Dec 8, 2023 · 1h 14m · in-depth
Winning with open and closed source products | Neha Narkhede (Co-founder at Confluent and Oscilar)
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In this in-depth interview, technologist and entrepreneur Neha Narkhede shares foundational strategies for scaling open-source and closed-source software companies based on her experiences building Confluent and Oscilar. She details tactical approaches to commercializing developer tools, executing hybrid-to-cloud SaaS pivots, creating market categories, and navigating enterprise sales dynamics.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Brett holds 16.8% of the talking time here. How this is scored →
Brett as informed peer 2.8 Guest teaching 2.3 Guest disagreement 0.1 Brett pushing back 0.2
speaking balance: gold is Brett, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:06:43 Reframing the crowded fraud market
Neha directly addresses Brett's skepticism about market saturation by clarifying that incumbent vendors are narrow point solutions that create fragmented, suboptimal decisions.
Hardest push from Brett ▶ 1:06:21 Brett questions entering a crowded fraud and risk spaceBrett challenges Neha on whether fraud and risk is an overly congested market with dozens or hundreds of established players.
Biggest teaching moment ▶ 1:08:40 Infrastructure DIY vs application software build-or-buyNeha educates Brett on how customer psychology differs fundamentally between developer tooling (high DIY pushback) and risk software (buyers have no dedicated engineering staff and must purchase).
Brett holds their own ▶ 58:00 Brett highlights the hidden variable trap for repeat foundersBrett demonstrates deep founder-pattern expertise by explaining how past success can create false causality and dogmatic playbooks that fail in new company contexts.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Brett as informed peer | Guest teaching | Guest disagreement | Brett pushing back | Why |
|---|---|---|---|---|---|---|
| The Origin and Motivation Behind Apache Kafka at LinkedIn | 1 | 2 | 0 | 0 | Brett asks foundational open-ended questions about Kafka's inception at LinkedIn. Neha explains the dual architectural problem between real-time apps and offline analytics that motivated building Kafka. | |
| Validating Market Demand and the Genesis of Confluent | 3 | 2 | 0 | 0 | Brett contextualizes how building internal tools differs from classic enterprise software validation. Neha details the zero-to-one shift from an open-source project to a commercial entity. | |
| The Decision to Launch and Defining the Confluent MVP | 2 | 2 | 0 | 0 | Brett inquires about the decision to spin out and define the commercial MVP. Neha outlines the three early pillars: operational ease, data integration, and stream processing. | |
| Horizontal Platform Strategy vs Narrow Ideal Customer Profiles | 4 | 2 | 0 | 1 | Brett challenges the decision to build a broad horizontal platform rather than focusing on a specific vertical ICP like banks. Neha explains why a foundational approach was mandatory to capture Kafka's existing breadth before competitors did. | |
| Building Enterprise Credibility Through Developer Evangelism and Thought Leadership | 2 | 2 | 0 | 0 | Brett asks what differentiates top-tier developer evangelism from average efforts. Neha distinguishes basic technical documentation from thought leadership that teaches a paradigm shift. | |
| Creating and Defining the Data Streaming Category | 2 | 2 | 0 | 0 | Brett asks how category creation unfolded and how they settled on terminology. Neha shares early missteps, such as event streaming causing confusion with video streaming like Netflix. | |
| Co-Founder Dynamics, Team Roles, and Career Principles | 3 | 2 | 0 | 0 | Brett explores how three technical co-founders divided responsibilities without turf wars. Neha explains how natural roles at LinkedIn mapped directly to CEO, CTO/CPO, and open-source architect positions. | |
| Monetization Strategy: Open Source, Enterprise Subscriptions, and SaaS | 2 | 3 | 0 | 0 | Brett prompts Neha on generating Confluent's first dollar. Neha articulates the monetization playbook across open source, subscription enterprise features, and fully managed cloud infrastructure. | |
| Navigating Dual Business Models: Software Subscriptions and Cloud Services | 3 | 2 | 0 | 0 | Brett asks how Confluent navigated running two fundamentally different businesses (subscription software and consumption cloud). Neha explains the structural and sales compensation challenges involved. | |
