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Funding Software Development Through Bonds
TwP writes "There is a rather long but very interesting paper posted on First Monday that describes a software completion bond market. The bond market would be used by programmers to generate revenue for software projects, open source or otherwise. It would also help to identify potential users of the software package - those who invest in the bonds would most likely be those to use the developed software."
the problem i see with this proposal is that it requires the bond purchaser to fully specify the functionality of the project. this kills any incentive for the developer to apply any creativity to the program. it basically makes your open source project a contract job. i may be way off base here, but i think most open source developers are control freaks programming either for recognition or fun. i can't see a whole lot of them signing up to do a project where someone else dictates the terms.
Some of the links at the bottom of the article are more interesting than the article itself. Specifically, the author rightly acknowledges Ian Grigg's task market as an important contribution to his thinking. In my opinion, the Task Market paper is far better thought out than this paper about completion bonds, and is what should have been posted as the topic for discussion instead. http://www.systemics.com/docs/papers/task_market.h tml
Also, the referenced article about the Street Performer Protocol is well worth reading.
http://firstmonday.org/issues/issue4_6/kelsey/
Not referenced, but complimentary to the Street Performer article is this article about buskware.
http://www.boswa.com/buskware/buskware.html
This financing through bonds has little if anyone to do with the bond market as you would find on Wall Street.
A normal bond would be where I give you $1000, and every year you send me $50 interest. At the end of 10 years you send me $1050. (The orgional $1000 + $50 interest) Interest rates change of course, trust worthy companies with little dept pay less interest, while untrustworth companies with a lot of dept pay high interest. You get the idea though, basicaly a bond is a loan.
These bonds are an agreement, I put up $1000 (with a trusted third party), payable to anyone who provides certian software functionality. The third party, upon reciving a program with that functionality would pay the programers. The bonds avaibale would be known so programers could decide what to work on.
I'm not sure if it is a good or workable idea, but it is an idea.
It seems to me that there are currently at least 4.5 million (more or less) schemes designed to make Free Software development "profitable." Now, I am certainly not opposed to making money, but I fail to see how the current system of Free Software development is broken. It seems to me that when I sit down at my Debian GNU/Linux box I have plenty of good software available to me. In fact, the advance in the state of the art for Free Software has been so amazing in the last 7 or 8 years that commercial software houses are finally realizing that they have to adopt some Free Software techniques in order to remain competitive. Nearly every major commercial software vendor has sponsored some type of Free Software project. And Microsoft is clearly borrowing ideas from the Free Software community with their "Shared Source" initiative.
If you really are interested in making money writing free software here is the trick. Don't spend a big fat pile of money going to trade shows, buying fancy cars, and purchasing expensive office space in Silicon Valley. Instead start by doing contract work for small companies and make sure your contract has a provision that allows you to keep the copyrights for your work. Then turn around and use that same source in your next contract. Now take that working software and release some (or all) of it on the Internet, and start to market it. Chances are good that your source will be of interest to a fellow developer with a similar problem, and with a little marketing you might even get some patches containing new features (which you can then sell to your existing customers).
Cygnus made money like this for years. With many business type packages the service and support contract is the main revenue source anyhow. You won't make Microsoft type money, but you probably wouldn't make Microsoft type money with a closed source product either.
There are plenty of software packages that small businesses pay tens of thousands of dollars for that are literally overgrown Access Databases. Competing with these packages on price and features is not particularly difficult (considering the wide array of inexpensive useful tools and existing source code), and more importantly it isn't particularly expensive to finance this type of software. In fact, that's one of Free Software's biggest advantages. Free Software development requires substantially less working capital, and the expense can be shared among interested developers.
Wouldn't it be easier to simply hire the contractors that are actually doing the work? It seems to me that the infrastructure that would go into making these sorts of bonds possible would be a lot more expensive than simply hiring a lawyer to write up a standard contract with the developers (or their company).
Heck, if you actually hired the developers and brought them in house you could even decide which parts of the software in question became Free Software. That might be important if you had important business intelligence you were interested in coding into the application that you didn't want your competitors to have. This would be perfectly legal under the GPL. Your customer would receive a copy of the source with their copy of the modified binaries fulfilling the requirements of the GPL and then neither you or the customer would distribute binaries with the proprietary bits (guaranteeing that you needn't distribute the code you didn't want to share).
With bonds and several investors this sort of deal wouldn't be possible.
And that's not even the most obvious of its failings. The most obvious failing is that companies that don't participate in the bond will probably also receive access to the product. What exactly, then, is the incentive to pay?
