In the Unusual Field Guide, we described how Series A investors will evaluate your company for indicators of product-market fit. Series A fundraising for an OSS company has important nuances because the primary indicator of product-market fit is adoption, not revenue. In the first phase of building an OSS company, prioritization should be given to adoption at the expense of monetization. Therefore, OSS companies do not reach the same revenue milestones as other companies by the time it comes to raise Series A. The good news is that top open-source investors understand this and don’t evaluate OSS companies based on revenue. Instead, they will look at a different set of metrics to determine project adoption and community engagement as indicators of product-market fit and how well-positioned you are to achieve repeatable sales with your commercial offering.
Determining whether your OSS project is progressing toward product-market requires paying attention to metrics that can help you assess its traction. There are many OSS metrics that are available for founders to measure, and understanding the relevance of each is important to figure out how to best drive awareness and interest.
So-called “vanity” metrics are the easiest to immediately look at because they’re publicly displayed but could simply reflect passing interest — these include GitHub stars, watchers, forks, and contributors.
These metrics, however, are not necessarily a reliable indicator of actual adoption. Many users who star your project may never end up using it. Instead, these metrics represent “mindshare” among your target audience. We’ve also observed that these types of metrics for OSS projects can vary widely across different categories of projects.
For example, OSS developer tool projects tend to generate many more stars than OSS security projects. Gauging your public metrics with those of peer projects will give you a sense of the relative overall awareness or recognition your project has, akin to “Share of Voice” in marketing.
For reference, in the table below, we’ve listed GitHub star count data drawn from 67 open-source companies who announced their Series A fundraisings in 2021 and 2022. You’ll see that average, median, and top-quartile star counts vary between open-source developer tools, data/ML, and security projects. Growth rate also varies though it’s worth noting that top decile month-over-month star growth across all companies is above 12%, which we consider to be best-in-class.
Another metric founders often track is the number of downloads. This is oftentimes not a reliable measure of adoption since automated workflows and systems will drive this number artificially up without providing clarity on the numbers of users, a much more important metric.
Another caveat to these metrics is that their counts do not decrease even if activity starts to wane. Therefore, tracking absolute counts is insufficient. It’s necessary to measure growth rates in these metrics — week-over-week and month-over-month — to determine if your OSS project is maintaining or capturing additional mindshare.
If these public metrics on GitHub can help you measure your relative mindshare among your target audience, what metrics can you use to assess meaningful adoption? To start, the size of your community is a far better reflection of the number of users who have adopted your OSS than the number of GitHub stars. The degree of activity of user engagement in your community Slack or Discord is incredibly important — having hundreds of members with very little activity is a telling sign that your project adoption is minimal.
Adoption typically corresponds to project “velocity,” the pace at which changes in the OSS occur. To measure your project velocity, evaluate metrics such as the number of active project contributors (those who have contributed commits within a given recent time period), the number of issues that have been filed, and the number of pull requests.
Measuring adoption is also not just about quantitative data but about qualitative aspects. For example, as we previously highlighted, it’s valuable to understand the organizations that your users belong to since lighthouse companies provide early credibility. “The right metrics depend on your market, your product, and how it works,” says Ev Kontsevoy, Co-founder and CEO of Teleport. “Find the proxy metric that measures your market-share capture.”
In the Unusual Field Guide, we shared how to best position yourself for a successful fundraising process. If you are an open-source founder, this starts with identifying Series A investors with a track record of working with open-source companies and who know how to evaluate whether your OSS project has achieved (or is well on its way) to product-market fit. Open-source software gives these investors ways to gauge traction early in a startup’s journey, before the company is generating revenue. The same transparency that makes OSS projects easy to adopt also provides a window for investors to assess your progress to date.
As with any investor presentation, your pitch deck must communicate a compelling narrative that highlights the strength of your team, the large market opportunity, and the goals for this financing. However, for slides that cover traction, Series A investors want to see specific information to evaluate whether your OSS project has reached product-market fit and if your company is ready to build a repeatable sales motion. Here’s what you can expect them to look for.
As mentioned above, public metrics provide a window into only part of the story. They help investors gain a sense of relative project popularity, mindshare, and awareness, which is the starting point for broad user adoption. But investors also want to understand metrics for actual adoption including the ones we listed: how large your user base is, their level of engagement, active contributions, support requests, and project velocity. Momentum, as evidenced in growth rates, is a key aspect across these metrics that investors will pay attention to.
Beyond metrics, investors will want to understand who is engaging with your project and the organizations they belong to. Early lighthouse adopters that are technically sophisticated and forward-thinking provide credibility and influence with the broader market. Mid-market and large enterprises with sizable budgets represent real buying power that make it easier for investors to believe your company is well-positioned to achieve a repeatable sales motion.
It’s worth keeping in mind that many popular OSS projects achieve sizable adoption but are unable to monetize because their users have low willingness to pay. For example, if your user base is primarily made up of hobbyist developers, investors may question the commercial potential of your company. Investors will look out for what these adopters are saying about your project — why they found it compelling, what features they like best, why everyone else needs to be using it. Expect that investors will conduct reference checks with users at lighthouse companies to ask them directly.
Beyond the metrics and understanding your user base, investors (at least the best ones) will want to understand the details of how those users are implementing your OSS. Is it being used in production? This increases the likelihood that users are getting high value out of it. Has it been integrated with existing tooling and/or workflows? This signals that your OSS has some level of stickiness and is being used regularly. What are the use cases that everyone gets started with? This suggests there is strong repeatability for user onboarding.
Here’s an investor checklist that will help you prepare for what investors will evaluate as part of your Series A fundraising process:
☑️ Public GitHub metrics — as a measure of relative mindshare
☑️ Community metrics — as a measure of project usage
☑️ Profile of users and their organizations — as a measure of credible, influential early adopters
☑️ Examples of usage
☑️ Caliber of team
It’s important to note that beyond Series A, OSS adoption isn’t a substitute for revenue. Companies must demonstrate product-market fit for their commercial offering in terms of actual revenue and paying customers, while continuing to grow their OSS velocity.
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