133
How to Organize and Fund Free Culture Projects Kevin Shockey @shockeyk Founder, Mis Tribus

Financing freedom0.71

Embed Size (px)

Citation preview

Page 1: Financing freedom0.71

How to Organize and Fund Free Culture Projects

Kevin Shockey @shockeykFounder, Mis Tribus

Page 2: Financing freedom0.71

What?

Free culture projects often fail

due to a lack of resources.

Page 3: Financing freedom0.71

So What?

By focusing on raising funds and resources,

a project can increase its' chances

of survival

Page 4: Financing freedom0.71

Why me?

Page 5: Financing freedom0.71

Why now? Declining interest in FLOSS

Lingering confusion surrounding free software

Lack of unity, more division

- Freedom

Cloud computing and proprietary platforms, like iOS, are:

- Reducing awareness of FLOSS contribution

- Reducing interest in freedom

Page 6: Financing freedom0.71

O'Reilly Home Page (06/16/2012)

Page 7: Financing freedom0.71

Disclaimer

Some of this class

Is based on theories

I'm currently researching

And using

Page 8: Financing freedom0.71

Key Takeaways from Tutorial Now:

- Ideas are easy, execution is hard

- Most FLOSS projects fail

- Lack of resources

Financing Freedom:

- Most popular FLOSS foundations aggressively pursue funding

- Success requires a methodical process

- Mastery of Internet marketing

Page 9: Financing freedom0.71

Software Development Project Methodologies Waterfall

Microsoft Solutions Framework

Rational (IBM) Model

Open Source

Expert Programming

Agile/SCRUM Development Method

Lean Startup

Page 10: Financing freedom0.71

Eric Ries – The Lean Startup Financing Freedom - “How to organize and fund free culture projects”

- Slides

- Handout

- eBook

Supporting Materials

- Background

- Data

- Illustrations (Graphs)

- Vision for Maximum Strategy

Community

Page 11: Financing freedom0.71

So far...Startup Progress Funding Free Culture:

- Blog: news.financingfreedom.com

- Homepage: www.financingfreedom.com

- @_ff12

One Blogger post triggers:

- 5 automated social messages on 5 different accounts

- 3 Twitter accounts

- Linked In

- Financing Freedom Page on Facebook

Page 12: Financing freedom0.71

NW St Johns Bridge

Page 13: Financing freedom0.71

Assumptions Free Culture

Project Execution

Project Funding

Page 14: Financing freedom0.71

Free Culture Assumptions Free culture projects often fail

- Never shipping

- Unable to attract a community

Division makes free culture weaker

- Contributors must choose

- Only able to sustain two or three projects

Page 15: Financing freedom0.71

“Free” Assumptions Ambiguity between free and open source software

In many cases there is a an unequal value transaction:

- Many use “free” software

- Few look for ways to give back to the community

- Projects need to convert users into contributors

Page 16: Financing freedom0.71

State of FLOSS? Projects in growth, maturity, and decline stages

State is Mixed

- Enterprise recognition

- Limited user recognition/support

- Finances (resources) are limited (often to just one person)

Page 17: Financing freedom0.71

Top 10 FLOSS Hall of Fame 1. Linux Kernel

2. GNU Utilities & Compilers

3. Ubuntu

4. BSD

5. Samba(Top 10 Open Source Hall of Famers. (2009). http://mstrb.us/zjn6zK)

Page 18: Financing freedom0.71

Top 10 FLOSS Hall of Fame6. MySQL

7. BIND

8. SendMail

9. OpenSSH & OpenSSL

10. Apache

Page 19: Financing freedom0.71

Measuring FLOSS Through search, Google Trends

Through search, Google Scholar

Through investigation, Mining SourceForge.net Repository

Page 20: Financing freedom0.71

What Can SEO Tells Us? Many Thanks to Stephen O'Grady and his SEO research, which he shared: “The State of

Open Source: Startup, Growth, Maturity or Decline?”