Free Software developers currently share code for various reasons. One reason seen in Mozilla, OpenOffice, eSpeak, etc. is that the sponsoring company wants a product to become a standard. The company then hopes to leverage their expertise to sell hardware, support, or other goods and services. These projects generally don't need to worry about outside financing as the the organization sponsoring the project has sufficient resources to carry the bulk of development out itself.
The other reason that Free Software developers share code is because it allows small time developers with limited resources the ability to tackle large projects by pooling their talents. The fact of the matter is that if you have enough money to pay for all the coding to be done in house, and you plan on paying your bills by selling software (and not some other good or service) then you are probably better off keeping the code private.
How is this easier or more functional than simply hiring a contractor to make the changes that you would like to see made? And why should a company pay money so that it can vote when instead it can pay money and hire a contractor to add features. Especially since you can sit down with your contractor and sign a legally binding contract.
How many would invest knowing that it was likely that the software would be released as Free Software at the end of the project whether you paid or not. Why not simply let your competitors pay for development, and you could simply scoop up the project when it was finished.
You could probably even hire the original developer to install it for you (he would be looking for a new job).
This type of system would actually work much better for closed source development. But we already know how to finance those sorts of companies. Basically the whole point of Free Software development is that it requires less working capital, and allows you to spread development costs over several interested parties. If you are going to develop software in a closed source commercial type of setting (ie, cathedral style) why not simply fund your R&D in a more traditional manner.
Frankly I am not impressed. Basically he is suggesting everyone donate to a project and all the money goes into escrow, until enough money is collected to fund the project.
Then, the programmer goes to the bank and gets a loan against the money in escrow. Okay, this already works this way on cosource... Seems to me that he is just rewording what the site already does, this isn't a proposal for anything new...
I also notice that he mentions sourcexchange in the article. Since the article was published 6/4/01 and sourcexchange was shut down 4/6/01, this article was sorely out of date before it every went out. Now if we figure 90 days from submital to publishing, ie print publishing. This would have been written and submitted 3/4/01, so sourcexchange wasn't down yet, but they had already announced that they were going down...
So let me paraphase the article,
reporter: I need money, let me reword the cosource/sourcexchange business model and submit it as original work...
Lando
/* TODO: Spawn child process, interest child in technology, have child write a new sig */
Not so much as major large programs such as from Adoble or Mircosoft, but from small companies that have one programs that's in wide use in a nitch market, or companies where their major source of income is one or two major accounts.
Companies that use open source projects could buy bonds, and then direct to the path of the project to suit them. I'm a midrange copration, and I want an office suite. I buy X amount of bonds in OpenOffice, and say I want A, B and C. A, B and C are quickly added, the changes benefit all, and my company has an office suite with the exact fetures my company needs.
I COULD just as eaisly hire programs, and have it done internally. But why? If my company makes wire, why the hell do I want to go though the trouble of another department to optimize the company standard office suite. I have wire to worry about, not office suites.
So, if bond purchacers have an actual say in where they want a project they invest in go, this could be a VERY good thing for all open source projects.
I am a VC I want to fund a software company.
I put up 10million in funds. This money goes
to a medium intrest account and the intrest goes to the company.
The conditions are: use this intrest to build a good company within x amount of time or untill you have used this to get a value of x amount and the rest is yours to go strong with the idea. Fold and I get the 10 million back.
This seems to me that it would help build a company on shoe string budget untill they got a working model, then they get the money to do the real work, of building and expanding.
Or they fold and VC gets there money back loseing only the intrest they could have made on it.
Paying taxes to buy civilization is like paying a hooker to buy love.
Hey, everybody! Sally Struthers has been hoarding food!
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"Outlook not so good." That magic 8-ball knows everything! I'll ask about Exchange Server next.
Bonds have to be paid back with interest usually. Considering the what until now has happened in the open source world, namely many projects getting VC funding and going bust unfortunately with little to no ROI, this may not be the best idea. Many investors may regard this as "the same but different". How are the bond buyers going to get their money back is what they are going to ask. And in todays financial markets the buyers a being very picky. I hope it works but some may get burned badly, both developers and bond holders.
From where I sit, I see only two ways to generate revenue from Open Source software.
1) Sell a feature-added proprietary version of the software. Aladdin and Trolltech do this and are quite successful.
2) Sell proprietary addons to the software. The Kompany is doing this.
Conspicuously absent from this list are service/support, consulting, and reselling.
