This week on The Business of Open Source, I spoke with Tyler Jewell — for the second time, now. Last time I spoke with Tyler, he was an investor at Dell Technologies Capital, he’s since taken over as CEO of Lightbend.

We talked about a lot, but there was a definite theme to our conversation: License changes. Lightbend had been running an open core model, with the open core using a permissive Apache license. The company’s open source project, Akka, is massively popular. Lightben had about $13 million in ARR. But it was spending over $20 million per year, mostly of on R&D and then GTM. And they had a churn problem; and the churn problem was that customers would stop buying Lightbend’s product, but they would stay with Akka, because it was good enough.

Why did this happen? The added proprietary features weren’t valuable enough for companies to pay for, especially in the face of budget cuts. And because the community was quite mature, it often started to duplicate these capabilities. And then the company faced a near-death experience in 2021. At the same time, usage of Akka was only growing, while the company was facing potential bankruptcy. Investors saw the potential and didn’t want to give up on the company, but it was clear to the board of directors that something needed to change — and that the thing that wasn’t working was the business model.

So they changed it.

There’s a couple things I hope people can take away from this.

If the difference in value between your commercial product and your open source project isn’t big enough, you’ll have a rough time building a profitable company.
Sometimes the alternative to changing a license is bankruptcy; bankruptcy ultimately is not in anyone’s best interest, not the company, not the community’s, not the customer’s.
Offering a cloud option can work, but it’s an entirely different business, and trying to build it up while the company is in a crisis and expecting it to save the company is only realistic if there’s a good overlap between the market for the cloud offering and the open source project; in this case, there wasn’t good overlap.
The license options open to you depend on what the actual software does. And if you’re going to enforce the license at all, you need to have some visibility into where it’s installed, which, again, can be challenging depending on what kind of software you’re dealing with.
Changing an open source project’s license is not a trivial undertaking. You have to hold copyright to the code, and you better hope that you’re structured your contributor license agreements correctly. You also have to do the change on a new release — and it’s more likely to work if the new version is different enough from the previous one that people really want to update.
If you’re going to make a license change, you might get backlash, but if being transparent and honest can go a long way towards minimizing the PR disaster.
So what happened? Churn went down, revenue is nearly doubled and Tyler projects that this year will be cashflow positive.

This summary doesn’t do it full justice, though, so check out the full episode!!

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