At the end of each quarter I always take a look back at the successes and less-than-successes (*cough* failures *cough*) of MindTouch. Formally I do this with departmental and corporate dashboards that map objectives and results. Informally I do this with a series of long bike rides. The look back helps MindTouch determine the direction, objectives and expected results for the coming months and years as well as diminishes the likelihood that we make the same mistakes. <shameless_plug>Of course, MindTouch software makes this easy.</shameless_plug> The end of Q2 2009 was no different except that I took the time to graph MindTouch revenue growth by quarter.
Yes, this is the real revenue graph for MindTouch. I know what you’re thinking: What happened in Q2 2008? Good question. I will get to this in a moment. There is a lot to learn from this graph like this. Beginning with MindTouch investing the first year solely in creating an install base and developer community. The first thing we launched was our developer community (July, 2006 at OSCON) and for the first year MindTouch did not bother trying to sell anything. We did manage to generate a surprising amount of revenue selling support without having a formal product in place and we began formally selling support subscriptions near the end of 2007. By the end of Q1 2008 MindTouch software was being distributed about 5,000 times a day and we turned our attention toward building the business. In Q2 2008 we began experimenting with a commercial edition.
As you see above, our first commercial attempt was flawed and we had to course correct. This commercial product was a supported and stable build, but it did not add anything more of value. The message became: this is the stable build. Buy this. It’s supported. This had the side effect of placing the open source build as a second class citizen and in a way disenfranchised our very large and rapidly growing community of open source users. Obviously this was counter productive. I quickly changed our approach to an open core model in which we stack value-adds on top of the free and open MindTouch Core. Over time as MindTouch adds more value-adds the old value-adds become part of the free and open MindTouch core. It has been very successful for MindTouch and I will write more about the open core business model in a future blog post.
One might ponder our early focus on adoption and reason: “I can’t do this. My company is not venture capital backed. This would take a huge marketing budget and significant cash reserves.” Not true. MindTouch is a bootstrapped company. Our marketing budget has always been anemic by enterprise software standards. I have focused our marketing resources on guerrilla, social media, selected conferences and a small budget for Google Adwords. Rest assured, you too can do this, but there is a catch — I know, always a catch — You must have a great product and you will likely need to be open source.
By having a great open source product MindTouch has rallied a community of users, developers and customers to help spread the word about MindTouch. Nothing beats word of mouth marketing. Also, the community has helped MindTouch steer the product development and business toward the most efficient models. When you have several million users telling you what they are willing to pay for you tend to listen. Finally, because we are open source MindTouch has received volumes of documentation, translation into 20+ languages and code contributions. Some of the big names that have contributed code to MindTouch include: Mozilla, Microsoft, Cap Gemini, Novell and The Washington Post.
In short, MindTouch has created a remarkable organic pull on our product. Upon review of our lead generation for July I see we’ve generated 1,600 leads in the first six days of this month (this does not include landing page registrations). So, how do you weather the recession? Build a great product and open source it. Focus on adoption. Then listen to your community.