OPINION: Building open source gives startups a head start, not a moat

Every startup faces the same squeeze: big ambitions, small team and limited budget. Free open-source software, which can be used, modified, and redistributed under its license, can help founders ease the squeeze. It lets a small startup build products that once required a large engineering department.

But a shortcut is not a strategy. To make good use of open source, founders must decide what they should build themselves, what to borrow, and which skills their team needs to retain. Here is what to consider, from saving time and standing out to staying secure and talking to investors.

Saving time

Microsoft’s Edge browser shows how this can work. I co-authored a study of its move to Chromium, the open-source engine also behind Google’s Chrome, found faster releases and closer alignment with Chrome’s supported web features. Edge remained Microsoft’s own product, on a shared foundation. For founders, the question is how much development work a shared foundation can save, and what trade-offs come with it.

Artificial intelligence offers a similar shortcut. Free toolkits such as TensorFlow and PyTorch help developers build AI applications. “Open-weight” models, such as Meta’s Llama, DeepSeek and Qwen, let teams download an AI system that has already been trained and adapt it, rather than start from scratch.

But open-weight does not necessarily mean open source. Founders should read the license carefully: downloading a model does not necessarily provide access to its training data or unrestricted rights to sell products built on it.

Before committing, startups should build a small prototype around a real customer task. A polished demo can hide missing features, thin documentation or fiddly integration work. Founders should also factor in the costs of computing power and upkeep. Access to the code lets teams tailor software or run it in a customer’s own systems, provided they have the skills and resources to manage it.

Standing out

If competitors can use the same technology, a startup needs to give customers a reason to choose its product. That might mean specialist features, smoother links with the systems customers already use, or reliable support. Founders can use the development time saved to find out what customers value enough to pay for.

Take an AI tool for manufacturers. It could pair a widely available model with a factory’s equipment records and tests designed around how engineers work. Tying the technology to a real job can make a product useful even when the model underneath is available to everyone.

Some companies make money from their own open code. Strapi, a French startup, offers a free content management system and charges for extra features and support. Founders who publish their code need to be equally clear about what customers pay for. They also need to allow time for users’ questions, documentation and outside contributions.

Keeping expertise in-house

Startups need staff who understand how the product works and can change it. In research I led on German firms, I found that product innovation was strongest among companies that outsourced a moderate amount of IT work. In related research I co-authored, we found that excessive reliance on outsourcing raises the risk of intellectual-property infringement.

The practical question for founders is which skills they need to retain as they draw on outside work. Early choices can become expensive to reverse. A team learns one framework; data takes on its format, and other parts of the product grow around it.

Before the business relies on a critical component, the team should test how easily it could be replaced. Design decisions and the ability to investigate failures should stay within the team. When working with outside developers, founders should agree who owns the work and what stays confidential.

Engineers also need time to experiment. If all their effort goes into stitching together other people’s software, they may struggle to build the know-how needed for the startup’s next product.

Maintenance and security

Joining an open-source community can help a startup’s developers learn. Research on larger companies found that contributors got more value from using open source, partly through feedback from other developers.

An active community can help spot and fix problems, but security still needs an owner inside the startup. 

The Open-Source Security Foundation advises tracking outside components, checking their origins and maintenance, and monitoring newly discovered vulnerabilities. Someone within the startup should be responsible for testing and installing updates.

Some popular projects rely on a single volunteer. Paid support may be worthwhile for critical components, while startups publishing their own code also need time for handling security reports and maintaining new versions.

Making the case to investors

Founders should show what the head start delivered, whether they have a working product, paying customers, or evidence of demand. They should explain what they didn’t have to build because they used open source, and what they developed themselves.

Our study found that US startups that engaged with outside projects on GitHub, a popular code-sharing site, were more likely to have raised their first funding round. The link was stronger for novel technologies and weaker in crowded markets. However, the research does not imply that publishing open source code alone will win over investors.

Founders should be ready to explain their own contribution to the product, the cost of maintaining it and how they would manage problems with a critical dependency. The test is whether open source helps them build something customers value while leaving the team able to maintain and improve it.

The post OPINION: Building open source gives startups a head start, not a moat appeared first on EU-Startups.