| Scaling the Sales Organization from Founder-Led to Enterprise Reps | 3 | 2 | 0 | 0 | Brett probes the sequencing of hiring individual quota-carrying sales reps before a dedicated sales executive. Neha validates that sequence based on founder-led discovery. | |
| Critical Decisions: Cloud Timing and Strategic Licensing Defense | 3 | 3 | 0 | 0 | Brett asks for non-consensus calls that paid off. Neha details the controversial decision to introduce restrictive commercial licensing around add-on tools to prevent cloud hyperscalers from free-riding. | |
| Executing the Cloud Pivot and the Case for Starting Hybrid | 4 | 3 | 0 | 1 | Brett asks whether Confluent could have skipped on-premises software entirely and launched cloud-only. Neha explains that skipping on-prem would have conceded the massive enterprise market to competitors. | |
| Founding Oscilar and Discovering Founder-Market Fit | 2 | 2 | 0 | 0 | Brett transitions into why Neha founded Oscilar rather than retiring or investing. Neha explains her builder identity and identifying fraud/risk as Kafka's largest dollar-value workload. | |
| Open Source vs Closed-Source SaaS: Contrasting Confluent and Oscilar | 4 | 2 | 0 | 0 | Brett raises the 'hidden variable problem' where successful founders overapply prior playbooks. Neha methodically contrasts what she retained versus what she intentionally inverted at Oscilar. | |
| Customer Discovery and Validating the Unified Risk Platform Thesis | 4 | 3 | 1 | 1 | Brett pushes back on the risk and fraud category appearing overcrowded with hundreds of competitors. Neha reframes the landscape, explaining that existing vendors are fragmented point solutions lacking a unified real-time engine. | |
| Build vs Buy Dynamics in Enterprise Infrastructure vs Application Software | 4 | 3 | 0 | 0 | Brett explores the difference between technical pain and commercial willingness to pay. Neha contrasts infrastructure buyers (who want to build in-house) with risk leaders (who lack engineering teams and must buy). | |
| Proactive Research, Consumption PLG Lessons, and Concluding Thoughts | 2 | 2 | 0 | 0 | Brett asks for concrete examples of executive research sprints. Neha describes learning consumption-based PLG mechanics from the CPO of MongoDB. |
Statements from this episode (24)
Narkhede: Kafka was built only after finding no existing streaming platforms
“We actually began by researching the market to see if anyone had built something like that. So definitely wasn't the preference to build Apache Kafka, but when we realized that nothing else existed, we decided to take the leap and start Apache Kafka, open sour…”
Narkhede: Confluent was founded four years after Kafka was open-sourced
“So this conference started four years after Apache Kafka was open sourced and became successful and
It was very much an organic decision.”
Narkhede: Kafka was used by 50% of Fortune 500 when Confluent launched
“Confluent kind of started with a proven technology that was used at, you know, roughly 50% of Fortune 500 companies at that point in time.”
Narkhede: Operational ease is the right starting point for open-source companies
“The first one was operational ease, you know, offering tools and enhancements to simplify the deployment, management, and scaling of Kafka clusters, which is actually, I think, the right starting point for many open source companies.”
Narkhede: Confluent ignored narrow ICPs to capture the broad Kafka base
“Kafka, you know, that was one of the reasons why we couldn't or we didn't sort of narrowly focus on an ICP like traditional companies do for good reason. It was because, you know, the Kafka adoption base was so broad and for Confluent to quickly convert those …”
Narkhede: Competing against a thought leader is harder than product-level competition
“I think what differentiates the top 20% from the rest is thought leadership. You know, thinking of develop developer evangelism as one of the most important tools to establish yourself as the thought leader in the space, because that is actually a core differe…”
Narkhede: Commercial open-source requires all project creators to found together
“For the success of an open source company, all the creators should be part of it. And when that doesn't happen, you have two companies and they're competing on things they shouldn't be competing on, which mostly comes down to pricing and it's just a race to th…”
Narkhede: Features enabling end users should remain open source
“Features that directly
Enabled the end users of the open source product.
