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Jan 2, 2019 · 25m · a16z

a16z Podcast | Selling to Developers & Open Source Business Models

Peter Levine · 13m spoken Martin Casado · 8m spoken Sonal Chokshi · 2m spoken
0:00 / 0:00
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In this episode of the a16z Podcast, Andreessen Horowitz general partners Martin Casado and Peter Levine discuss how developers have become primary enterprise buyers and outline strategies for building, monetizing, and scaling open-source software businesses.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 9.6% of the talking time here. How this is scored →

The host as informed peer 3.5 Guest teaching 5.5 Guest disagreement 1.3 The host pushing back 3.3
05100:0010:0020:003:24–5:52 · The host as informed peer 2/10 Budget Allocation Mechanics and Developer Infrastructure Abstraction The host prompts the guests on how developers obtain purchasing power, letting Casado and Levine explain line-of-business budget alignment and container abstractions. The tone is highly collaborative and educational with no friction.5:52–11:33 · The host as informed peer 5/10 Combining Bottom-Up Adoption with Enterprise Sales Sonal directly pushes back against the guests, questioning why top-down sales forces are needed if product adoption is organically taking off. Levine and Casado counter by explaining cross-silo value proposition and revenue predictability.11:33–18:09 · The host as informed peer 3/10 Open Source Business Models and Monetization Strategies The host facilitates questions on open source monetization, interjecting brief clarifications while Levine and Casado explain why the Red Hat support model rarely works and advocate for cloud SaaS models.18:09–25:09 · The host as informed peer 4/10 Startup Execution, Organizational Structure, and Roadmap Strategy Sonal highlights low profitability in services companies and asks sharp operational questions regarding hiring and product management. The guests outline internal team tensions between open source maintainers and enterprise product engineers.3:24–5:52 · Guest teaching 5/10 Budget Allocation Mechanics and Developer Infrastructure Abstraction The host prompts the guests on how developers obtain purchasing power, letting Casado and Levine explain line-of-business budget alignment and container abstractions. The tone is highly collaborative and educational with no friction.5:52–11:33 · Guest teaching 6/10 Combining Bottom-Up Adoption with Enterprise Sales Sonal directly pushes back against the guests, questioning why top-down sales forces are needed if product adoption is organically taking off. Levine and Casado counter by explaining cross-silo value proposition and revenue predictability.11:33–18:09 · Guest teaching 6/10 Open Source Business Models and Monetization Strategies The host facilitates questions on open source monetization, interjecting brief clarifications while Levine and Casado explain why the Red Hat support model rarely works and advocate for cloud SaaS models.18:09–25:09 · Guest teaching 5/10 Startup Execution, Organizational Structure, and Roadmap Strategy Sonal highlights low profitability in services companies and asks sharp operational questions regarding hiring and product management. The guests outline internal team tensions between open source maintainers and enterprise product engineers.3:24–5:52 · Guest disagreement 1/10 Budget Allocation Mechanics and Developer Infrastructure Abstraction The host prompts the guests on how developers obtain purchasing power, letting Casado and Levine explain line-of-business budget alignment and container abstractions. The tone is highly collaborative and educational with no friction.5:52–11:33 · Guest disagreement 2/10 Combining Bottom-Up Adoption with Enterprise Sales Sonal directly pushes back against the guests, questioning why top-down sales forces are needed if product adoption is organically taking off. Levine and Casado counter by explaining cross-silo value proposition and revenue predictability.11:33–18:09 · Guest disagreement 1/10 Open Source Business Models and Monetization Strategies The host facilitates questions on open source monetization, interjecting brief clarifications while Levine and Casado explain why the Red Hat support model rarely works and advocate for cloud SaaS models.18:09–25:09 · Guest disagreement 1/10 Startup Execution, Organizational Structure, and Roadmap Strategy Sonal highlights low profitability in services companies and asks sharp operational questions regarding hiring and product management. The guests outline internal team tensions between open source maintainers and enterprise product engineers.3:24–5:52 · The host pushing back 1/10 Budget Allocation Mechanics and Developer Infrastructure Abstraction The host prompts the guests on how developers obtain purchasing power, letting Casado and Levine explain line-of-business budget alignment and container abstractions. The tone is highly collaborative and educational with no friction.5:52–11:33 · The host pushing back 7/10 Combining Bottom-Up Adoption with Enterprise Sales Sonal directly pushes back against the guests, questioning why top-down sales forces are needed if product adoption is organically taking off. Levine and Casado counter by explaining cross-silo value proposition and revenue predictability.11:33–18:09 · The host pushing back 2/10 Open Source Business Models and Monetization Strategies The host facilitates questions on open source monetization, interjecting brief clarifications while Levine and Casado explain why the Red Hat support model rarely works and advocate for cloud SaaS models.18:09–25:09 · The host pushing back 3/10 Startup Execution, Organizational Structure, and Roadmap Strategy Sonal highlights low profitability in services companies and asks sharp operational questions regarding hiring and product management. The guests outline internal team tensions between open source maintainers and enterprise product engineers.

speaking balance: gold is the host, purple is the guest (3 minute bins)

0:00 · the host 28.2% · guest 71.8%0:00 · the host 28.2% · guest 71.8%3:00 · the host 10.7% · guest 89.3%3:00 · the host 10.7% · guest 89.3%6:00 · the host 14.7% · guest 85.3%6:00 · the host 14.7% · guest 85.3%9:00 · the host 0% · guest 100%9:00 · the host 0% · guest 100%12:00 · the host 0.9% · guest 99.1%12:00 · the host 0.9% · guest 99.1%15:00 · the host 4.2% · guest 95.8%15:00 · the host 4.2% · guest 95.8%18:00 · the host 15.1% · guest 84.9%18:00 · the host 15.1% · guest 84.9%21:00 · the host 6.1% · guest 93.9%21:00 · the host 6.1% · guest 93.9%24:00 · the host 2% · guest 98%24:00 · the host 2% · guest 98%
Sharpest disagreement ▶ 8:35 Calling Pure Viral Adoption a False Hope

Peter forcefully dismisses the idea that free software offerings can virally penetrate enterprise accounts without enterprise sales support, calling it a false hope.

