Good morning, everyone. Welcome to the open source funding room.
Well, we have a very long schedule for you today.
When you learn a lot, we are starting off with Ben and Shannon and they are going to tell us about how they got back
the platform for funding from venture capitalists.
Hi, everyone. Welcome to our talk about how the open source community liberated its own platform.
Okay, the open collective platform. My name is Shannon. I'm hit of operations at open collective and this has been Jim.
I'm not Shannon. I'm president of open source collective and one of the directors of Ofico, which you'll hear a little bit more about and talk.
Let's get going.
Okay, so the first thing to say is that this is kind of us airing our dirty laundry. This is the most appropriate and British picture that I could produce for that statement.
But ultimately, it's a good news story about how the open source community supported the transition of a full profit company that was owned predominantly by investors and a couple of founders into a non profit organisation that is run for and by the community that kind of depends on the platform.
So there with us, consider yourselves to be our kind of group therapists and we will basically let it all out.
So what is open collective? Can I have a show of hands of who knows open collective and what we do?
That's a lot more than I thought it would be.
So open collective is a technology platform. It enables projects, specifically open source projects, community groups, climate activists to transparently raise and manage their money.
It also has another layer which provides them with legal statuses and access to bank accounts. So it really takes all the bureaucracy out of doing the good work that a lot of our groups do in the world today.
So we are effectively a collection of organisations that are centered around a particular platform and I'm going to take you through a little bit of the history.
So 2015, these beautiful people started open collective ink with about $500,000 worth of seed funding. So that's Pierre, that's Xavier, and at the end this is him and this is Roma that was a baby born basically around the same time as open collective ink was started.
And then since then open collective kind of went on a bit of journey. So 2015, $500,000, $300,000 later on in 2016 and further I think $2 million shortly after that as well.
So around $2.8 million in VC back funding. And then basically what happened is having built the platform, the organisation decided to kind of create its own verticals.
So we have open source collectives, these are host organisations that kind of extend their legal and financial kind of capacities to member projects.
So open source collectives might be the most famous one for first-end, but certainly if you work in more kind of mutual aid services then OCF open collective foundation or maybe if you're in Europe open collective Europe or open collective New Zealand or wait what's the last one?
Oh yeah, sorry, sorry you're collecting another New Zealand one.
So yeah, basically open collective started these fully independent foundations to kind of act as verticals for its platform over time.
So as I say, open collective, sorry open source collective, probably the most famous, we host around 2,600 open source platforms on that open collective platform.
We have open collective Europe based here in Europe. They host a lot of open source projects as well, but also a lot of community groups and climate activists and other things like that.
We had OCF which was a big charitable service in the U.S., they again did a lot of the mutual aid, food fridges, other sorts of community groups, kind of activism that was really big in the state.
Some federal funds and stuff as well.
We have the social change news, they're based in the UK. We didn't incubate these guys, but there are another one of the hosts that we work really closely with as we grew up in collective.
So over the course of what is effectively 10 years, we've supported thousands of non-profit organizations and collectives as we call them and raised over $150,000.
There's a dip in that graph which we're going to talk a little bit about in a moment, but effectively this is our kind of success story.
If you wanted to look at this, you can go discover.opencollective.com and you can kind of have a look at some of the projects that we've supported over the lifetime of the organization.
But how does this all kind of work? I'm going to go into a little bit of economics and how this kind of transition was supported.
Basically, the pricing structure for open collective ink as a platform is a kind of you win, we win structure.
So if you are not providing services and charging for them on open collective platform is free, but if you are, then open collective ink would take a kind of revenue share of a 15% to account for the cost of maintaining the platform.
Now, one of the issues that open source collective and open collective foundation had is that we had a kind of historical relationship from way back when open collective ink, the platform first started, which was the pricing was initially 5% for the platform, 5% for the host.
And then that got melded into a revenue share that looked more like 50-50 because 5% 5% is basically 50-50 if you charge 10% on top.
So we've moved the cost from the projects into the big host organizations, but in that process we effectively built in a 50% revenue share with a full profit company,
which represents a considerable risk for a non-profit like open collective foundation or open source collective because our status as a non-profit might be risked if someone kind of looked at that too closely.
And also as the organizations grew, the amount of support that that meant was going in a mandatory kind of fashion to the platform is quite high.
So ultimately we ended up with this is 2023's numbers kind of open source collective and open collective foundations supporting the platform to the tune of about 1.2 million plus some other smaller host organizations and independent collectives.
