Troubles with the Open Source Gig Economy and Sustainability Tip Jar

Note: This was published originally posted on my blog: https://www.aniszczyk.org/2019/03/25/troubles-with-the-open-source-gig-economy-and-sustainability-tip-jar/

There has been a lot of discussions lately on open source sustainability and honestly, it’s something I think about on a daily basis through my current role at The Linux Foundation and myself being an open source contributor and maintainer for ~20 years.

Open Source Tip Jars

There has been a trend lately to have open source communities/projects open an electronic tip jar for individuals (or organizations) to give back. While a tip jar can raise some funds, it’s truly not sustainable long term, as outside of it not being an effective way to raise funds for project development, it puts maintainers unfortunately in a gig style economy without health and retirement benefits. There are only a handful of individual maintainers are making money from donations, most tend to abandon the approach over time.

Take Patreon as an example, a popular funding platform for all sorts of things including open source projects that has been around since 2013 and has paid out $1 billion to creators since then. While that’s an astonishing figure, Patreon isn’t a sustainable business with its current private company model and level of VC funding of $105M:

“Under the company's current business model, 90 percent of funds are paid directly to content creators. Patreon takes 5 percent, and the remaining 5 percent covers transaction fees.” Patreon CEO Jack Conte said in an interview with CNBC, that the platform will soon be facing the challenge of maintaining a profitable model as the company continues its growth.

In 2019, the company is also on track to pay out $500 million to content creators, 5% of that is $25 million and Patreon has ~300 employees, so probably not even covering their labor costs. Also, when the creators don’t have much say in the governance of the organization they depend on, especially if it’s a privately funded company, the terms can change overnight.

“So today, Patreon is overhauling its pricing. Any creator can still get a 5 percent rate, but just for a Lite version without bonus tools or different fan tiers. All of Patreon’s extra features will now be in the Pro plan, with an 8 percent rate, but with existing creators grandfathered in at 5 percent. And the new Premium enterprise plan for 12 percent (9 percent for existing creators) will offer full-service merchandise sales, multi-user team accounts and dedicated customer support. Patreon now has 3 million fans paying 100,000 creators more than half a billion dollars per year, and it will cross $1 billion in payouts in 2019 after six years in business. But Patreon was starving on its 5 percent rate, which some venture capitalists tell me is why they passed on its funding rounds totaling $105 million led by Thrive Capital and Index. Now it might make enough to keep the lights on, retain ownership and maybe even earn a profit one day.”

I guess we will see if Patreon is truly sustainable in the long run for its community and investors, it currently isn’t working out so well for most creators (“No one makes a living on Patreon”).

As a note, this also applies to smaller open source mini-patreon style fundraising efforts such as BountySource, OpenCollective, GitCoin, Fundition, Librepay and more. For example, I strongly admire OpenCollective and their transparency for a private VC funded company (on a side note, I also admire companies like Buffer who go further with transparency dashboards), from their level of funding as a startup to more. However, they are facing similar sustainability problems on a smaller scale if you look at the financials over time (their burn rate allows for 6-12 months depending on their growth), also maintainers don’t own any equity in the company. If this was a normal VC company the investors would cut their losses in my opinion.

It’s also interesting to see some nonprofit options out there like Liberapay founded in 2015 in France that is running on a break-even basis for all that I can tell. I think part of the sustainable solution for funding platforms is to build one in a way where it lives in a neutral place where creators have a say in governance and ownership. Outside of supporting projects forming their own companies, I’m interested in innovative startups like Tidelift which are experimenting with new approaches to make it easier for open source maintainers to get paid for their work by essentially by offering a subscription product and acting as a guarantor of sorts.

Note: I don’t think any of the blockchain coins will solve this problem or any problem for that matter.

Open Source Gig Economy

My biggest issue with these fundraising platforms is that even if we ever get to a point where some developers are making money, who pays for their health and retirement benefits (I know this is dependent on country but in many countries employers assist with retirement benefits). There has been a ton of press and research as of late on the gig economy, usually featuring Uber/Lyft in the news:

• “Uber or Deliveroo offers flexibility, but the isolation and stress can take their toll”
• “Gig economy review delivers benefits but brings no job security”
• “Rethinking worker benefits for an economy in flux”

In the US and many countries, there are different protections for “employees” versus “independent contractors” and leads to a lot of situations where you lose protections depending on how you’re classified.

We can do better than having developers run in a hamster wheel of no benefits and protections offered via normal employment schemes. It’s not sustainable and not fair to developers.

Conclusion and Corporate Open Source Sustainability

I don’t think there is one solution for open source sustainability but I do strongly feel that VC-funded donation platforms that fuel the gig economy are not the best solutions for long term sustainability (even Patreon had to expand its business model outside just donations). There’s a part of me that feels some of this donation discussion echoes the past discussion of micropayments and publishers. This presentation from GitLab about how their business model evolved over time from the early days donations to consultancy to open core product business does a great job of showing the pitfalls of a variety of common approaches:

Also, we should revisit the premise that open source isn’t sustainable to begin with, I think many folks in the community are selling short the progress that has been made over time in supporting open source. I’d like to make the argument that we are better off today than we were in the past. In fact, some research shows that “about 50% of all open source software development has been paid work for many years now and that many small projects are fully paid for by companies.” The reality is that there are still projects that fall through the cracks like OpenSSL that were aided eventually by the Core Infrastructure Initiative, so as long as we can discover and catch those we will be in good shape.

We should remember that a big part of innovation comes from developers working at organizations adopting open source software at scale and using it in interesting ways. It’s these organizations that should be tasked to sustain open source software versus individuals, especially since they depend on open source software to survive as a business. I also think it’s high time that corporate sustainability and social responsibility initiatives include open source contribution as part of them. I’ve seen some initiatives recently that I admire from organizations:

• CitusData donated 1% of their equity to the open source community
• Bloomberg has a software philanthropy budget for projects they depend on
• Indeed democratizes the open source sponsorship process with its employees
• Stripe hosts open source retreats to give back to open source projects

I truly hope to continue to see the trend of companies giving back to open source through contribution (fiscally or code) as I believe it’s key to open source sustainability and one of the reasons I co-founded the TODO Group and collaborate today with an excellent set of peers teaching organizations about the benefits of open source programs and why contributing back is good for business.

In the end, there are many ways to fund and sustain open source projects, from starting companies that sell open source based products and deliver value for customers, to working at organizations and having them dedicate time to contribute to open source and many more. I highly recommend visiting the oss.fund sheet to see what funding options are out there (also look at oss.cash to see large businesses built around open source technology). On a related note, I’m personally excited about the Community Bridge platform from the Linux Foundation which I was personally involved with:

CommunityBridge will automate some of the activities the Linux Foundation performs as an organization to benefit open source sustainability, from basic funding, expense reimbursement, mentorships and to paid internships that may lead to full time jobs with benefits.

Anyways, thanks for reading and I hope you learned something new about open source and understand why I think the charity/donation approach won’t work well for long term open source sustainability.