Page 21: Financing freedom0.71

General trends for mature projects - Linux

Page 22: Financing freedom0.71

Apache

Page 23: Financing freedom0.71

MySQL

Page 24: Financing freedom0.71

PHP

Page 25: Financing freedom0.71

Open Source

Page 26: Financing freedom0.71

GPL

Page 27: Financing freedom0.71

General Conclusion

Most popular projects, open source itself, and free software are ALL in decline!

Page 28: Financing freedom0.71

Emerging Technologies Dominated by FLOSS – Linux Cloud

Page 29: Financing freedom0.71

NoSQL

Page 30: Financing freedom0.71

Hadoop

Page 31: Financing freedom0.71

Growth Projects

They are clearly in the growth stage of their adoption

Page 32: Financing freedom0.71

SW Hawthorne Bridge

Page 33: Financing freedom0.71

Google Scholar Advanced Search Google version 0.7, circa 1996?

Parameters

- “Open Source” exact phrase all in title

- “Engineering, Computer Science, and Mathematics” subject area

- Year to Year (eg; 2012 to 2012, 2011 to 2011, etc.)

Page 34: Financing freedom0.71

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997

0

100

200

300

400

500

600

700

800

900

Direct Results

Open Source Academic Papers by Year

Page 35: Financing freedom0.71

“Open Source” vs “Free Software” (since 1983)

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983

0

100

200

300

400

500

600

700

800

900

Open Source Results

Free Softw are Results

Page 36: Financing freedom0.71

Two Distinct Stories Strong growth by open source. 2012 may be the most important year ever

Free software has received limited researched attention:

- Out-published by a margin of 8 to 1 by open source.

Page 37: Financing freedom0.71

Academic Paper Questions Has research on “open source peaked?

Why isn't anyone researching “free software?”

Has “open source” obscured the importance of free software?

Page 38: Financing freedom0.71

Most Famous Bridge

Page 39: Financing freedom0.71

SourceForge Research Data Archive (SRDA) Many tables archived from February 2005 to present

Data includes any churn in any count of: active users, projects, messages, etc.

Slides

Page 40: Financing freedom0.71

Observations User base is still growing, but it's slowing down

There is a sharp increase in the number of new projects

And the number of new packages are also up

- But:

- Releases are down

- Number of files are down

Page 41: Financing freedom0.71

Is GitHub Eating SourceForge's Candy?

Page 42: Financing freedom0.71

SourceForge and GitHub Smackdown Four comparisons

- Number of Users

- Number of Academic Papers

- Number of Repositories

- Bonus

Round One - Number of Users:

- SF (3 Million to 1.6 Million)

Round Two – Academic papers

- SF (195 to 8)

Round Three – Repositories

- No correlation for repositories

Page 43: Financing freedom0.71

Round 4 – Source Code Repository Usage

Page 44: Financing freedom0.71

Another Bridge

Page 45: Financing freedom0.71

Project Execution Assumptions Most projects end in failure

A successful project organization has emerged

FLOSS projects are similar to startups

Execution is achieved through testing assumptions

Page 46: Financing freedom0.71

What is Open Source Failure? A project that is unable to grow a community beyond the founder.

A project that fails to ship anything.

Abandoned projects

Page 47: Financing freedom0.71

Open Source Failure A project that is unable to grow a community beyond the founder.

A project that fails to ship anything.

Abandoned projects...when either of the 1st two conditions reoccurs

Page 48: Financing freedom0.71

SourceForge Projects 324,000 projects

268,554 projects with only 1 developer (83%)

Only 21 projects with > 100 developers

Page 49: Financing freedom0.71

Developers Per Project

Page 50: Financing freedom0.71

Open Source Success Constant and synchronous communication

Consistency in methodological development approach

Geographical dispersion management through an extensive testing culture

FLOSSD experience in accepting and handling the environmental limitations

Page 51: Financing freedom0.71

An Infinite Marketplace Thousands of new OSS projects every month

Thousands of new apps on Android and Apple

A hundred thousand new e-Books

Millions of social media updates

- Photos

- Videos

- Blog entries

Page 52: Financing freedom0.71

Irrelevance is Your Enemy

Page 53: Financing freedom0.71

Thought Experiment Put the following non-profits in order of their revenues:

