Can My Open Source Company Raise Series A?

Investors’ definition of ‘greatness’ has changed — this is what founders need to know

Historically, there has been no clear playbook for open source metrics, benchmarks, and timeline to paid product. Prior to the 2022 downturn, many open source companies could raise Series A (and even Series B) without a commercial product or strategy (see the Airbyte Series A deck for one example). But, things have changed.

We asked 18 of the top multi-stage investors (including ones at Founders Fund, Redpoint, Bessemer, a16z, GGV, Lightspeed, Index, Felicis, Vertex, Bain, Battery, Insight, Norwest, Lux, Acrew, CRV, and others) what they’re looking for to lead a $10M — $25M Series A in an open source company. Here’s what they said 👇

Do open source companies need ARR by Series A?

The short answer is yes, and at least $100k. This is a change from years prior as 67% of investors say their view on ARR at Series A has changed over the past few years. And while 50% of investors say they’re looking for $100K — $500K ARR, our hunch is more investors will move into the $500K+ ARR camp if the macro environment doesn’t improve.

Which open source metrics do investors care about?

#1 Users Running the Project in Production. Running a project in production signals trust as it can impact end-user experiences. By Series A, 59% of investors want to see 10–50 production users, while 29% want to see 50–100.

#2 Users from Mid-Market & Enterprise Companies. Users from mid-market and enterprise companies are more likely to have budget and scale than users from small companies. 39% of investors want to see usage by 5–10 mid-market and enterprise users while 33% want 10–20 by Series A.

#3 Users in Slack or Discord. Open source communities use Slack or Discord primarily for support, so growth in these communities points to strong engagement with the underlying project. By Series A, 67% of investors expect 500–1K members in a project’s Slack or Discord.

#4 Number of GitHub Issues. When users submit issues, it shows deep engagement. Instead of giving up and finding another solution when there’s a problem with the project, users are staying and providing feedback. At Series A, 71% of investors look for 100–300 GitHub issues.

#5 Number of GitHub Stars. GitHub stars are a quick way to assess an open source project’s momentum. However, “starring” a project takes little time and doesn’t always align with the intent to use the project. GitHub stars do, however, signify growing interest and 60% of investors expect 3K stars or more at this stage.

Outside of the top 5, investors look for a variety of other metrics such as:

1. Usage & retention of users

2. Unique monthly contributors

3. Diversity of companies using the project

4. Conversion ratios (community member to free user to paid user)

5. Annual contract value

6. NPS of production users

A note of caution using this data — your project’s market and the team’s expertise are hugely important factors that investors consider when deciding whether to invest in your company. Metrics alone are only part of the story.

For seed-stage open source founders, we hope the above benchmarks are helpful when determining the north star metrics to focus on. If you have questions, find me at robby@cowboy.vc or shoot me a message on Twitter. I love thinking through the early-stage open source founder journey 👩‍💻

For additional resources on how to build an open source company, check out our posts on Turning Project-Market Fit into Product-Market Fit and Deciding on the Right Open Source Business Model. You can also check out the Open Source Startup Podcast where we’ve interviewed 70+ open source founders from companies such as HashiCorp, Supabase, Hugging Face, Vercel, Temporal, DBT, mobile.dev, PlanetScale and Elementary Data along with our co-host Tim Chen from Essence VC. Finally, for more information on open source metrics be sure to check out these great posts from Jordan Segall at Redpoint and Chang Xu at Basis Set.