I haven't seen any profitability for service/support yet. It might be possible, but I just haven't seen it. Besides which, it's a lousy incentive for quality.
Consulting can be very profitable, and in fact, is where Cygnus made a heck of a lot of money. But consulting isn't generating revenue from the software. It's generating revenue from the consulting! The software merely acts as a glorified resume.
And of course, resellers aren't writing the software anyway.
I wish there was a way to make money directly off of Open Source without resorting to proprietary versions, extensions or addons. But I just don't see it yet. Bonds and other investments don't count, because they are not revenue. Likewise, I don't count donations to the "cause".
Instead of trying to find ways to make Open Source profitable, perhaps we should be trying to find ways to make closed source less onerous. Very few people are against paying for quality software. What they do object to are closed standards, upgrade cycles, and restrictions on personal and internal use.
A Government Is a Body of People, Usually Notably Ungoverned
I refuse to believe that there is a lower form of life than people in sales.
"That's Tron. He fights for the Users."
The real problem with this idea is although you put up money with a trusted third party, you have NO guarantee anyone is going to develop your software. As a company, if you need a feature in a package or even a brand new package you must contract someone to do the work, not hope someone will pick up your offer.
It's basically the difference between driving across the US and hitchhiking. Hitchhiking works but you don't know how long it will take, what class of ride you will get and whether the person you hitch with is gonna shoot you with that gun under his seat.
Fear: When you see B8 00 4C CD 21 and know what it means
...as much as most other /.'ers - but as far as using it for open source and making money from the software, it seems to be a real difficult thing to do. What about this as a solution - while not GPL, it might allow the making of money from open source software:
Basically, when you bought the product, you would receive the source, with a license stating that you could only share the source and any modifications with other license holders of the software, as well as with the company - in fact, make it a necessity that the company gets the mods , so the new users/buyers of the software get the mods as well in their copy of the source. Maybe have some kind of CVS system set up for all of this.
The license would have to state that any sharing of the source or binaries outside the group would be prohibited. Finally, the license would have to state that in the event that the company goes under, is bought out, etc - that the source would be automatically transferred to GPL status.
Would this even work? Would it be appealing? I am looking at this and am thinking it isn't that appealing (I am a GPL zealot for the most part), but it would make money. I also have this nagging idea that this is already being done by a company, but I can't put my finger on it.
Comments?
Worldcom - Generation Duh!
Reason is the Path to God - Anon
Don't know about bonds for completion but I would be interested in a futures market for developers... can you imagine the cries of "Buy December ESR"???
Any sufficiently advanced man is indistinguishable from God
Maybe, just maybe, issuing bonds will put a dent in vaporware. Talk big, get people hyped up, GET FUNDING, release date passes, second release date passes... umm, uh oh, now we're fscked. And we owe money to people. Vaporware developers spend their life savings paying off the funding that weakened their credibility... maybe people will be a little more careful next time they start writing code.
There is no reasonable defense against an idiot with an agenda
:wq
We did this once on a videogame a few years ago and it worked out really well. As a developer we felt it gave us a fair amount of 'protection' from the publisher; should there be any dispute there was a very serious 3rd party interested in mediating any problem.
;-). But you have to have your shit together to do it, and you can't sign up for something you don't think you can really do. It's bad enough to have a publisher breathing down your neck but adding a bank to that would be much worse.
As long as you, as the developer, are really good at The Paper Trail and you're not trying to hide anything, I really recommend going with a bond. Of course you get the publisher to pick up the fee
"Uncle Richard says 'Invest in world domination. buy GNU Bonds.'"
This is the only realistic option I saw. Trying to set up the bond jury would be ridiculously difficult, subjective, and prone to undue outside influence.
Option #3 is something that you can do today, and your revenue stream is entirely within your control. You can decide how much you want to market/advertise. You are in control of your profit model. You will fail or succeed on your own merits.
You could even set up a business supporting someone else's software. Examples: Cygnus, all those Perl consultants, book authors, magazine article authors, etc.
- Programmer nominates friends as bond judges, perhaps with explicit or implicit promise of a cut of the take.
- Programmer cranks out a half-baked implementation of the idea, and asks the bond judges to approve it.
- Bond judges comply, even though the product falls far short (in most users' eyes) of the promises.
- Bond judges either cash in bonds they have bought, or get money from the programmer (who has also cashed in).
- If anyone complains, bond judges have a detailed justification of their saying "yes", sufficient to convince any judge of law that the complaint may be just an honest difference of opinion between professionals, and thus not legally actionable as fraud.
