In Defense of Free

Stewart Brand’s famous qoute "Information wants to be free" has been the rallying cry of the open source software movement for years.

And I basically think Stewart was right.

So how do you reconcile the desire for free code and data with capitalism and its derivative – venture capitalism?

That is a question that we have been struggling with for the past ten years and it is a question that Brad and I have spent countless hours analyzing and debating.

Our mentiors and guiding lights are people like Bob Young of Red Hat and Craig Newmark of CraigsList who have shown that free software and data can co-exist with the profit motive.

Red Hat is so instructive.  It’s business model was making free software, specifically Linux, available to enterprise customers.  It made money packaging and providing support.  The code was free, the expertise on how to use the free code was not.

CraigsList is even more instructive.  Craig built an open utility – a classifieds listing service in San Francisco that anyone could use for free.  And he lovingly cultivated it into a community that had values and feelings. And people used it and got results.  He has kept it mostly free with the exception of certain categories, Jobs to start, and soon Real Estate, where a paid model turned out to be a benefit to the community.

That last point, that a paid model can actually be beneficial, is really interesting and needs to be better understood.  But this post is intended to be the beginning of this discussion, so I’ll move on.

What about Google?  They give away an incredibly powerful Internet search service every day millions of times a day.  They get paid by advertisers who also get to run their text ads for free.  The only time an advertiser pays is when the ad is clicked on.  Free to use, pay for performance.  It doesn’t sound that different from the Red Hat model, does it?

And take Flickr.  It’s the best photo site on the Internet by a long shot.  And its free.  For about a day.  My friend Mark Ghuniem said something to me last month which I have used a lot since then.  Mark said, "it took me about a day to turn pro on Flickr".  Turn pro means becoming a paying customer.

You can get a really great free experience uploading and sharing photos on Flickr. But if you are like many of us who love taking and sharing photos, you’ll turn pro in about a day.

So I was working with one of our portfolio companies earlier this month.  They have an enterprise software/service that customers pay for.  But there are huge network effects in the deployment of their service.  The more users they have, the more value accrues to each user.  They are thinking about the role of free code and data in their business.  And well they should.

Because free is a great way to make money.  You just have to know how you are going to get paid for being free.

#VC & Technology