financing freedom0.71
TRANSCRIPT
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How to Organize and Fund Free Culture Projects
Kevin Shockey @shockeykFounder, Mis Tribus
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What?
Free culture projects often fail
due to a lack of resources.
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So What?
By focusing on raising funds and resources,
a project can increase its' chances
of survival
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Why me?
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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
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O'Reilly Home Page (06/16/2012)
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Disclaimer
Some of this class
Is based on theories
I'm currently researching
And using
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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
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Software Development Project Methodologies Waterfall
Microsoft Solutions Framework
Rational (IBM) Model
Open Source
Expert Programming
Agile/SCRUM Development Method
Lean Startup
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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
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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
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NW St Johns Bridge
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Assumptions Free Culture
Project Execution
Project Funding
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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
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“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
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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)
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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)
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Top 10 FLOSS Hall of Fame6. MySQL
7. BIND
8. SendMail
9. OpenSSH & OpenSSL
10. Apache
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Measuring FLOSS Through search, Google Trends
Through search, Google Scholar
Through investigation, Mining SourceForge.net Repository
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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?”
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General trends for mature projects - Linux
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Apache
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MySQL
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PHP
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Open Source
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GPL
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General Conclusion
Most popular projects, open source itself, and free software are ALL in decline!
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Emerging Technologies Dominated by FLOSS – Linux Cloud
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NoSQL
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Hadoop
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Growth Projects
They are clearly in the growth stage of their adoption
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SW Hawthorne Bridge
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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.)
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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
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“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
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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.
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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?
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Most Famous Bridge
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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
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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
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Is GitHub Eating SourceForge's Candy?
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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
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Round 4 – Source Code Repository Usage
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Another Bridge
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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
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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
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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
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SourceForge Projects 324,000 projects
268,554 projects with only 1 developer (83%)
Only 21 projects with > 100 developers
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Developers Per Project
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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
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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
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Irrelevance is Your Enemy
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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
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Breaking Bridge
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Free LOSS
Section Two – How to Organize
and Fund Free Culture Projects
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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 __________________
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Resources = Time = Opportunity Most projects fail
They fail due to a lack of resources
What resources?
- Community
- Contributions
- Participation
- Money
- Attention
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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
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Fund-raising Alternatives for Startups Bootstrapping
Seed funding
- The 3 F's
- Dumb money
- Equity investment
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Examining Popular Foundation Revenues
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Foundation Metrics If they are a 501(c)(3), they must file publicly their financial statements
IRS Form 990 or 990EZ
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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
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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
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Case Study: Apache FoundationApache Foundation Revenues
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
2006 2007 2008 2009 2010
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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
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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
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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
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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
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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
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Mozilla Foundation
2011 Annual Report (sort of)
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Mozilla Versus the World
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Free Software Foundation Drill Down Primary channels are:
- Website
- Conference participation
Little or no social media
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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
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Another Bridge
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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
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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)
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Fund-raising Best Practices Build a Foundation
501(c)(3)
Establish a Fund-raising Program
Obtain Grants
Corporate Donors
Community
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Best Practices for Startups Build something interesting
Innovation Accounting
- Testing
- Methodology
Team
- Talent
Leadership
Use Web2.0 and Cloud Computing
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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)
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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
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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
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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
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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 (*)
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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/ (*)
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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
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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.
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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
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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
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Total Giving By Top 100 US Private Foundations (June 2012)
$18,498,784,792
$46,900,000,000
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Why Corporations Give? Creating programs to use company employees as volunteers
Forming partnerships
Promoting the corporation
Gaining cost effectiveness
Creating a win-win situation
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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
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Corporate Solicitation Kit Current list of board of directors
Mission statement
Budget information
Purpose of funding request
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Most Common Forms of Corporate Support Cash
Matching donations of employees
Employee time
In-kind
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The Power of the Crowd
Crowd Funding &
Sourcing
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Contributions From the Crowd Crowd funded
- Crowd funding platforms
- Donations
- Merchandise
- Customers
Crowd source
- Bugs, testing, documentation, code, design
- Governance
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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)
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Kickstarter
56% of all projects fail!
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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%
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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
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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
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Kickstarter Best Practices
Crowdfunding forces a proof of concept before the product
hits the shelves:
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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
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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
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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
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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
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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
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Crowd Sourcing = Building Community Who ever has the biggest social network wins
Build-Measure-Learn
Using Social Media
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The Art of Community
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Final Bridge
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Transmedia Production and Lean Startup Mashup Max Strategy
Big Data
Innovation Accounting
Expert Systems
Machine Intelligence
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Transmedia Production and Social Media Caves
Supermarkets
Rain Clouds
Better To Give
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Afraid Of Caves?
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Caves Are Like…
=
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Social Media Is… The Unknown
Dark
Scary
- Most of your customers are in there
- And they’re probably talking about you!!!
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Filled With Treasure
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Unusual Characters
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Just Do it!
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Do Whatever It Takes Hire a guide
Get some tools
Learn the ropes
Talk to people
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The Internet Is…
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Social Media Is Like A
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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
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∞ 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
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Social Media Is Not…
About About You!You!
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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
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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
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Final Suggestions Those who use social media will learn what works
Break it down:
- 3-5 simple tasks
- Do them daily
And…
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Grow your Network!
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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...
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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
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Cutting Costs
If you can spend less time marketing, recruiting, and networking…
Spend more time producing
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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
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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