- Apache Foundation

- Free Software Foundation

- GNOME Foundation

- Mozilla Foundation

- Perl Foundation

- Wikimedia Foundation

Page 54: Financing freedom0.71

Breaking Bridge

Page 55: Financing freedom0.71

Free LOSS

Section Two – How to Organize

and Fund Free Culture Projects

Page 56: Financing freedom0.71

Project Funding Assumptions Our software (product) is sufficient to obtain resources

- Build it and they will come

- Free beer will fuel our project

Not much is known about how to raise funds effectively

- Only one level “information”

Funding is an independent function, different from __________________

Page 57: Financing freedom0.71

Resources = Time = Opportunity Most projects fail

They fail due to a lack of resources

What resources?

- Community

- Contributions

- Participation

- Money

- Attention

Page 58: Financing freedom0.71

Paying for FLOSS Software is “free.”

Recognition that projects are highly sensitive to resource constraints

Usual methods available:

- Project donation page

- Merchandise

Missing most lucrative donors:

- Corporations

- Governments

- Customers

Page 59: Financing freedom0.71

Fund-raising Alternatives for Startups Bootstrapping

Seed funding

- The 3 F's

- Dumb money

- Equity investment

Page 60: Financing freedom0.71

Examining Popular Foundation Revenues

Page 61: Financing freedom0.71

Foundation Metrics If they are a 501(c)(3), they must file publicly their financial statements

IRS Form 990 or 990EZ

Page 62: Financing freedom0.71

Case Study: Perl Foundation Perl Foundation Revenues

$-

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

2006 2007 2008 2009 2010

Page 63: Financing freedom0.71

Case Study: GNOME FoundationGNOME Foundation Revenues

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Page 64: Financing freedom0.71

Case Study: Apache FoundationApache Foundation Revenues

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

2006 2007 2008 2009 2010

Page 65: Financing freedom0.71

Case Study: Free Software FoundationFree Software Foundation Revenues

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Page 66: Financing freedom0.71

Case Study: Mozilla Foundation Mozilla Foundation Revenues

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

2003 2004 2005 2006 2007 2008 2009 2010

Page 67: Financing freedom0.71

Case Study: Wikimedia Foundation Wikimedia Foundation Revenues

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

2006 2007 2008 2009 2010

Page 68: Financing freedom0.71

Mozilla Foundation Drill Down July 15, 2003 - The Mozilla Foundation is born with a $2 million start-up support from

America Online's Netscape division

FY 2005 - The Mozilla Foundation added $28 million in revenues in royalties

August 3, 2005 - The Mozilla Corporation was established to handle the revenue-related operations of the Mozilla Foundation.

- The Mozilla Corporation (abbreviated MoCo) is a wholly owned subsidiary of the Mozilla Foundation

Page 69: Financing freedom0.71

Mozilla and Subsidiaries

2003 2004 2005 2006 2007 2008 2009 2010 $-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

Page 70: Financing freedom0.71

Mozilla Foundation

2011 Annual Report (sort of)

Page 71: Financing freedom0.71

Mozilla Versus the World

Page 72: Financing freedom0.71

Free Software Foundation Drill Down Primary channels are:

- Website

- Email

- Conference participation

Little or no social media

Page 73: Financing freedom0.71

Assumption Take Aways... Mixed State of Open Source

- Acceptance of open source decline is misguided

Best projects use project methodology

- Growing a community

- Shipping in iterations

Financial support (donations, purchases, memberships) is lacking

Large difference between public relationship strategies

- Most successful projects use modern strategies

Niche groups who are content with scratching their own itch

- Dogmatic approach to community

Page 74: Financing freedom0.71

Another Bridge

Page 75: Financing freedom0.71

Top Ten Startup Fund-raising Lies1. All we have to do is get 1% of the market

2. We filed patents so our intellectual property is protected

3. Our management team is proven

4. The large companies in our market are too big, dumb, and slow to compete with us

5. Our product will go viral

Page 76: Financing freedom0.71

Top Ten Startup Fund-raising Lies (Continued)6. Hurry up because our other investors are about to do our deal