Really this is here to talk about kind of the power and the value in the open collective and the ecosystem.
And well you've got an ownership structure that looks like this. So you've got kind of 50 plus percent of the platform company that's owned by investors, that's 26% that's owned by founders and that's permanently payers, even in Serbia.
18% that was available that I argue should be shared with staff and then a little tiny staff slice down here that's about 2.5%.
So do you want to talk about Exit's community?
So as a company we were following the Exit's community movement. This is a way for traditional startups instead of doing the big let's get bought by another company or let's go public.
It's a way of turning around and going, we want our community and we want our users to own the services that are being provided.
So we were exploring what this looked like, we were trying to figure out how we could do this and we had a lot of different thought pieces going on.
And yeah eventually it happened but not on the way we thought that it would.
And as you can see very blatantly there's a dip in 2024. Unfortunately OCF open collective foundation our big charitable U.S. entity it closed down.
We were quite shocked by this it was unexpected and it did result in us losing about 50% of our income as you saw that graph earlier.
So basically introduce another risk for us to go on. So open collective foundation is for O.S.C. being the last remaining large host on the platform and opportunity on a risk.
The risk is that a for-profit company has effectively lost a significant amount of revenue that needs to replace and like all good companies pivoting to food delivery as the main option.
Which isn't great for an organization that depends upon the platform.
So we saw two risks, you know, the risk about the relationship with the for-profit company and the risk that this for-profit company would have to replace that revenue.
There's something that didn't align with the incentives or the needs basically of its biggest customer at the time.
As a result, this ensued.
I'm not talking about your slides.
I just made a meme. We're at a point where it happened a few years ago now where we can laugh, which is lovely.
But everyone wanted the platform. We had the host on one side. We had the founder on the other. We have OCF in the background, obviously not involved anymore.
But what happened from this was a negotiation.
And this was the result.
So on one side, we have the new nonprofit that stewards the Open Collective platform of EconSortium.
They got the platform and the business.
And some of the cash reserves. On the other side, we have the founder who ended up with the brand Open Collective.
Some of the reserves and some of the other core founders, the shares and staff shares.
This was the negotiation that was able to come to result. Did you have anything you wanted to add about it?
No, I mean, so having spoken about the company being owned significantly by founders and investors.
I think one of the things that happened that really made this work was that Pierre gave her entire share stock allocation to the consortium effectively to make it.
I also did as the transfer. So yeah, there was like a lot of individual kind of support in that transition also.
And to go further into OTHI consortium. So we now have the really lovely nonprofit that's doing the Open Collective platform.
Overall, the mission is to maintain these open financial tools and make sure that they're available for all.
We have five members that are stewarding this consortium at the moment. You'll notice.
The big one of the source collective and Open Collective Europe, they are founding members.
We then have the gift collective in New Zealand, social change, needs to new K and the rough foundation.
And we think it's really, really positive that because of the strength of a resource collective, we've been able to keep the platform up for all of these other groups around the world that are also doing really important work and other areas.
We really wanted to demonstrate how, you know, we were able to make that happen and we weren't, we didn't lose all the work we've been doing.
To go a bit more into some of the governance, we've been sitting all of this up over the last few months.
It's been a lot of having decisions about how do we make decisions and having a lot of meetings and talking about how do we make the platform sustainable?
How do we move forward from here? And what sort of things do we need to be building? There's a lot of conversations happening around what the members need from the platform and what we should be focusing on.
So our team has really had to adapt and pivot to how we work, but it really feels a lot more aligned and it feels a lot more.
You know, we're really working for our biggest users now and they're really involved in the decision making and everything that we're doing and it just feels, yeah, so good.
To get to the realities, we're still really heavily dependent on open source collective financially.
They make up a significant amount of the money that we need to operate every year.
So we're definitely going to be moving in a direction of trying to bring in more users, more big fiscal hosts, so that we don't have that risk.
Because if something did happen to open source collective, it would impact all of the work we're doing it for ourselves, which would be really devastating.
Nothing's going to happen to open source collective. We're fine. I've been doing this for five years now. We're stable.
Yeah, so just to kind of add to that, like, so OFO is a 501 and C6 for you governance nerds.
The same as OSC itself actually and the next foundation if you're checking.
We're effectively like a group of organizations that come together for a shared purpose.
The 501 C6 for OFO is basically a member organization for hosts, so all of these organizations are kind of represented in the governance structure.
