Focus on Your Own Metrics
An interview with Nadia Eghbal on company building and financing the unfundable, yet indispensable, open-source projects startups are built upon.
You founded your own company, went through an accelerator, sold it, and then became a VC. Now you’re an open-source community evangelist. What was that journey like?
We had the typical accelerator experience: in for 3 months and your goal is to raise a round. My co-founder was doing the fundraising, and it was hard. Every time an investor was like, “Well, why doesn’t the platform look like this and do this?”, we would take all of that advice to heart, and we would go back to the drawing board and add all these features. It looked like this awful Frankenstein version of all the things we had heard.
During that time, we weren’t focused on building the product, and our sales were completely fucked. We were focused on raising money, because we thought if we raised money, then we’ll be safe.
By the end of the accelerator, we hadn’t raised anything. We thought, “What are we going to do?” We decided to buckle down and not talk to anyone; not listen to anyone. We had this existential heart-to-heart with ourselves. When we rebuilt the product, we did it with the voice and execution that we believed in. The new language and framing worked really well.
When we rereleased it, the difference from one month to the next month was 10x. It wasn’t a ton of money, but it was enough that we could be paying our salaries. We didn’t have to worry so much about raising money, because we had some degree of independence now. Eventually, we ended up selling it to another brand and going down different paths.
I felt changed from that whole experience. Why is everyone trying to raise venture? I felt what our company needed to do was so disconnected from what ended up actually working and getting us revenue. We got all this advice, but in the end, all that worked was us saying, “Let’s not listen to other people and focus on what we want to do.” The most important thing when you’re founding a company is listening to yourself, because no one else is going to do the work.
I felt disillusioned by venture. I was wondering, “What else is out there that is really valuable that isn’t getting built because it doesn’t fit into a traditional venture model?”
It’s not glamorous. I was going down this path and writing about it; not sure what I wanted to do with it. I wrote this one blog post: “What If Facebook Was a Nonprofit?” I was thinking about how differently things would look if we had all these models that weren’t solely dependent on venture, and how would the incentives change to build different kinds of companies.
A partner at Collaborative Fund read that post and you ended up joining them for a year to do seed investing. But after a year, you left.
I’m glad that I saw the inside of venture. It helped me understand there’s a lot of good about venture. There’s a lot of nuance that I wouldn’t have otherwise seen. When I left last spring, I didn’t want to complain about venture. I wanted to talk about solutions. There’s plenty of situations where venture is great. But what does it look like to introduce different incentives into the system? What is not being supported that should be supported? This took me down a long weird path for a couple of months. I ended up landing on trying to find things that were not venture backed tech, but were being heavily used.
That’s how I stumbled into all these different open-source projects and ecosystems where it’s public software that every single software company is using in their code. Those projects themselves are not actually businesses. They’re not venture backable, but they’re still a very vital part of the ecosystem. Literally any app that you open up your phone, or any website that you go to, has some sort of open-source software that is hidden in their code. I felt like I’d stumbled upon a thing that I could at least evangelize as being a really great example of something that is exists outside of venture capital, but is still vital to software itself.
What major problems are facing open-source community right now? There seems to be an overlap in the problems facing open-source projects & independent businesses.
I think the common difference they’re facing is a lack of frameworks, and a lack of a clear path. I think about my own experience as a founder where we had an idea, and then we built a prototype, and then some people used it, and it was enough that we validated our MVP. Then we went to an accelerator, and then the idea is that you get funding. There is very common wisdom on, how do you start a venture backed startup? You can ask anyone how to start a VC-backed company. There are tons of resources online. If you have a successful open-source project — I think this is also true for indie founders — there are not a lot of resources and information out there on how you run something that’s really valuable to other people.
With open-source communities, you’ll have something that’s being used by millions of people and that billion dollar companies are relying on. You’re somehow struggling to pay your rent, and that makes absolutely no sense. I think a lot of it is just, “Well, I don’t know how to manage this.” Not just, “I don’t know how to find the funding”, but also, “I don’t know how to manage a successful project. I don’t know how to grow my contributorship. I don’t know the kind of documentation I need. I don’t know if there are templates that will help me manage my workflows better. How do I do all this?” That was the consistent thing I heard from a lot of founders too. “How do I do this? I have no information.”
Similarly, with starting a technology business that’s revenue first, there’s not a lot of information to help you. So much of the common startup wisdom right now is not around for that kind of business. It’s around, raise as much money as you can, and then you’ll figure it out. That’s a very different mindset.
It’s not just about finding the funding or having a source of capital available, but it’s also about creating the knowledge and resources that people need to empower themselves.
After spending so much time on these problems from so many different angles, what’s the biggest thing you’ve realized?
I think you don’t have to do things the way that people always think you have to. It’s been a consistent life lesson for me, and maybe sometimes that’s exhausting, but I also find it fulfilling. When I first started diving into this, everyone was like, “Open-source needs money, just raise a fund and do it.” I realized that money was not the biggest problem in open-source. It's so much more complicated than, “Let me just pool together money and give it to open-source projects.”
It was the same struggle when I was a founder. Investors or advisors would say, “Do this thing. Make your product look like this.” It wasn’t playing to our strengths, and it wasn’t the right answer.
I’ve gone outside of tech to get the funding I needed this past year. I went through a foundation, and that’s weird to people sometimes, because they’re like, “Well, why are you going to foundations?” Money is money. All money is green, and it supports me and allows me to do things the way I want to do them in the world. I feel very enabled to be able to structure my day the way I want to, and focus on the areas and products I find interesting. Don’t always assume there’s only one way to do things.
It’s the same with startups. People say, “Raise venture. That’s what you’re supposed to do, or you’re not a real company.” I’ve talked to people who’ve had enormous exits and created very big companies, and they say, “I never felt like a real company no matter how much money we were making, until we raised venture. No one thought we were real until then.” I think that makes people feel uncomfortable sometimes, even if you have a great company. That’s the first question people ask you, if you have a startup. I think people hate responding to that by saying, “We haven’t raised anything, but we make a lot of money.” Everyone’s response is, “Oh… cool. I guess.” It makes people uncomfortable, and they think, “Maybe we should raise.”
Just because people don’t understand what you’re doing doesn’t mean that it isn’t valuable. You should focus on your own metrics for what’s valuable in the world.
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