7. No one else can do what we're doing

8. Several Fortune 500 companies are set to do business with us

9. Jupiter says our market will be worth $50 billion in ten years

10. Our projections are conservative (Kawasaki, 2012)

Page 77: Financing freedom0.71

Fund-raising Best Practices Build a Foundation

501(c)(3)

Establish a Fund-raising Program

Obtain Grants

Corporate Donors

Community

Page 78: Financing freedom0.71

Best Practices for Startups Build something interesting

Innovation Accounting

- Testing

- Methodology

Team

- Talent

Leadership

Use Web2.0 and Cloud Computing

Page 79: Financing freedom0.71

Build a Foundation Incorporation

- Think about SEO first

Mission/Vision

- Ensure your mission matches up with the charitable activities you plan for your 501(c)(3)

Board of Directors

Transparency

- Expect to make all of your founding documents public

- Required by IRS for all 501(c)(3)

Page 80: Financing freedom0.71

Setting up a 501(c)(3) Supporting documentation:

- Formal articles of incorporation

- Create corporate bylaws

- Appointment and record of every board meeting and action.

Financial data

- Financial statements

- A current balance sheet

Open to foreign corporations

- Donations are not exempt

Page 81: Financing freedom0.71

IRS Application Form SS-4 – Employer Identification Number

IRS Form 1023 – Application for Recognition of Exemption

IRS Form 2848– Power of Attorney

Organizations must usually file a form 990 (or 990-EZ) every year

Page 82: Financing freedom0.71

How to Start a Fund-raising Program Create a fund-raising committee

- 5-7 members

Put your fund raising goals in writing

Develop a plan of action

Revise your plans

- Build-Measure-Learn

- Contingency

Share your plans

Page 83: Financing freedom0.71

Finding Government Grants Grants.gov

Department of Health and Human Services

- http://www.hhs.gov/grants/

National Institute of General Medical Sciences

- http://www.nigms.nih.gov/Research/

National Institute of Health

- http://grants.nih.gov/grants/guide/

- http://grants1.nih.gov/grants/funding/sbir.htm (*)

Page 84: Financing freedom0.71

Finding Government Grants (continued) National Science Foundation

- http://nsf.gov/funding/

National Endowment of the Arts

- http://www.nea.gov/grants/index.html

Department of Defense

- http://www.dodsbir.net/ (*)

Page 85: Financing freedom0.71

How Can Grants Fund A Project? Must be able to align project's needs with needs of the CFP

Whether it is research or development, the needs can be the same

Examples:

- DARPANet

- The US DoD has spent > $100 million on social network sentiment analysis

- The NSF just initiated a multimillion dollar CFP for Big Data projects

Page 86: Financing freedom0.71

Finding Private Foundation Grants Other 501(c)(3) Organizations

- Private Foundations

The Number One Complaint of Foundations:

- People do NOT do thorough RESEARCH!

- If you do NOT qualify – do NOT apply!

- When in doubt, reach out...

Best Practices; Be clear about:

- Purpose of your program or project.

- Type of support that is needed to carry out the project.

- Total amount of money that will be needed to complete the project.

Page 87: Financing freedom0.71

Top Private Foundations by Giving (June 2012)1. Bill & Melinda Gates Foundation - $2,486,342,209

2. Walton Family Foundation, Inc. - $1,479,636,053

3. Genentech Access To Care Foundation - $587,337,392

4. Pfizer Patient Assistance Foundation, Inc. - $569,495,443

5. GlaxoSmithKline Patient Access Programs Foundation - $555,867,032

Page 88: Financing freedom0.71

Top Private Foundations by Giving (June 2012) - Continued6. Abbott Patient Assistance Foundation - $482,610,604

7. Ford Foundation - $424,695,000

8. Johnson & Johnson Patient Assistance Foundation, Inc. - $416,443,559

9. Sanofi-aventis Patient Assistance Foundation - $392,778,999

10. The Bristol-Myers Squibb Patient Assistance Foundation, Inc. - $392,567,134

$7,787,773,425

Page 89: Financing freedom0.71

Total Giving By Top 100 US Private Foundations (June 2012)

