hope this article will inspire entrepreneurs to build great products 🙂
A new way to compete with startups already having a huge network effect
Picture this: You’re an entrepreneur with a keen sense of innovation, and you’ve identified potential gaps in tools you love, such as Airtable, Zapier, or Postman. Inspired by these observations, you’re tempted to create your version of these products and establish a startup that stands toe-to-toe with these industry giants.
But how do you acquire users when you have competitors that have years of cred, an army of loyalists, and that golden “stickiness” factor? Even if you develop a superior version of the product, how do you ensure its widespread adoption? More importantly, how do you convince the world to take a leap of faith with a newbie, especially when their precious workflows and data are at stake?
👉 Well, Open-Source could be a good solution for you.
By being among the pioneers to share code for a product inspired by established, beloved tools, and strategically promoting it (for instance, within communities dedicated to the original product), you’re not just offering an alternative. You’re creating a new paradigm by making a product that you already know people love and by opening it up completely to collaboration, removing the barrier of trust (notably by allowing customers to host it wherever they want), and above all by allowing anyone to take control of the product + customize it exactly as they wish.
If amongst that you sprinkle it with some new features and remove some issues the underlying product had, you could become a winner. A good example of a promising combo is Baserow, the Airtable Open-Source alternative that has removed the limitation of rows per base (while Airtable had a hard limit at 250k rows which might be its biggest flaw).
Most of all, open source can become your biggest marketing channel and argument. You can market yourself as the “Open-Source alternative to X”, and attract hundreds if not thousands of developers pretty quickly if your product is good enough. With this early community that might become much more engaged than the one of the underlying product, you can kick off your network effect and build on top of it.
⚠️ But you have to know, that building an Open-Source company is hard. And maybe harder than a classic SaaS business. It’s hard to attract the community, hard to engage it, hard to monetize without alienating this community, etc. So if you want to do it, get ready for a
An alternative or a better product?
Open-source alternatives are so much more than budget-friendly counterparts to mainstream products. When we dive deeper, these alternatives can rise above their proprietary peers, evolving into superior, community-powered tools. After conversing with a multitude of entrepreneurs diving into this realm, here are some compelling reasons their clientele gravitated towards open-source options:
1- They offer more privacy, trust, and the possibility to self-host their product
Many establishments, ranging from private corporations to governmental bodies, hesitate to trust platforms like Zapier, Airtable, or Calendly.
Why? The obscurity of closed-source code forces unwavering reliance on the platform. For smaller startups, earning trust becomes even more challenging compared to tech giants like Microsoft or AWS.
Besides, most of the time, these SaaS platforms don’t offer any flexibility in terms of hosting. They don’t offer any self-hosting capacity, and they don’t even allow you to choose the country where your data will be hosted.
2- They offer more flexibility and scaling capacity
By definition, Open-Source products are more flexible than closed-source ones, allowing anyone to modify the code, for their internal usage, build on top of it, or integrate it in a better way with their stack.
This flexibility also offers better scaling capacities as companies can build on top of the product, host it by themselves, and much more. A great example of that could be n8n, a Zapier Alternative that doesn’t have any workflow execution limits (while Zapier has a 2M task limit). But even with Open-Source, scalability could come at a cost, you have to deploy it to a specific infrastructure and maybe even adapt the code to handle the workload (that’s why offering the capacity to scale easily is one of the ways for Open-Source startups to monetize).
As flexibility and scaling capacity are some of the biggest issues of No-Code tools, I believe that more and more No-Code companies will be open-source. It might be how No-Code tools will go from being used for SMBs, internal projects, and POC, to becoming how great scale-ups and tech startups build most of their tech infrastructure.
3- They are less expensive or can even be free
Of course, the price is one of the reasons why customers are often choosing an Open-Source alternative. Most of the alternatives I showed in the market mapping above have a lower price for their basic cloud version than their closed-source competitors. And of course, they come with a free version if you download the code, and host it by yourself.
But it’s not necessarily a bad thing for entrepreneurs building these businesses or VCs backing them. Many companies find these costs prohibitive providing them to use the underlying tools. For instance, small businesses may lack the budget for expensive products, while enterprise companies might find the pricing of tools like Zapier escalating too quickly for extensive automation needs. Offering a free version with the option to purchase additional paid modules, following the Open-Core model, could actually broaden the market size.
The free version also allows companies to test the product for free before implementing it in production, reducing the need for salespeople and shortening the sale cycles.
4- Being community-led, they solve the issues of the original product
Being shaped by a community has its distinct advantages. Open-source versions, often emerging in the wake of the original, are positioned to address and rectify existing issues. The community-driven approach lets them cater to the underserved needs or pain points the original product might have overlooked or found too daunting to tackle. This unique positioning allows open-source alternatives to capture a significant portion of customers who felt sidelined or dissatisfied with the mainstream option.
How companies are making Open-Source alternatives great businesses?
Everything begins with finding some issues in a great closed-source product and building a great community around something that not only solves these issues but also benefits from all the advantages of Open-Source. Most of the founders I talked to started like that.
To lay a foundation and carve out a distinct identity, these startups initially position themselves as “THE Open-Source counterpart to X.” This strategy serves as a tactical entry point, helping them target a niche market segment and establish brand recall.
A testament to this is Supabase, which even amidst its success, continues to call itself the “Open-Source Firebase alternative” — a name so iconic that it simplifies Supabase’s proposition into an easily digestible pitch. Indeed, it’s when they revamped their branding with this tagline that they exploded on platforms like HackerNews and the number of users went from a dozen to 800+ in 3 days (don’t hesitate to listen to one of the founders explaining the underlying in this podcast).
However, as these companies mature, there’s an imperative shift from merely being an “alternative” to becoming a standalone powerhouse. At this juncture, they’re not just resonating as an echo of another product but are gaining recognition for their intrinsic value. Consider Metabase, which has transcended its identity as just a Tableau alternative. I, for one, genuinely find it superior in many aspects.
It’s during this phase of evolution that the question of monetization becomes important. The majority resort to an Open-Core model, offering premium modules alongside their core open-source offering. Simultaneously, there’s a move toward the SaaS business model, leveraging product hosting as a revenue stream. Yet, the SaaS route often becomes a double-edged sword. If your clientele predominantly gravitates toward you for the flexibility of self-hosting, relying solely on a SaaS monetization strategy could backfire. Navigating this dual approach of Open-Core and SaaS is a nuanced challenge.
While this trend of open-source alternatives is not nascent for Developer-Tools and companies operating in the infrastructure layer with great successes such as Gitlab, or Databricks, it is still in its early stages for no-code tools and companies operating in the UI/application layer. So there are many unanswered questions: Can they generate enough revenue to join the ranks of decacorns? How will established closed-source entities respond to this shifting paradigm? Is there a chance some will be eclipsed and sidelined (I believe a lot of them will)?
I will watch it happen very closely shortly, so don’t hesitate to contact me (abel@redriverwest.com) or my colleagues Olivier Huez (olivier@redriverwest.com) and Maxime Dolores (maxime@redriverwest.com) who helped me write this article!