And the sad thing is, this doesn't even have to be a scam. The bond judges and programmer could honestly believe they're legit. (In which case, bribing the bond judges becomes optional.) Or the bond judges could flash all kinds of credentials but be unable to honestly judge software. (Which might be solved by having reputable bond judges who are known for only approving good systems, but how does one avoid having this problem discredit the whole system until reputations can be built up?)it seems to me that the rush to make programming profitable is accually detrimental to programming itself.
let me explain:
programming was originally done to solve known problems. spreadsheets made bookkeeping a hell of a lot easier and THIS was the main reason a hobby became a neccessity. THIS is the reason companies and corporations embraced computers. (yes there were other reasons such as cost of hardware etc.)
but, in the last 20 years Microsotf has shown people how to become rich by software alone. "write once, sell forever" was a motto a friend of mine used to mutter and yes, he is wealthy because of it. but i believe this is no longer valid. there is too much competition. there is too many features that mean nothing to businesses.
i know of a company that has been trying to find software to handle the books for 2 years now. the software they search for is very sophisticated (Municipal Bonds and Securities) and the only product that matches their needs is horribly bloated and costs around $30m with an additional $20m in yearly maintanence fees. this company will NOT support this type of extortion.
they now pay me to write/find any software they want/need.
THEY ARE NOT UNIQUE!!!
i could sit at home and write code to do what i want it to do and hope someone will buy it from me or i could CONSULT for some companies and have the pleasure of solving problems that are already defined.
and i turn away 2-3 requests a month.
Microsotf got rich by creating problems to which they had solutions. that is the goal of any monopoly.
but trust me, solving problems defined by a paying customer is MUCH more rewarding then coding for the possibility to sell it later.
the danger is this:
until programmers stop worrying about how they can sell their software, make money, go public and retire, and start coding for other peoples problems, they further nothing but greed.
they will never have the joys of a happy customer and a fat bank account.
this is my post from after before.
TIME is the Aether...
That way you always have it there ready to pay the developers when their program solved a particular problem of yours. Could work.
Of course Gnome is just an example (because it has an help menu) but you catch my drift here.
Of course there will be needed big infrastructure here and it will only work if it's really easy to use. Having to put money on paypal or similiar is probably to much effort to ask from the users.
it's rather philosophically similar to "The Payvote Method of Selling Intellectual Property" see http://www.payvote.com/
so basically this is like sourceforge with money involved. sounds like a very well meant idea which got overly complicated. Sometimes simpler is better, daring venture capitalists seem like a more elegant solution to me (tho maybe harder to find).
This idea really only works if the bond backers cannot produce the software more cheaply by hiring programmers themselves. Of course, the assumption is that the backers want the product, not the capital returns; but investment is a major factor in providing capital.
Even if the investor were to receive the interest accumulated, if the money from the bond backers must go into an interest-bearing account, to be released only when the product is finished, then investors would not see a high enough rate of return to cover interest on the value of the bank loans the programmer has to take out -- which must be covered before the investor could see any return at all.
More simply, the rate of interest which the programmer faces on the loan will be higher than the rate of interest earned on the bonds. Although the bank won't provide anything near the entire value of the bonds for a loan amount, the difference must be made up entirely in the difference between the programming costs and the final value of the bonds.
This is great for programmers; but these bonds would be worthless to anyone actually interested in investment. And without a heavy influx of investment capital, today's tech companies wouldn't be able to do much of anything.
As an excercise in communitarian ventures, it's a great idea.
Larsal
Two points: People wouldn't buy the bonds; this should be equity not debit First, Investors as a whole are reasonably rational. Even if you can find a few suckers to by this type of stuff, they're going to have huge problems selling these bonds. The problem with this is that, the returns would have to be quite high given the risks of financing these projects. The software business is much like the movie business, a few great productions make a lot of money and lot more whimper off to die and be forgotten. There are a lot of "direct to video" equivalents in the software world. To understand what I'm saying about risk think about this; if two investments both offered the same return but one was riskier, people (assuming the recognize the higher risk) aren't going to buy the riskier investment ever! Software projects are quite risky, sometimes they work sometimes they don't. Investors would expect to be compensated for this, and they would demand higher returns, they normally get those because the price drops and the return goes up. Since I've been an investment banker selling junk bonds, I would say that that these bonds would in all likelihood be unsellable at any price. Only a very select few people will buy bonds at the risk levels that software projects would offer, and they wouldn't be interested in more than a handful of these issues. Given the risks, and the potential for a "star wars" to continue the movie metaphor, people want equity. For the risks that investors take, if you give them part of the upside of the project then they start to get comfortable taking a piece of the action. Equity, and venture capitalists make more sense. The vc's are very good at picking what makes money, and also building portfolios of companies lowering the risk of putting your money with them. A VC only needs to fund one star wars for every 20 Polly shore movies to make a significant amount of money. The VC model works a lot better. IF there is real money to be made, they will find it. If you can make a decent about of money off a project, people have to be buying it, and you must be doing something productive for society. That's my rant. Take what you will.