$18,498,784,792

$46,900,000,000

Page 90: Financing freedom0.71

Why Corporations Give? Creating programs to use company employees as volunteers

Forming partnerships

Promoting the corporation

Gaining cost effectiveness

Creating a win-win situation

Page 91: Financing freedom0.71

Best Practices for Corporate Donations Create list of corporations

Identify A-list prospects

Personal contacts make a difference

Stay in touch

- Add to social network

- Engage with your network directly (Thank you, RT, posts)

Don't take “No” for an answer

Page 92: Financing freedom0.71

Corporate Solicitation Kit Current list of board of directors

Mission statement

Budget information

Purpose of funding request

Page 93: Financing freedom0.71

Most Common Forms of Corporate Support Cash

Matching donations of employees

Employee time

In-kind

Page 94: Financing freedom0.71

The Power of the Crowd

Crowd Funding &

Sourcing

Page 95: Financing freedom0.71

Contributions From the Crowd Crowd funded

- Crowd funding platforms

- Donations

- Merchandise

- Customers

Crowd source

- Bugs, testing, documentation, code, design

- Governance

Page 96: Financing freedom0.71

The Crowd Funding Battle Royale There will be an estimated 530 platforms by the end of 2012

$280,600,000 raised by CFPs in 2012

Majority are ONLY for 501(c)(3)

Page 97: Financing freedom0.71

Kickstarter

56% of all projects fail!

Page 98: Financing freedom0.71

Drill Down on Kickstarter Success

Fashion Technology Publishing Games Design Photography Film & Video Food Comics Art Music Theater Dance

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

27.29%

28.80%

31.86%

33.83%

35.47%

38.30%

39.62%

40.83%

45.49%

48.22%

54.18%

63.81%

69.00%

Success Rate By Category

Over all Aver age is 44%

Page 99: Financing freedom0.71

Kickstarter Failure Analysis

22.51%

60.70%

11.19%

3.89%1.19%0.52%

Funding for Failed Kickstarter Projects, by Percent

0% Funded 1% to 20% Funded 21% to 40% Funded 41% to 60% Funded 61% to 80% Funded 81% to 99% Funded

Page 100: Financing freedom0.71

Kickstarter Best Practices You're already a 501(c)(3) non-profit

You have an existing brand, fan base, or personality

Extensive pre-launch preparation

Social networking:

- Your social engagement platform is working optimally

- You consistently share valuable status and progress and communicate effectively

- You maintain constant contact with anyone granting you permission

Kickstarter platform:

- Your project explanation is clear and concise

- Imbalance between offer and value

- Getting too greedy

Page 101: Financing freedom0.71

Kickstarter Best Practices

Crowdfunding forces a proof of concept before the product

hits the shelves:

Page 102: Financing freedom0.71

The Crowd as Customer Merchandise

- Make it cool

- Make it limited

- Use it to drive engagement

- Badges (The gamification of community)

Services

- The most successful open source businesses model

Page 103: Financing freedom0.71

The Crowd as Donor? In 2009, the Giving USA Foundation reported individual donations were $217.79 B

Of a grand amounts donated, the top 5 types recipients were:

- Religion (32%)

- Education (14%)

- Human Services (12%)

- Gifts to Foundations (9%)

- Public-Society Benefit (7%)

Direct marketing to the crowd is the most challenging

Page 104: Financing freedom0.71

Why Do People Give?1. Belief in the cause

2. Recognition and honor

3. For a tax deduction

4. Family tradition

5. Religious beliefs

6. Joy

7. Guilt

8. Fear

9. To make a difference

Page 105: Financing freedom0.71

Why we give, or don't Different kinds of giving, and therefore different explanations

- People who are religious give more

- People who plan donations, give more

- People who have more, don't necessarily give more

- Senior citizens who volunteer live longer

Page 106: Financing freedom0.71

How giving makes us feel Experience internal satisfaction, the “warm glow”

