This morning Tidelift, a startup focused on helping developers work with open source technology, announced that it has closed a $15 million Series A round of funding co-led by General Catalyst, Foundry, and Matthew Szulik, the former CEO of Red Hat, a public open source-centered technology company.
The subscription-powered startup has an interesting business model which we’ll dive into shortly, but it’s worth noting that the open source space as a whole is quite active. It’s something that Crunchbase News covered last year, describing how startups working with open source software have enjoyed a dramatic rise in investor interest.
That puts Tidelift in the midst of a trend.
How Tidelift Works
Tidelift’s key offering is a subscription product that runs $1,000 monthly with an annual commitment, putting it squarely outside of the consumer and prosumer developer market.
Tidelift Subscription, as it is creatively known, is a two part service. First, it provides “commercial-grade security updates, maintenance, and quality assurance” to developers using open source technology, per the company’s website.
The startup also distributes a hefty percentage of its monthly fee to the folks working to build and maintain those same open source products. Crunchbase News asked the company for details concerning how the monies are disbursed to the open source community, to which Tidelift’s CEO Donald Fischer provided the following comment:
“Tidelift tracks which open source components its subscribers use, and directs subscription payments to participating maintainers of those open source projects, aligning everyone’s interests. Subscribers get better maintained software, and maintainers get paid. It’s a win-win.”
Right, so how much of the money goes to developers versus Tidelift itself? The firm isn’t merely a middleman, sitting between the paying developer and the open source project as it helps manage updates and the like. But, according to Fischer, the firm’s “goal is to pay out at least half, and ideally more of subscription revenue to open source maintainers.”
More than half seems like a good goal. But, at a 50-50 split, Tidelift is still taking in $6,000 in ARR per seat, after carving off for the open source world. That price point gives Tidelift plenty of room to use spend to go after customers. (Which it can do, now that it has $15 million fresh new dollars.)
I’d normally argue for more details regarding how well the subscription product is currently working, but Tidelift only launched it in on the last day of February, giving it only a quarter or so in the market. We’ll check back in with the company in a few more months to see how well it found balance between price. the correct portion of the pie to consume, and how much it can send to external developers in aggregate.
What will be interesting is whether the company makes regular disclosures of the total funds it has sent to external developers. If it does, we’ll be able to reverse engineer its revenue to date to a pretty reasonable range. But in case you’re worried that we just put them off sharing those numbers, don’t worry too much. It will be hard for the firm to not share the data in time, as it will act as a critical calling card for its place in the open source world.
More when we have it.