Open source entrepreneur turns his hobby into an Inc. 500 enterprise
iFAX, a commercial company that is built on open source fax server software HylaFAX, was recently included in Inc. Magazine's 2007 list of the top 500 fastest growing companies in the United States. iFAX founder Darren Nickerson says one of the keys to iFAX's success has been its commitment to the open source community behind HylaFAX. "Our success is tied to the openness of the software."
iFAX provides value-added services, support, and hardware to the HylaFAX open source facsimile server software. HylaFAX uses a client-server architecture that allows users to send documents through fax modems from any computer on the network. Nickerson says the company was "founded from the ashes" of a dotcom bust. "In 2000 I relocated from England to start this [other] company with a friend. He had something probably nobody really wanted, like many of the companies of that era. It never took off." The company failed, but in his newly unemployed state Nickerson found much more time to work on his true passion: the HylaFAX open source project. Nickerson had been involved with the project since 1991, when it was known as FlexFax. It was his first exposure to the concept of open source software development, and he "became very enamored with the idea." After several years of development that some said was too slow, in 1998 Nickerson was one of the community members responsible for revitalizing the HylaFAX project, when he and fellow developer Robert Colquhoun created community repository hylafax.org. After the dotcom startup died, Nickerson says he was left with a choice. "I could go back to England, or I could continue following the roots I had planted here." He decided to make his passion into his career, launching iFAX in 2002. "That was my dream," he says. "My goal was to build a company around this software that would allow me to pay myself and other people who had been involved: to monetize it."
Nickerson says HylaFAX lends itself very well to a commercial business model. "We were particularly able to monetize it because HylaFAX has very clear business uses. [In the community], we were being solicited by companies all the time: 'We'd like some support.' But we'd never gotten organized enough. As soon as we launched iFAX, people started knocking on our door. One of our early customers was AT&T. When one of your first customers is the phone company, you know you're doing something right."
iFAX had such a good start that Nickerson never felt the need to solicit venture capital. "We're completely organically self-funded," he says. "It is our plan to remain so. Sure, it may have been a good idea to have made a bigger splash; to have come out with a larger plan earlier, but I've seen the dark side of VC in the dotcom era, and if that can be avoided, it should be. We already have two masters: the business itself, and the open source community. We can't have a third."
Nickerson considers that second master, the community, to be an indispensable part of the success of the company. Other entrepreneurs building a company on top of open source software should do the same, he recommends. "Be true to the community. Be transparent in what you do -- 100%. Make it very clear to people that you won't do anything anti-community. It's in your best interests to make sure that the software improves and is very healthy, so don't do anything to jeopardize that. It's very easy to fall into the trap: let's build some special sauce and sell that. That's the way the proprietary software industry works, but it doesn't map well onto an open source community. It generates hostility and they will leave you." Instead of creating proprietary add-ons, create superior service, he says. "In our situation, we're lucky enough to have a large line of hardware along with the software."
The biggest challenge Nickerson faces with iFAX is one that many entrepreneurs experience: a lack of balance between work and the rest of life. "It's especially difficult when you're doing it in the open source software industry because there are no business hours in open source development," Nickerson says. "They're global. People do it whenever. It's usual to see people all over the mailing lists on the weekends. I do it. Several of the employees do it. Nobody asks them to, but it is what we believe in -- it is our passion. So it's very difficult to maintain balance. If you talk to my girlfriend, you'll know. The needs of the business come first, and on the evenings and weekends, the needs of the open source stuff."
One of the principles that has guided iFAX's rapid growth is Nickerson's belief in "win-win" scenarios. "Open source just allows us to come in at a good price point. The fact that we can get the software exposed to businesses [in the community] and learn from them, and then contribute the improvements back to HylaFAX, is a win-win. We're able to come in and pitch a lower cost, high performance solution, and we can do that because the software is free; there's no line item on the quotation for software. And we come in with so many other advantages. It is open, you can modify the source, they can do it themselves. They're not locked in. It removes a lot of barriers. It's a great way to do business."
Another key to success with open source is "looking to the future," Nickerson says. "Open source project can become irrelevant very quickly, so we have diversified and taken our knowledge and built a second line of business around Asterisk, which is very similar to HylaFAX in some ways. We don't stand still -- we hit the ground running and then keep running."
Nickerson's number one piece of advice to entrepreneurs thinking of launching a new business based on open source software is "just do it. Try it. You just don't know until you do, whether it's going to take off or not."
Labels: Open Source