Download - Financing Freedom Slides - Final
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How to Organize and Fund Free Culture Projects
Kevin ShockeyFounder, 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 (resources),
a project can increase its' chances
of survival
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Why me?
Computer Science, Math,
Financials, and Software Development
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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:
- Funding is available
- 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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Tutorial as a Startup Eric Ries – 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
- Tumblr: FundingFreeCulture.Tumblr.com
One Blogger post triggers:
- 5 Automated tweets on 3 different accounts
- 3 Twitter accounts
- Linked In
- Financing Freedom Page on Facebook
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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
- Volunteer
- Recommendations
- Donations
- Merchandise
- Services
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State of FLOSS? Projects in emergent, growth, & maturity 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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Search is relative (Rabbit Hole) Search is a simulation;
- By measuring “reality” we affect reality
- It is a proxy,
- We humanely can not understand the math involved
- Artificial intelligence
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What 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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Emerging Technologies Dominated by FLOSS – Linux Cloud
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NoSQL
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Hadoop
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Another Bridge
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Google Scholar Advanced Search 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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Academic Paper Analysis Growth reversed in 2011, but 2012 will show new growth
Free software has not been researched much
- Out-published by a margin of 5 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 the number of active users, projects, messages, etc.
Observations
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Monthly additions of users is slowing down
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User base is STILL growing- Just over 3 million users
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Sharp increase in the number of projects
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Number of packages is also up.
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Number of releases are down
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Number of files are down.
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Downloads are generally rising- Extreme variances are unexplained
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3.6 Million in January 2009 *
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Is GitHub Eating all of SourceForge's Candy?
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SourceForge and GitHub Smackdown Three comparisons
- Number of Users
- Number of Academic Papers
- Number of Repositories
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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Possible Conclusions Certain aspects of open source are in decline:
- Open source has moved beyond technology maturity
- Cloud computing and apps are more popular
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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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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%)
44,446 “viable” projects (14%)
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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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Critical Success Factors Obligatory use of project methodology
An extensive testing culture (Lean Startup)
- Build Measure Learn or your competition will
Irrelevance is your enemy
- Mastery of Internet and Social Media marketing
Create, nurture, and manage a viable community
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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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Build Measure Learn (Rabbit Hole)
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Build
A good design is
one that changes customer behavior
for the better.(Ries, 2011)
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Modeling
If we do not know who the customer is,
we do not know what quality is.(Ries, 2011)
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Questioning Assumptions
“What if they don’t care about [fill in the blank]
in the same way we do?”(Ries, 2011)
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Questioning Assumptions
“In fact, piercing the reality distortion field
is quite uncomfortable. ”(Ries, 2011)
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Thought Experiment Put the following non-profits in order of size of assets (donations):
- Apache Foundation
- Free Software Foundation
- GNOME Foundation
- Mozilla Foundation
- Perl Foundation
- Other?
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Breaking Bridge
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Free LOSS
Session 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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Common Fund-raising Alternatives Bootstrapping
Donations
Merchandise
Grants
- Private
- Government
Seed funding
Dumb money
Corporate Donations 501.3(c)
Raise resources not only money
- Building community
- Creating a platform for donating time
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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 Experience internal satisfaction, the “warm glow”
Helper's high, which increases our feelings of self-worth
Different kinds of giving, and therefore different explanations
- People who are religious give more
- People who have more, don't necessarily give more
- Senior citizens who volunteer live longer
- People who plan donations, give more
Some research links oxytocin to generosity:
- Amygdala has oxytocin receptors that control feelings of safety and fear
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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
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
2011 Annual Report (sort of)
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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 Versus the World
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Free Software Foundation Drill Down Primary channels are:
- Website
- Conference participation
Internet Marketing
- Discover the niche communities
- Adding value to relationship
- Earning trust
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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 marker 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) Choose an available business name
Formal articles of incorporation
Create corporate bylaws
Appoint the initial directors
Hold the first meeting of the board of directors
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 – 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
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.
The Number One Complaint of Foundations?
- People do NOT do thorough RESEARCH!
- If you do NOT qualify – do NOT apply!
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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
Don't take “No” for an answer
Stay in touch
- Thank you
- Add to social network
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Most Common Forms of Corporate Support Matching donations of employees
In-kind
Cash
Employee time
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Corporate Solicitation Kit Current list of board of directors
Mission statement
Budget information
Audit information
Purpose of funding request
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The Power of the Crowd
Crowd Funding &
Sourcing
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Contributions From the Crowd Crowd source
- Bugs, testing, documentation, code, design
- Governance
Crowd funded
- Donations
- Merchandise
- Customers
- Crowd funding platforms
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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
Overall Average 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
- Kickstarter does not grow your network it harvests existing engagement
Your project explanation is clear and concise
- Extensive pre-launch preparation and testing have already taken place
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
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 $217.79B
Of a grand total $298.42B donated, the top 5 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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Crowd Sourcing = Building Community Who ever has the biggest social network wins
Using Social Media
Build-Measure-Learn
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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!
got permission?got permission?
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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