Helper's high, which increases our feelings of self-worth

Some research links oxytocin to generosity:

- Amygdala has oxytocin receptors that control feelings of safety

Page 107: Financing freedom0.71

Crowd Sourcing = Building Community Who ever has the biggest social network wins

Build-Measure-Learn

Using Social Media

Page 108: Financing freedom0.71

The Art of Community

Page 109: Financing freedom0.71

Final Bridge

Page 110: Financing freedom0.71

Transmedia Production and Lean Startup Mashup Max Strategy

Big Data

Innovation Accounting

Expert Systems

Machine Intelligence

Page 111: Financing freedom0.71

Transmedia Production and Social Media Caves

Supermarkets

Rain Clouds

Better To Give

Page 112: Financing freedom0.71

Afraid Of Caves?

Page 113: Financing freedom0.71

Caves Are Like…

=

Page 114: Financing freedom0.71

Social Media Is… The Unknown

Dark

Scary

- Most of your customers are in there

- And they’re probably talking about you!!!

Page 115: Financing freedom0.71

Filled With Treasure

Page 116: Financing freedom0.71

Unusual Characters

Page 117: Financing freedom0.71

Just Do it!

Page 118: Financing freedom0.71

Do Whatever It Takes Hire a guide

Get some tools

Learn the ropes

Talk to people

Page 119: Financing freedom0.71

The Internet Is…

Page 120: Financing freedom0.71

Social Media Is Like A

Page 121: Financing freedom0.71

How big is ∞? Facebook – 700,000,000

Twitter – 140,000,000

LinkedIn – 125,000,000

MySpace –19,7000,000

Flickr – 32,000,000

YouTube – 3,000,000,000

Page 122: Financing freedom0.71

∞ Needs Max-Strategy ∞ means you can’t predict:

- Who will become a customer

- Where you will find them

- What products they will buy

Need to:

- Simplify around keywords

- Find better tools

- Data & AI

Page 123: Financing freedom0.71

Social Media Is Not…

About About You!You!

Page 124: Financing freedom0.71

Social Media Is About Your customers:

- How do you give THEM more value than you get?

- How do you gain your customer’s trust?

With trust comes permission

Page 125: Financing freedom0.71

Using Social Media Doing nothing is not an option

Have to answer the critical question: “Now what?”

- Engage/Converse/Ask/Answer

Can’t implement and forget

Deliver value

Page 126: Financing freedom0.71

Final Suggestions Those who use social media will learn what works

Break it down:

- 3-5 simple tasks

- Do them daily

And…

Page 127: Financing freedom0.71

Grow your Network!

Page 128: Financing freedom0.71

The Biggest Social Graph Wins All major networks:

- FB, LI, Twitter, & YouTube...

All the large networks:

- Flickr, Tumblr, Hi5, & MySpace...

All the small networks:

- About.Me, Paper.li, PhotoBucket, Pinterest, Wikia...

All future social network systems...

Page 129: Financing freedom0.71

Cutting Costs Significantly reduces cost of advertising

- Nothing is unacceptable

- Cost approaches $0

- Less direct or email costs

- Generate leads (24/7/365)

E-Commerce

- Potential to sell (24/7/365)

- Cost approaches $0

Page 130: Financing freedom0.71

Cutting Costs

If you can spend less time marketing, recruiting, and networking…

Spend more time producing

Page 131: Financing freedom0.71

The Era of Big Data Many accepted business metrics are obsolete

Engagement is the only metric that counts now

Only a max-strategy has a chance

Mining the Internet for permission

Using Artificial Intelligence to predict engagement and permission

Page 132: Financing freedom0.71

The Singularity is Coming Sentiment analysis is coming:

- HLD: Predicting terrorist activity

- CDC: Tracking epidemics

- Big Data

- Data Mining

- Machine Intelligence

A Minority Report Future

- Followed and interrupted

- Face recognition will track us

- We already carry a tracking device

Page 133: Financing freedom0.71

Thank You!

[email protected]

@shockeyk

@mistribus

@_ff12

Questions & Discussion