We believe should ideally remain open source or be open source.”
Narkhede: Confluent initiated SaaS product two years in
“So about two years in, we realized that there must be a SaaS offering because at that time, the whole industry was in the middle of this transition from on-prem environments to the public cloud.”
Narkhede: Transitioning enterprise sales to consumption models is the hardest challenge
“Sales was just a whole different, you know, dynamic. It was The most difficult one to solve for because in the early days, you know, if you're offering a software product, you have the traditional salespeople who are used to selling a subscription-based softwa…”
Narkhede: Confluent chose not to separate on-prem and cloud sales teams
“We actually decided to not split it. And that was because we ultimately wanted to transition to a cloud first business. So we put in a, instead a lot of thought and a lot of investment in sales enablement you know, internal education of why this is important, …”
Narkhede: Confluent Cloud is nearly larger than its on-premise software business
“And today, our cloud business is growing and is, you know, almost larger than the software business as well.”
Narkhede: Confluent relicensed add-ons to stop cloud vendors reselling managed services
“So we introduced value-added offerings like stream processing, KSQL, under licenses that were similar, very similar in spirit to the open source friendly Apache two dot O, but these licenses had specific provisions that prevented other entities from just offer…”
Narkhede: Confluent never split engineering teams between cloud and on-prem
“We kept the foundational teams the same. So there was only one team ever working on Apache Kafka and the foundation. There was only one team that was ever developing a specific proprietary feature set. So we never split, you know, specific teams or individual …”
Narkhede: Confluent probably would have failed if it started as SaaS-only
“Would it have just been feasible if we started with a SaaS only offering? And the answer is probably not because, you know, one of the most important things an open source company needs to do is quickly establish yourself as the market leader, quickly establis…”
Narkhede: Fraud and risk is Kafka's largest use case by dollar spend
“The whole fraud and risk space came to mind because it's one of the largest use cases of Kafka on a dollar basis.”
Narkhede: Confluent's initial branding was easy because of Kafka's popularity
“At Confluent, we could lean on the brand of a very popular Open source projects, so the zero to one branding phase was actually really easy. With Ocelor, you're, you know, humbled that you're starting with something that people don't really know about.”
Narkhede: Chose closed-source SaaS for Oscilar to avoid hybrid software headaches
“I specifically chose a company that would be entirely different. You know, the reasons are like, A, one is just simplicity. You know, you kind of have the experience you've had already balancing building a software business and a SaaS business and trying to ba…”
Narkhede: Pre-validated Oscilar by pitching Figma prototypes to 80 risk executives
“Set up meetings with about 70 or 80 different buyers who are, you know, heads of risk. At different companies in different industry verticals and literally sort of showed them a Figma prototype of what they would be using if they were to use a product like Oce…”
Narkhede: Passed on Customer 360 Startup Idea Due to Crowded Market
“There was one other, maybe problem space again, sort of drawing on my experience, which is a helping companies build like a customer three 60 product where you have like a central platform to tap into, to understand your customer usage patterns, your customer …”
Narkhede: Confluent had to combat strong developer DIY mentality around Kafka
“We spent a lot of time focusing on convincing the company that they didn't need a team managing Kafka or their team could be much smaller. Effectively, you're dealing with a, you know, target customer base that just wants to do it themselves, right? So the DIY…”
Narkhede: Oscilar targets risk executives because they lack in-house engineering teams
“In Austin, I realized that the head of risk, which is the buyer, actually does not have the engineering team. They just don't hire for it. They don't report into it. They just don't have the team that can build the technology and the product they want. So they…”
Narkhede: MongoDB Atlas is arguably the most successful cloud product
“And back then I remember that the CPO of MongoDB and today Atlas, their product is the most successful cloud product out there, arguably.”
Narkhede: Confluent hired MongoDB's CPO as cloud strategy advisor
“And proactively reached out to the CPO there and regularly had conversations, hired him as an advisor at Confluent and was very helpful in avoiding some of the problems that they ran into and learning from the experience that they were, they had because they w…”