Open Source is Eating the Startup Ecosystem: A Guide for Assessing the Value Creation of Startups

In the last few years, we have witnessed the unprecedented growth of open source in all industries—from the increased adoption of open source software in products and services, to the extensive growth in open source contributions and the releasing of proprietary technologies under an open source license. It has been an incredible experience to be a part of.

As many have stated, Open Source is the New Normal, Open Source is Eating the World, Open Source is Eating Software, etc. all of which are true statements. To that extent, I’d like to add one more maxim: Open Source is Eating the Startup Ecosystem. It is almost impossible to find a technology startup today that does not rely in one shape or form on open source software to boot up its operation and develop its product offering. As a result, we are operating in a space where open source due diligence is now a mandatory exercise in every M&A transaction. These exercises evaluate the open source practices of an organization and scope out all open source software used in product(s)/service(s) and how it interacts with proprietary components—all of which is necessary to assess the value creation of the company in relation to open source software.

Being intimately involved in this space has allowed me to observe, learn, and apply many open source best practices. I decided to chronicle these learnings in an ebook as a contribution to the OpenChain project: Assessment of Open Source Practices as part of Due Diligence in Merger and Acquisition Transactions. This ebook addresses the basic question of: How does one evaluate open source practices in a given organization that is an acquisition target? We address this question by offering a path to evaluate these practices along with appropriate checklists for reference. Essentially, it explains how the acquirer and the target company can prepare for this due diligence, offers an explanation of the audit process, and provides general recommended practices for ensuring open source compliance.

If is important to note that not every organization will see a need to implement every practice we recommend. Some organizations will find alternative practices or implementation approaches to achieve the same results. Appropriately, an organization will adapt its open source approach based upon the nature and amount of the open source it uses, the licenses that apply to open source it uses, the kinds of products it distributes or services it offers, and the design of the products or services themselves