Because that would be all that your bond certificates would be worth. Bonds have to be backed by someone, usually someone big like a bank or investment brokerage firm or a small town in central Pennsylvania. Huge companies put out bonds to do big things, like build power plants, not little things like make software. Software projects aren't nearly as much money. It's usually a guarantee that the big stuff the bonds were issued to fund will be built, barring tremendous fraud or disaster. Steel and concrete holds things up better than code.
A bond issue backed by software is nuts. How is the company going to pay back the bonds in X years or months? Most, and yes, you know I'm right, software projects wither and die or make little money. To get people to invest in bonds with a crap rating, which software bonds would have, you need to promise massive returns in a short period. I know software engineers are good at promising things they can't deliver, but this is another story.
"Life's funny sometimes." "And sometimes it isn't." --Cat's Cradle
From a quick skim of the article, it sounds like these bonds may allow software companies to build up what was usually angel-stage money by taking funds directly from potential clients.
It's so crazy, it just might work!
(email addr is at acm, not mca)
We are Number One. All others are Number Two, or lower.
(email addr is at acm, not mca)
We are Number One. All others are Number Two, or lower.
--The Sphinx
OSDN Bake sale
BusinessMan: Yes, I'd like a C++ Carmel Cake, please
Programmer: Would you like a programming bond with that???
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Good quote, too many chars. Seriously, the slashdot 120 char limit sucks!
Poor bond ratings will likely prevent the use of bonds from becoming a viable way to raise money for software development. The concept of having the end users pay for development, while an interesting idea, is unworkable under the model proposed.
Frylock: That's not a toy!
Master Shake: You say that about everything you own. You should own toys. They're fun.
I might take heat for saying so, but what the heck. Actually, I think its a great idea. here is why. Venture capitalists are a pain, since once thye have dropped 10,000,000 into your compnay they are going to expect results and with each passing day they will press harder to see results. The same goes with signing up with a big publisher for your software, esspecially games. In a bond market this would be less so, of course the investors are going to expect results, but then at least its based on your rep as a software creator. If you have a great idea, put it out there, get people invest, and get the cash you need to get through development. I would imagine over time the market would learn who is worth the bucks. The better you stuff the better the investment gets. Imagine if you would Sid Mier, or Chris Roberts in the game world doing this, I'd buy bonds on the development of the next Civ game or the next Wing Commander(ok the last Chris Roberts game was not so good, but he hitched his wagon to M$ there which i think actually proves my point)
Power Corrupts,Absolute Power Corrupts Absolutely, leaving one person(group)in charge is absolutely corrupt.
From the paper: "A software completion bond is a promise to pay the bond owner the face value of the bond when anyone, anywhere in the world, completes software that meets the bond specifications.
Don't fork over $$$ for any bond that has specifications like "Bug Free Microsoft OS".
If the only tool you have is a hammer, you tend to see every problem as a nail.
Blarf.
The difference between your standard financing of R&D and this is that with these bonds, you're getting your VC from potential customers, and so they're getting something for their money at the end. It's not some random company, and the profit stream is something the investor wants. It's a win-win situation!
"Free beer tends to lead to free speech"
For just pennies a day, the cost of a cup of coffee, you can save one of thousands of OpenSource developers like these:
Camera pans down and to the left to the image of a shrunken, pale, programmer, intraveneously importing deep brown coffee into his system, working with gdb on debugging a file system.
For just Pennies a day, you can make all the difference for a programmer who has no life, no future. When you pledge your pennies, you will receive, with every quarterly report, a low quality JPEG of your programmer, and also a plaintext email from your programmer, telling you about his dreams for his software.
(Camera pans up and to the right, focusing on an image of Linus Torvalds, with a silly grin, reaching out to punch a final semicolon on his keyboard.)
Just look at what previous contributions have done for these people; As your developer grows and grows, day by day, you will feel such pride at his accomplishments.
