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Joseph (JJ) Jacks
Joseph (JJ) Jacks

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Open Core vs. Closed Core: Comparing Fundamental Startup Cost Dimensions

From: https://twitter.com/asynchio/status/1344048327852056576?s=21

Closed Core startup costs traditionally exposed on P&L, but displaced / dramatically reduced in Open Core / COSS:

  • Cost of core Product distribution
  • Cost of core Engineering / R&D
  • Cost of Sales/GTM
  • Cost of PR
  • Cost of Talent acquisition
  • Cost of Customer acquisition

In COSS, Product distribution costs often reduced dramatically via FOSS core distribution which itself scales exponentially and virally, with little to no spend required in best cases.

In COSS, core R&D often occurs in the open with the FOSS core via extensive and intensive feature validation, feedback, testing, iteration, etc. As compared to fully proprietary, hard cost savings here are immense.

In COSS, many of the best GTM motions are at least devoid of field sales and at most benefit from “pull” market dynamics (customers and leads emerging organically) vs. “push” dynamic which is both time&money expensive, error prone and often the result of death.

In COSS, “PR” as a function requires context specificity ... corporate PR may be needed, but product PR is often transformed with the pace of innovation and transparency that excites FOSS communities and ecosystems.

In COSS, talent acquisition and hiring are radically more capital efficient... why pay a recruiter for key roles that are blindly sourced and lacking relevance when you can directly hire immediately/clearly from your FOSS community and bring on instant context, experience, cred?

In COSS, “CAC” math breaks down in myriad ways. Your FOSS user / dev is, in most cases, NOT your direct customer persona. Consequently, treating CAC optimization as such leads to horribly undesirable outcomes. However, FOSS momentum and adoption lead to dramatically lower CAC.

COSS is not the only category transforming the conventional wisdom of startup building ... but consider this: maybe some of the highest churn functions in startups should maybe not be functions at all?

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