 Hardest push from the host ▶ 8:43 Sonal Questions Enterprise Sales Requirement

Sonal explicitly refuses the premise that top-down sales are necessary, stating she does not buy why enterprise sales competencies are needed for popular bottom-up developer tools.

 Biggest teaching moment ▶ 13:24 Deconstructing the Single-Use Red Hat Model

Peter educates the host on why charging for support and maintenance succeeded only once for Red Hat due to unique historical timing and fails for modern startups.

 The host holds their own ▶ 18:35 Sonal Pinpoints Services Business Margins

Sonal demonstrates strong business domain knowledge by interjecting that the key flaw in open source services companies is low profitability margins.
the scores for every segment, with the reasoning behind each
ChapterTopicThe host as informed peerGuest teachingGuest disagreementThe host pushing backWhy
Budget Allocation Mechanics and Developer Infrastructure Abstraction 2511 The host prompts the guests on how developers obtain purchasing power, letting Casado and Levine explain line-of-business budget alignment and container abstractions. The tone is highly collaborative and educational with no friction.
Combining Bottom-Up Adoption with Enterprise Sales 5627 Sonal directly pushes back against the guests, questioning why top-down sales forces are needed if product adoption is organically taking off. Levine and Casado counter by explaining cross-silo value proposition and revenue predictability.
Open Source Business Models and Monetization Strategies 3612 The host facilitates questions on open source monetization, interjecting brief clarifications while Levine and Casado explain why the Red Hat support model rarely works and advocate for cloud SaaS models.
Startup Execution, Organizational Structure, and Roadmap Strategy 4513 Sonal highlights low profitability in services companies and asks sharp operational questions regarding hiring and product management. The guests outline internal team tensions between open source maintainers and enterprise product engineers.

Statements from this episode (11)

Assertion Not checkable as stated
Levine: Developers Transformed into Key Enterprise Buying Centers
“I think one of the most notable transformations over the past five years has been the pauper to prince of the developer as a buying center within a company.”
Peter Levine Jan 2, 2019 ▶ 0:38
Disclosure
Levine: a16z Portfolio Startups Use Developer-First Wedge Strategy
“What we see are many of our startup companies now deliberately selling to developers as the first wedge point into an organization.”
Peter Levine Jan 2, 2019 ▶ 1:48
Insight
Casado: Enterprise budgets shift toward profit centers over IT cost centers
“You see budget shifting towards the profit center and trying to contract on the cost center. Behavior always follows business.”
Martin Casado Jan 2, 2019 ▶ 3:55
Insight
Levine: Enterprise purchases naturally follow consensus among developers
“And once the developers in an organization have coalesced around a set of great tools, It becomes a foregone conclusion that the company ought to step up and go purchase those particular tools and services.”
Peter Levine Jan 2, 2019 ▶ 5:24
Insight
Levine: Open Source and SaaS Are Primarily Marketing Pipeline Vehicles
“Really the whole indoctrination of open source and SaaS as a starting point is a marketing vehicle to build a pipeline for an organization.”
Peter Levine Jan 2, 2019 ▶ 7:03
Insight
Casado: Developers Influence Purchases but Rarely Serve as Buying Centers
“The developers are influencers. The developers have control and a large lateral voice on budget. But in my experience, they aren't explicitly the buying center.”
Martin Casado Jan 2, 2019 ▶ 7:53
Assertion Not checkable as stated
Levine: The Red Hat Open-Source Support Model Has Only Worked Once
“And that model has worked, in my opinion, exactly one time. That's worked for Red Hat and not so great for everyone else.”
Peter Levine Jan 2, 2019 ▶ 13:29
Insight
Casado: Open Source Succeeds by Cannibalizing Markets, Not Innovating
“If you look at these examples of quote unquote successful open source companies, in almost every case, they were going after and cannibalizing an existing market, which is way more difficult than actually doing new innovation, right?”
Martin Casado Jan 2, 2019 ▶ 14:59
Insight
Levine: Viral Spread Plus Enterprise Sales Is the Winning Open-Source Formula
“Organic virality works to a certain point, but in order to be a successful organization in this new ecosystem, the notion of viral spread plus an enterprise sales organization, I think is the winning formula.”
Peter Levine Jan 2, 2019 ▶ 20:00
Disclosure
Casado Assigned His Best Engineer to Open Source Over Core Product
“In my case, I put my best developer on the open source side of the house, which from a company is kind of difficult to do because you basically want that best developer to rework on the core product on the inside.”
Martin Casado Jan 2, 2019 ▶ 21:01
Insight
Casado: Great Engineering Drives Open-Source Adoption Better Than Community Managers
“A community manager is not going to drive adoption like the best engineer on the planet actually building something good.”
Martin Casado Jan 2, 2019 ▶ 21:15
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