Please, go to your PayPal account, send a $15 contribution for this month to "lion@speakeasy.org" and have the satisfaction that for the pittance of a cup of coffee a day, you've made the world a better place.
The BIGGEST problem will be the RATINGS of these bonds. Remember it will be the suits who just got hosed on tech stocks for the last few years giving any software bonds their ratings.
In this market, don't look for too many WS types to hand out many AAA ratings to coding, VC stealin' hippies.
S/he could sell Tee-shirts... but that would be an awful lot of tee-shirts...
-Mynn the Museless
Face it, people are stupid, and the internet is the place where they all meet.
Do you realize that Slashdot has indirectly linked to fiscally conservative rhetoric? Here's a tasty sample:
"The most recent calculations show that the annual cost to consumers and taxpayers of [Organisation for Economic Cooperation and Development, OECD] 29 member countries' support for agriculture and horticulture amounts to US$361 billion. Such a large sum is difficult to grasp, but it is large enough to pay for a first class, round-the-world air ticket for each of the 56 million cows in the 29-member OECD's dairy herd, and to give each cow a further US$1450 spending money for her stopovers in the US, Europe and Asia. Or the cows could slum it in business class, and have US$2800 spending money. And they could have this sort of trip every year, thanks to the generosity of OECD consumers and taxpayers."
You can't have your cake and eat it, too. Either you support inherently ineffective "social programs" as espoused by your beloved Ralph (uri)Nader, or you don't. You cannot use Libertarian logic when it pleases you and ignore it when it doesn't. Sorry.
[Waiting for my moderative spanking.]
"Saddam Hussein cavorts with terrorists."
Somehow I don't think Wall Street is going to go for this. Who would actually lend money to a "company" that plans to give it's software away. How would the interest get repaid? What about the principal?
Vary few technology companies ever debt finance (ie: through bonds) R&D because the revenue stream from such endevours is uncertain. It is far safer to equity finance such activitied (therough issuing stock) because debt financing is premised on the ability of the company to pay back the money borrowed, in that form, rather than the ability of the company (or OSS project or whatever) to produce equal value in some other form (such as high quality software) where the investor chooses that investment over others based on his perception of the value of the endevour and hid/her opinion of the ability of the company to return value to that investor in whatever investment horizon the investor has chosen for him/herself.
This is why companies like Nortel Networks, hith high debt loads are having a tougher time weathering these tough economic times than companies like Cisco Systems that has a low debt load.
This is basic economics. It's been proven over and over.
--CTH
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--Got Lists? | Top 95 Star Wars Line
Insightful??? Brother this is pure, 100%, George Foreman type genius!
Why should programmers risk their own money on the success of a product? Thats what the venture capatalists are for!
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The way to see by faith is to shut the eye of reason. --Ben Franklin
how many people would invest? you wouldn'tk now ahead of time if the programmer would actually write something good...
My server
In email discussions, I always argued for issuing bonds over issuing shares of ownership in a media property because bonds are less risky for an investor, so long as they can properly assess the ability for the property to generate the promised income. A stock, as we all know, can soar and crash. There are also huge issues surrounding ownership after bankrupsy, SEC regulations, and so on. Through the bond price may fluctuate, it will continue to generate income (unless they are unable to pay) until it is due.
I think that there is definitely a future for creating bonds for intellectual property, whether a film, software, a book, or whatever. Heck, junk boonds in risky movies and software projects could also have a big impact. However, bonds will be most successfully issued by individuals or groups having a good deal of credibility. Example: a prominent oss engineer funds a new version of his product by issuing a bond based on future corporate sales.
What the article does not point out is that SourceXchange has closed shop, and CoSource development is economically unsustainable. The problem in both cases is that people will not pay for open source development.
SourceXchange allowed programmers to negotiate the price of the software, with the result that no one was willing to meet these development costs. I am not aware of a single project that was sucessfully negotiated through SourceXchange.
CoSource is even worse, it allows people to request whatever projects for whatever amount of money they wish. The result is that most requests have zero dollars and zero cents committed. That's right, they expect someone to develop software for them without ever receiving a cent. Other projects have commitments of up to $300. There is no way you can develop a full-featured application for a total cost of $300.
Closed-source works because people are willing to fund closed-source shops with millions in investment cash. Until the same thing happens to open-source development, it will be playing catch-up to closed source applications.
Hell no! Don't do this. We would then have to ban the copying of corn, pigs, and hog bellies under the DMCA!
