MySQL’s pitch deck is an instructive example of how to pitch a free/open source startup to investors. With this pitch deck they raised $16 million in their Series B round way back in 2003 when it wasn’t so clear to investors that free/open source was the better way to develop software.
I wanted to point out some of the highlights that are especially relevant to startups and why startups that develop proprietary software should consider making their software open source instead.
MySQL tech support is everywhere
In the pitch deck on slide 7, the MySQL team talks about having lots of customers and having their own tech support company that services MySQL installations. This is one of the major sources of revenue for free/open source software companies: offering tech support. WordPress does it, Red Hat does it, MySQL does it, PostgreSQL does it too.
However, because the underlying code is open source and has no license fees, this means anyone in the world can start a new company that provides tech support. For investors, this would seem like a problem because there is no lock-in. Oracle and IBM and Microsoft and now Amazon and Google will lock you into their platform and make it difficult to switch away; you can’t hire someone to go into Google’s cloud servers to fix things for you. This is compelling for investors because there is guaranteed revenue.
To counter-act this, the MySQL team relies on tech support being everywhere. The lock-in is no longer needed because everyone is using MySQL by default and you can hire tech support anywhere but of course, why hire just anyone when you can hire the MySQL team to support your installation?
Choose a niche and then expand from there
On slide 10, the MySQL team shows their market reach in three markets: web databases, embedded databases, and enterprise databases. Their focus was on web databases (at that time Yahoo and Google were the large players using MySQL), and embedded databases which, I would think, have less competition from Oracle, Microsoft and IBM which focus on enterprise databases. The MySQL team wanted to raise funds so that they could start to expand from web and embedded into enterprise databases. By having a solid foundation in one market, they could ask for investment to establish leadership in the embedded databases market and then expand into another market, the enterprise databases market.
This is a smart business strategy, and they outline this on slides 19 and 20.
Modes of Production
The MySQL team talked about modes of production in their pitch deck on slide 24. This absolutely has to be talked about in any pitch deck that a free/open source startup creates. The first two modes of production are typical: employees working for a firm, and individuals working to satisfy customers in a market following price signals. The third mode of production is free/open source development which is branded as commons-based peer production (we’ve talked earlier about open development method which is similar and a replacement for SCRUM which is usually found in the first mode of production).
Slide 25 states that MySQL has two modes of production, they have their company and they have their open source contributors. Ideally, it wouldn’t matter whether someone works for the company or on their own with their own set of motivations.
They talk about what makes free/open source development different and position it as a competitive advantage with their MySQL Community Goals.
Focus on Growth and Community
The MySQL Community Goals on slide 26 are to grow the installed base from 4 million to 40 million, that’s a whole order of magnitude. Their other goal is to keep the community engaged and active.
Focusing on growth is vital for startups to receive funding. Increasing the installed base is simpler for free/open source because there are no licensing fees (or if there are, they’re dual-licensed like MySQL or Qt); this makes adoption easier for developers because they don’t have to get their boss’s approval or approval from accounting to just try out MySQL.
In slide 27, they outline many ways for them to grow the install base from focusing on getting other FOSS projects to adopt MySQL and to ensure MySQL can be deployed at a large-scale. These strategies should be adapted and learned from.
Slide 28 is about community activity and engagement. More developers helping each other out means more people using MySQL and supporting it, and a potential pool of hires for the MySQL company itself to draw from. What’s best for hiring is that the developers have self-selected and already proven they can do the work with their code submissions. This isn’t explicitly mentioned in the pitch deck, but it’s something all startups should be aware of; can you hire someone tomorrow who is already familiar with your product/service and its inner workings? In the case of proprietary software, the answer is no because whoever you hire will only be familiar with the surface layer and will need training on the inner workings. This ties into growth of the company.
Counter Objections To Free/Open Source Development
I think slide 31 was my favourite slide because it argues and counters the objections to free/open source software. I’m going to repeat them here because they’re just so good.
- Lack of proper support
- MySQL operates worldwide 24/7 support since 1999
- Lack of vendor accountability
- MySQL owns its product and takes full responsibility
- Lack of vendor viability
- MySQL has made money since 1995
- Lack of 3rd party software integration
- MySQL is working with Sun, Novell, Veritas and others to ensure interoperability
- Lack of skilled staff
- There are more than 4 million installations worldwide and hundreds of thousands of skilled developers and administrators. Use the community.
For most startups that are starting out, they will not have the scale of MySQL to make some of these arguments but they can argue by aligning their trajectory with those objectives. For example, tech support has to be done to bring in revenue. Integrating with other software is easier because the community can help with that. The community attracted to the code also trains itself so it can support that code; therefore growth of the community turns into growth of skilled staff, added 3rd party software integrations and proper support.