And I just wanted to kind of point out like cash support basis, like investment looks like this, but in terms of the governance structure, this is what the power dynamic looks like.
So come from a graph in which you have like 50% share of investors, 26% share and founders a little bit available a little bit of stuff, to 100% shared by the users of the platform.
And a governance structure that looks, you know, on paper, pretty balanced in terms of support versus use versus governance in that structure. So yeah.
And yeah, we wanted to show the team. This is the beautiful people behind all of this work.
It's drunk a little bit since 232, but yeah, these are all the humans that are making this possible.
Okay, that's us. I think we've got some time for questions.
Just grab this.
Hello, what is the fiscal and organizational link or legal link between OS, Europe and the collective in the US?
They're completely separate. Sorry. So the question was, what is the legal relationship between open collective in the US and open collective Europe?
So they're completely separate organizations. Now the platform is operated by Ofico, which is the nonprofit that's based in the US, and then open collective Europe is based here in Belgium.
JF is somewhere, not here today, but yeah. So it's completely separate, they're completely separate organizations.
The only relationship that they have is this shared kind of governance relationship in Ofico.
Hello. So you talked about executive community, which is a very nice goal in itself.
Obviously, when you have a VCBX company, there are some original capital owners who have the power and how do you arrange for them to agree with the exit to community?
Goal.
So from what I got from that, how did we talk to the initial investors to get them to agree to exit?
Yeah, how do you get them to accept? So we were really lucky that at the beginning of open collective, we had a range of investors that very much understood that we weren't going for a big unicorn.
We weren't trying to become a multimillion dollar company. It was a lot more about the impact than it was anything else.
So when it came to that negotiation piece, it was really just with the founder who had a lot of the other shares.
The investors were kind of just told as from what I understand when things were happening.
I think there wasn't really much of a choice at the end of the day because the company was in such a bad situation having lost 50% of its revenue.
It was kind of a forced hand.
Hello. You had the slides with the cash contributions versus the governance representation percentages, right?
So I'm wondering, do you have anything in your governance rules that kind of prevents a future conflict here?
Like if the disparity stays this big, somebody might get unhappy and then how do you mitigate that?
Yeah, it's a really good question. So when we were doing the initial governance work of how do we make decisions?
We also put in place a decision making framework which is based on consent.
This means that we aren't voting most of the time.
Voting is used as a fallback because we understand that voting can create unequal power dynamics and it can cause teaming up and people feeling singled out.
So we really use a consent-based framework where we have proposals that are proposed through to the general assembly and we require half of the members to consent
and if any of them object it stops and we revise.
And this means that we're constantly trying to find the best way forward that it works for everyone.
And this voting is as a fallback if that doesn't work.
We've also purposefully built it so that OSC is the biggest financial supporter is not the biggest kind of single representative.
So it can't out vote like everybody else and basically it needs to build some kind of friends within the community in order to be able to make those decisions.
So yeah, it's balanced.
I have two questions for the talk.
One is in hindsight, is there anything that you could have done earlier in this whole story to facilitate this exit to community?
It was a success model to first boost the platform with a classic investment strategy.
And the second question is who was actually representing the interest of the community was that employees at Open Collective,
or were that representatives from the community otherwise?
Have you given it to me because I was predominantly.
It was me. I was being really annoying.
Yeah, I fought for a long time within like I was one of the leadership team of the full profit entity as well.
And was fighting for a lot more involvement of staff and the community in the organization that led to partly led to the conversations around exit to community and stuff, especially during the good times.
I think it would have been better if the company had been more forward about sharing its success with staff and potentially talking with host organizations about an economic model where it could share in the financial success of the platform.
And which it didn't do, so I would advise all companies that have big customers that they are sharing a little bit more, basically.
Yes, so my question is how you chose to incorporate in Delaware as a 501, C6 and how do you decide it on the bios?
If you want to share something interesting for example, I see that you have members mostly corporate members and they have the general assembly that decides on the bios.
Is this pretty interesting if you want to say something about this?
Yeah, sure. So the question is how do we decide to incorporate in Delaware and broadly how the bios would decide it?
It's as boring as it's sticking to what we knew.
So as one of the founding partners and the largest kind of founding partner at OSC, we kind of followed the same pattern that we had with OSC.
And the kind of general assembly kind of membership model is slightly different, the voting dynamics are slightly different, but yeah, it was predominantly sticking to what we knew already.
I think that I know more questions, so let's give a hand for Shannon and a bedding, again for opening up this room.