"How can we find funding for our open source project?"
First things first: This started as a fork from https://github.com/nayafia/lemonade-stand. @nayafia wanted to focus on how people fund their work on open source projects, and not how the projects themselves are sustained, which she thought was out of scope for her document (see https://github.com/nayafia/lemonade-stand/issues/1), so I've created this instead.
A project often starts with a bright idea and an initial commitment of volunteer time, or perhaps, a fixed term grant. But what happens after that initial activity? How can the project continue to sustain itself? (We define sustainability as the capacity to endure. Software is sustainable if it will continue to be available in the future, on new platforms, and meeting new needs. [This is from slide 23 of http://www.slideshare.net/danielskatz/scientific-software-challenges-and-community-responses, though it may have been taken from somewhere else earlier - if you know where, please fix this.])
The intent below is to list how projects do this — support themselves over time. Each funding category should ideally link to several real examples, and when possible, to a useful article or page instead of just a homepage.
The categories are not mutually exclusive. For example, a project might have a foundation but also use crowdfunding to raise money. Another project might provide services and also have a donation button. Etc. The purpose of this guide is to provide an exhaustive list of all the ways a project can survive, so that your project can figure out what works best for you.
[probably drop this sentence later] In addition to suggesting ways that individual developers can get paid for their work, most of these categories are useful for projects that want to find funding for their project/team.
APPENDIX: Contributing to this guide // License & attribution
*"personal effort" notes when a funding effort was led by an individual, not a project
Get people to volunteer their time to your project.
Stick a donation button on your project's site. Stripe and PayPal are examples of services a project can use to accept donations.
If a project has a specific idea it wants to implement (rather than ongoing project work), a one-time crowdfunding campaign can help raise the needed funds. Both individuals and companies might be willing to donate to the campaign.
If you'd like to fund ongoing project work, you can set up a recurring crowdfunding campaign, with a monthly or annual financial commitment that renews indefinitely (or until the donor cancels). Those who use your project regularly (including both individuals and companies) might be willing to fund it.
If your project is something people want to learn about, or it is in a domain that people want to learn about, your project could write and sell a book or series of books. You can find a publisher (like O'Reilly) or self-publish. In addition to selling books, some projects sell merchandise (ex. shirts, hoodies) to support their work.
If your project has a large audience, you can sell sponsorships to advertisers who might want to reach them. You probably have a very targeted audience (ex. if you have a Python project, you can assume your audience is likely people who are technically familiar with Python), so use that to your advantage.
Companies sometimes support particular projects via paying for some development in that project,
or by supporting a PhD or researcher to undertake a specific development project.
Find a company that uses your project, and determine something the project wants to do that the company is willing to put work into.
(Note that this might overlap Consulting & services below.)
A project can offer consulting & services around the project itself. For example, a client might pay you to implement the project for them, build something custom, or train them on how to use it. This could also be done as a service that is written in the client's grant proposals. (Note that this might overlap Industry support above.)
Grants are effectively large donations that do not require repayment. Oftentimes the grantmaker receives other benefits from giving you the grant, such as access to your project's developers, demonstration of impact, a report of the project work, or tax benefits.
Grants can come from many places, including companies, software foundations, philanthropic foundations, and the government. The technical and legal aspects of a grant vary greatly depending on where it comes from. For example, a company might give a project a "grant" but legally treat it as a consulting invoice. A philanthropic foundation can only make grants to nonprofits, so the project would need to be a nonprofit yourself, or (more commonly) find a nonprofit to sponsor it. If you're unfamiliar with grants, the best way to understand how grants work is to talk to someone who has received one before. Some examples of grant recipients are listed below.
SaaS means Software as a Service. In this model, the codebase itself is open source, but the project might offer additional paid services that make it easier for people to use the project. One common example of a paid service is charging for hosting.
Software (and any SaaS provided) is open source and free to use, but an organization can pay (e.g., a larger fixed annual fee) to become an official member or supporter or partner of the project. Membership give additional benefits such as having a stronger say in political or technical decisions, early access to development versions, larger usage quotas, custom integrations (e.g., single sign on), on-site training, and kudos by being officially listed. Membership may also be available at various levels (e.g., bronze, silver, gold.)
Sometimes, projects offer an identical codebase with two different licenses: one that is commercially-friendly, and one that is less so (ex. GPL). The latter is free for anyone to use, but companies pay for the commercial license in order to have legal peace of mind.
Under an open core (or freemium) model, some aspects of the project are free, but other features are proprietary and available only to paid users. Usually this works when there is enterprise demand for the project.
A foundation is a legal entity that can accept and/or disburse donations and be the legal owner of the Intellectual Property rights. Because their purpose is not to make a profit, they can be a great choice to signal neutrality and steward a project. In the US, foundations are either 501(c)(3) (nonprofit) or 501(c)(6) (trade consortium). Many software foundations are 501(c)(6) because 501(c)(3)s require demonstrating a charitable purpose, which can be more difficult in software.
For a detailed discussion about this topic, see: Bavitz, Christopher; Topelson Ritvo, Dalia & Hessekiel, Kira. Organization & Structure of Open Source Software Development Initiatives: Challenges & Opportunities Concerning Corporate Formation, Nonprofit Status, & Governance for Open Source Projects (March 2017). Berkman Klein Center Research Publication. Available at: https://dash.harvard.edu/handle/1/30805146
Venture capital is a form of funding for high growth businesses. Unlike a bank loan or other forms of debt financing, venture capitaists take equity (a percent ownership in your business) in exchange for funding. The tradeoff is that unlike taking out a loan, you don't have to repay your creditors if your business tanks. If the project does succeed, however, it should expect to return capital to the investor at a multiple.
Venture capital is "high risk high reward": VCs are more risk tolerant than, say, a bank, but they also expect a large payoff if the project is successful. If you plan on raising venture capital, you should set up a business entity structured as a C Corp, preferably in Delaware. If you're unfamiliar with the venture capital process, the best place to start is by reaching out to similar founders who have successfully raised venture.
If a FOSS project has a well-known name and large user community, it can potentially capitalize on its trademark as a form of intellectual property to license out to franchises that provide support or hardware appliances that use the software.
As with the original from @nayafia, this guide welcomes changes and edits. If something is factually incorrect (especially with a case study example), your edits would be great. Also, if there's a category that's missing, please add it.
This guide is available under the Creative Commons CC0 1.0 License, meaning you are free to use it for any purpose, commercial or non-commercial, without any attribution back to me (public domain).