After bailing a couple of times in the past, I finally made it to one of Dave McClure’s Startup2Startup dinners. Very interesting format–what makes it work is the fact that Dave imposes a high quality filter on attendees, and that the usual talk is supplemented by a table discussion.

Tonight’s guests were Matt and Toni from Automattic (disclosure: Various of my companies have worked with Automattic before, and I’m a big user of their products…just not for this blog). Here are my quick notes:

Matt’s Presentation: 7 rules for Open Source Businesses

1) Lead by example
Code talks, everything else walks. If you want other people to work on an open source project, they’d better see you working even harder.

2) Get off the computer
Relationships matter. Since people are working for free, you have a carrot and no stick. You’ve got to make it fun, or people won’t work.

3) Transparency
Overcommunicate. (Note that Matt admitted that he no longer does this, with his rate of blog posting falling to “once every couple of months”)

4) Build consensus (even when you’re right)
Matt backed down on his tagging implementation because the community thought another approach was better.

5) You’re not right
The crowd is wiser than the individual. Matt realized he was wrong about the tagging issue. Today, neither he nor any Automattic employees gets any more of a vote than the general WordPress community.

6) Centralize the community
WordPress themes didn’t spread as fast as plug-ins because artists didn’t understand Subversion like coders did. Themes only took off once they allowed themes to be uploaded as zip files.

7) Open source has little to do with the license
Simply saying you’re open source doesn’t do you much good if the community doesn’t want to contribute. When Matt formed Automattic, he put all of the WordPress IP in the open source realm; technically Automattic doesn’t have any IP, and anyone in the world can set up shop to compete with them. If Matt acts like a jerk, the community can fork off a new branch. For example, there’s one company in Australia that hosts a customized version of WordPress for teachers and students.

Toni’s Presentation

Toni’s presentation talked about the business side of open source. That is, how do you apply open source principles to running a business? It turns out that Automattic doesn’t look like your typical company.

It’s virtual.
It has 30 employees, some in the Bay Area, others scattered around the world. They have no physical office, even in the Bay Area, though they meet up in person twice a year. 90% of their communication occurs over IRC.

This has some interesting effects; for example, some developers moved to places they wanted to live, but couldn’t do so before because there weren’t tech jobs.

Entry into the market is organic.
As Toni put it, he never goes on sales calls. He just asks people who are using WordPress if the company can help them. One day, they simply noticed that the Wall Street Journal had started using WordPress for all their blogs.

It’s successful.

• The WordPress software is downloaded 20,000 times per day

• There are 5.5 million active installs of WordPress (that Automattic is aware of)

• There are 4 million blogs hosted on WordPress.com

• 235 million unique visitors visit a WordPress.com blog each month

• WordPress.com has about “98%” of its code in common with standard WordPress, and Automattic releases the additional scalability modules, such as HyperDB, as open source software as well

• Automattic has 800 servers, and one sysadmin, who spends much of his time talking with customers who want to learn how to improve their hosting environments

• The community has built over 3,000 WordPress plugins

• Automattic uses Google AdSense on WordPress.com, but in a very targeted way; since Firefox users don’t click on ads, they don’t bother showing them. Since regular visitors to the blog aren’t likely to click, they focus on RSS visitors. Their approach is designed to optimize for the highest possible revenues with the lowest annoyance to users.