Can Montreal Become an Open Source Startup Hub?

“First prize is a Cadillac El Dorado. Second prize is a set of steak knives. Third prize is you’re fired.” –Blake, Glengarry Glen Ross

Seth Godin, in his great book The Dip, points out that the only place that’s worth being, in business, is first place. When power laws and network effects are involved, the first place in line is the only place to be. You need to be “best in the world” at something, or you need to quit and start doing something else.

Technology ecosystems – most business markets, actually — have network effects. And that means that the only rank to have, as an ecosystem, is first place. Best in the world.

Who’s best in the world in Web startups? The San Francisco Bay Area. Who’s second? Probably New York City. Who’s third? Who cares? Third prize is you’re fired.

If we care about growing our local ecosystem, maybe we need to collectively quit our race for 14th or 29th place in the Web startup world and think about building something else. Something that we’re good at, and that nobody else is really working on. Something we can be best in the world at – not 14th in the world, and dropping.

Montreal has the opportunity to be the best ecosystem in the world for Open Source software startups. We’ve got a good cadre of entrepreneurs here who’ve had experience with building Open Source companies. We have investors who’ve been through the process of investing in and nurturing Open Source companies. And we have the all-important talent pool of people who’ve been part of the process.

More importantly, there’s not another leading Open Source city on the globe. San Francisco and Boston have a few companies, but they’re definitely not hubs. The commercial Open Source landscape is spread much further across the globe – from London to Utah to Germany to Austin.

Most of all, Open Source commercialization is hard. Ask anyone involved in an Open Source company. It’s difficult to make the model work. There aren’t easy answers. Startup techniques for other kinds of businesses — investment and release strategies — don’t seem to apply as well. That means there’s a barrier to entry for other ecosystems – one we can exploit.

Right now, I know of at least five Open Source startups in the city.

  • StatusNet – I started this company here in 2008. We’ve raised $2.3M in Montreal and New York. We do about 5000 downloads per month, and we have 45,000 sites running on our SaaS service. We have a staff of 9 in Montreal and San Francisco.
  • Vanilla Forums – World’s best forum software. It powers hundreds of thousands of sites worldwide, including a high-performance SaaS service.
  • Bookoven – This social publishing platform has pivoted to an Open Source software model. Led by Hugh McGuire, creator of Librivox, the immensely popular Open Content audio book project.
  • Stella – This great performance metrics company makes their software available as Open Source.
  • Subgraph – Startup security company whose vulnerability assessment software, Vega, is Open Source.

On the investor front, two of the leading funds in the city (iNovia Capital and Real Ventures) have experience with Open Source startups. Real Ventures (or rather, its predecessor fund, MSU) is an investor in three local Open Source companies.

As for talented potential employees… that’s tougher. There are a lot of talented technical people in the city, and out-of-town Open Source companies like Canonical have local tech teams that can feed into the startup talent pool. But talented business staff with Open Source experience? They’re thin on the ground everywhere. Fortunately, the people who’ve been working in the above companies are a good core for that pool, too.

I believe the conditions are ripe for Montreal to take its place in the technology world as the Open Source startup hub. Next week, I’ll give what I think is a potential plan for Montreal to take the lead in Open Source commercialization.

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