How to bootstrap an open-source project to $18M ARR with Frank Karlitschek @Nextcloud

saas.unbound is a podcast for and about founders who are working on scaling inspiring products that people love, brought to you by https://saas.group/, a serial acquirer of B2B SaaS companies.

In episode #24, Anna Nadeina talks with Frank, CEO and founder of @Nextcloud, the most popular on-premises content collaboration platform you can download.

Frank Karlitschek, the CEO and founder of Nextcloud, has an impressive story of building a successful open-source project from the ground up. With a lifelong passion for software development and a fascination with the power of open-source collaboration, Frank has navigated the ups and downs of entrepreneurship to create one of the most popular on-premises content collaboration platforms available today.

The Power of Open Source and Collaboration Software

Frank’s journey into the world of open-source software began at a young age, when he started experimenting with programming on a pocket calculator using BASIC. This early exposure to the creative potential of software development ignited a passion that would shape the course of his career. After working in various management positions at tech companies, Frank decided to venture out on his own, founding his own companies.

The turning point came when Frank founded Nextcloud, a fork of his previous project. Driven by his fascination with the collaborative nature of open-source communities, Frank saw an opportunity to create a product that would empower users with control and security over their data. Nextcloud’s open-source approach allowed Frank to tap into a global community of volunteers, who contributed their time and expertise to the project’s development.

One of the key advantages of Nextcloud’s open-source model is the direct feedback channel it provides. By working closely with users and the community, Frank and his team were able to ensure a strong product-market fit, constantly adapting the platform to meet the evolving needs of their customers. This collaborative approach also helped with Nextcloud’s marketing and brand-building efforts, as the community acted as a powerful network of ambassadors, spreading the word about the platform.

Building a Remote Work Culture and Hiring the Right People

As Nextcloud grew, Frank recognized the importance of cultivating the right company culture and hiring the right people. Reflecting on his previous experiences, Frank realized the importance of maintaining independence and control over the company’s direction. By bootstrapping Nextcloud and avoiding external investors, Frank was able to make strategic decisions that aligned with the company’s long-term vision and the interests of its stakeholders.

One of the key aspects of Nextcloud’s culture is its commitment to diversity and inclusion. The company has a team of 120 people spread across 23 countries, representing a wide range of backgrounds and perspectives. Frank believes that this diversity not only fosters a more inclusive work environment but also contributes to the company’s overall success.

Another critical element of Nextcloud’s culture is its embrace of remote work. By trusting and empowering its employees to work from anywhere, Nextcloud has been able to attract top talent from around the world, regardless of their geographic location. This approach has been a strategic advantage, allowing the company to build a highly skilled and dedicated team.

Nextcloud’s Business Model: Self-Hosted and On-Premises

Nextcloud’s business model is centered around its ability to provide a self-hosted and on-premises collaboration platform. Unlike cloud-based solutions, Nextcloud gives customers the option to host the platform on their own infrastructure or with a trusted local provider, providing them with greater control and data sovereignty.

This differentiation has been a key factor in Nextcloud’s success, particularly in attracting customers from the public sector, such as governments and healthcare organizations. These customers often have strict data privacy and security requirements, which Nextcloud’s on-premises model can effectively address.

Frank and his team have also been proactive in adapting Nextcloud to the changing technological landscape, particularly in the area of artificial intelligence (AI). Recognizing the potential impact of AI on the software industry, Nextcloud has developed its own ethical AI systems, which are designed to be transparent, open-source, and self-hosted, addressing the concerns around data privacy and algorithmic bias.

The Success of Open Source and Lead Generation

Nextcloud’s open-source approach has been a significant driver of its growth and success. By offering the platform for free and building a strong community of users and contributors, Nextcloud has been able to generate a steady stream of leads without relying on traditional marketing tactics.

Frank attributes Nextcloud’s impressive lead generation, with 200-300 new contacts per day and 20 qualified leads per day, to the company’s open-source strategy. The fact that Nextcloud is well-known and has a large community of fans around the world has allowed the company to attract customers from all over the globe, even in regions where Nextcloud has not actively marketed its services.