Why would users want to purchase bonds?
If a user has enough money, he'll hire programmers. If he does not, he probably doesn't need a program so special, it needs to be developed i.e. doesn't exist. I cannot understand the logic behind this assumption.
-Shaunak.
Hrmm... this sounds like a form of "stock purchase" in which people buy "part of the company" in order to invest their own money to make more money... Why not just start their own company? Oh that's right, that requires some sense of business.. which most of these geeks don't have. Oh yeah, and if they did they'd be against everything they fight for when they use StarOffice instead of MS Office... because it's free.
./ geeks complain about having to pay money for software... but programmers want to get paid. Since it would be hypocritical to start a company and sell their software, they come up with this "bomd scheme" to provide themselves with money while they remain jobless.
So...
Yes... I can see it now. Okay, I've got an idea... I'm going to start a "free software fund"... everyone who wants to join will send me $10... then for every person you get to join, you take $10 of their dollars and send me half of that... then when they get someone to join, they take THEIR $10, give you five of it and you give me $2.50. Hrmm oh yeah and the money I "earn" will be funding a project to code a PHP script to refresh a browser every 30 seconds incrementing a variable by 1. How about it?
I think you need to flash your brain's firmware.
ok, I know james bond is a cool guy, but come on, software development too?
oh, I get it... maybe he wants to put a back door in the evil villain's system so that he can escape before he gets sawed in half or something. /p?
Disconnect your television. Do your own research. Draw your own conclusions. They're probably lying. Don't be a sheep.
"Bond" is the wrong word to describe the instrument described in the article. A bond is something which would be bought by a financial institution, or Granny, or whatever -- someone who simply expects to get their money back at some defined time, with a defined amount of interest proportional to the risk. What's being described is much like the system used by GMT Games to fund new wargame development. Their system, called the P500, has been working successfully for two or so years now. See www.gmtgames.com for details. Wargames are very much a niche market. What happens is, a wargame designer completes the design of a game, then goes to GMT with it. If it passes muster, GMT publishes it on the P500 list (with description, etc). People are then asked to pre-buy the game (at a discout to the eventual retail price). When you sign up for the game, you are giving permission to have your credit card be charged when the game is finally published. When 500 people sign up for the game, GMT takes the plunge, and publishes it. The idea is that these sales should cover the cost of materials, at least. Any additional (retail) sales provides the profit. If 500 people don't sign up within some time period (a year, I think), then the listing is cancelled. Perhaps this model could work for open source. In any case, I don't think "bond" is the right word to use for this kind of transaction. You're then saying that when I sign up for a game on the P500, I've bought a "bond". That's not the conventional meaning of the word.
'crow
Last year, I came up with something very similar that I called the Partnered Development License (PDL), thinking that it would be the shiz-nit. No lawyer would touch it. Actually, they told me to sell it to e-trade or Ameri-trade (maybe I should)
Basically, you can just think of this as a micro-IPO, you invest, you get a share on the return and we're all happy right?Well, in devising such a plan, I realized a major factor of accountability here: Accurate and Accountable reporting on Gross sales statistics. That is, how do we know how much is actually sold on the market to be able to ensure that all participants get their due share?
The only real answer: A common market. So basically, we would need to create a model based upon the working model of NASDAQ or NYSE to accomodate the accounting of sales for each traded commodity (software) to ensure accountability and accurate exchange rates.
What a frickin mess!!!! damn-it Jim, I'm a developer not a suit!So, seeing the tremendous efforts that would be involved, and after presenting the following framework (linked below) to Capitalists to seek investment in this venture, and seeing them shudder with anxiety at the slightest thought of what would all have to into this:
- The hundreds of millions of $$$'s
- The ordeal of a year or more of filings and scrutiny by the SCC
- The effort to attract participants for this market
- The utter uncertainty
They kindly told me to rethink the requirements and suggested that I just forget about it and do what I do best: Develop Software. The fact that they gave me several hours of their time and pointed out these issues was reward unto itself and I thank them.I should note that a market very similar to this has already been established here: Asycrony.com and from what I can tell, really isn't doing all that hot. But, they've around for awhile and maybe they just need and deserve more support from the development community to gain more public awareness.
So for those who are interested in a Partnered Development License or agreement to facilitate Co-Development with Capitalists, see the following link for the M$Partnered Development License v2
...even for a slashdot post.
Where the hell have you been, didn't you notice the IT crash?
It's not less revenue (that is what this would make) that is required but a lot more!
