HashiCorp went public this week. This is the latest addition to our growing list of fourth-quarter IPOs.
The cloud infrastructure unicorn is a fascinating mix of proprietary and open source code. It also has recurring revenues and a new hosted product.
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We need to talk about HashiCorps approach to the market in order to understand its performance. It is a great read for anyone who loves open source software (OSS), or simply curious about how companies that have a core of open-source code make money.
HashiCorp's most recent quarter saw a 50% increase in revenue over the previous year, although it suffered smaller losses. The unicorn, which is expected to be worth around $5 billion by 2020, has already reached a nine-figure revenue level.
Let's talk about OSS. How it evolves into a business model and what HashCorps historic results look like through July.
Open source HashCorps approach
We meant to say that HashiCorp was a cloud infrastructure company. It has developed a suite to help other companies manage cloud apps (Terraform), keep their data safe (Boundary and Vault), handle networking at a granular level and orchestrate cross-platform deployments (Nomad and Waypoint).
This is a very brief overview of HashiCorp's software development over its lifetime. Since this company is going public, we expected to see a lot of code. This is not a small Series C startup hoping to one day become a unicorn.
Here's where the fun begins. Here's where things get interesting. According to the company's S-1 filing, it deliberately developed [its] products using an Open-core Software Development Model. Practically, this means that all HashiCorp products are open-source projects with large communities of contributors and partners working together on their development.
The Exchange published a piece about how OSS evolved from exoticism into in-market advantage over the past months. Investors should not be surprised to see HashiCorps IPO as a way to capitalize on the in-market monetization opportunities open source software offers.
How does HashiCorp make a living from open-source software? The company offers support and hosted versions of its open-source products, as well as proprietary code.
Revenue is generated in many buckets. Subscription revenues are the largest bucket. The second bucket is professional services. This is well understood so we can leave it at that.