The problem with the great number of new IT-related companies is that they are run by people who have absolutely no idea what so ever about how much revenue a company need. Or how to run them at all for that matter.
People look at companies and say that they make too much money. They don't. Do you have any idea what the costs are? Vacations, sickness, taxes, training and so on...
Say you have a pure consultant company. Not much additional costs above salaries for it's consultants. Just to make it (without profit, just avoid bancrypsy) each person have to make about twice his or her salary. Say you have ten people (a small company), you do the math for a year. You will discover that it's expensive to live!
Most companies have alot higher costs than this example company.
Bonds, you can't be serious! What we need are real companies, run as real companies with real (big enough) revenue.
And, just how the hell do anyone have the nerv to point fingers at the venture capitalists of all people? They are after all the ones that put in million after million to companies without income. They are the ones that lost ALOT of money because these companies are run by incompetent people who thinks it's possible to live on air.
You can blame VCs for being stupid for putting in money into companies without real revenue but it's certainly not their failt that they are failing.
This could certaintly work - assuming people aren't scared stiff by small software companies already. One thing which is required by bonds is paying people back. To actually pay people back, you need to make money. The only companies who are going to get decent bond ratings are those which are seeking to make money in the relatively near term - at least within the term of the bond. I think the market may be able to sort this out better than it handled the wizbang ideas of folks who floated stock.
Besides the problems about such a bond mentioned in other replies (eg pricing), I'm thinking potential buyers of the software might be reluctant to show their willingness to pay for the software by buying bonds to fund the development of this software.
It is my experience potential buyers of big software projects go out of their way _not_ to show to the developing firm their eagerness for this software. Let it be clear I am not talking about software products being sold to thousands of customers, I'm talking about software that is being developed for just a small potential market, possibly just a few interested firms.
Might it not be better for this small group of potential buyers to not reveal too much of their eagerness to buy a certain product?
On the other hand, if you are implying no money can be made buying these bonds, I beg to differ. In a well-functioning market, the price of a bond will reflect the potential gains of investing in this bond (taking into account risk of investing in this particular bond).
...but a real challenge to implement well. You need a way of deciding how to reward people based on how good it is, not just based on how good they say it will be. So some sort of general fund, which gets distributed based upon contributors votes seems to make sense. Making it work right and not be too complicated would be tough, but doable I'd think.
I think the general idea is good (find a way to pay people for contributing to open source projects), but the implementation described is not workable. Here's how I think it could work.
You have a general fee that companies and individuals could pay to be on an "all you can eat" subscription plan where they can use any software produced by such a system. Everyone who subscribes can use everything produced by the system.
Each subscriber also gets a fixed amount of "voting rights", so they can reward anyone who has contributed. They can give their vote to whole projects, individual developers, or whatever they like. The votes are weighted, so a licensee can throw all their votes at one thing or divide them up among a bunch of things, that is their choice. There is also a system for proposing and voting for things you'd like to see developed.....this doesn't commit actual money, but lets people know whether their proposed project might go over well. Again the voting would be weighted.
Anyone can go ahead and develop anything they want, in hopes that someone will like it and send a vote their way. Then the subscription fees are divided up based upon how people vote. Some people may not get anything for their efforts, but at least their is the chance of making a lot of money if you do something that really is great.
The key is that 1) voting for project doesn't require you to pay more money, the amount you pay is the same regardless, and 2) the rewards are not given out until the project has delivered.
> Wouldn't you also say it's true anything > that assumes that people will act on > self-interest alone is destined to failure? Not at all. Care to give an example? The whole concept of capitalism is based on the idea that self interest alone will make the system work (Adam Smith's "invisible hand", blah, blah, blah), it it works pretty well. The more people are able to profit from their hard work, the harder they work. This isn't to say that their aren't other motivators, but any time you make assumptions that those other motivators alone will make a large-scale system work, it fails. And no, I don't think any significant number of real companies (who have to answer to investors or shareholders or anyone for that matter) use the GPL just to "spite microsoft".
I'm actually in technology investment banking - the problem here (that some /.'rs have alluded to) is really the basics of risk & return. Software development is risky - there is no certainty a future income will develop - that is not the profile of any kind of bond or debt instrument. To accept that level of risk, an investor will demand better return - ie, if it does succeed, I own a portion of everything created - because most likely it'll bust, and I'll get nothing. This is why software startups are always equity deals...and where VCs come in.
You'll never see debt on early stage software code of any kind - and if you do it'll be converts/warrants and be equity for all purposes.