Commercial open-source software (COSS) startups are raising record amounts of funding and delivering huge value for investors — but remain largely concentrated in the US, according to a new report from French VC Serena.
COSS companies rely on open-source software, meaning the code underpinning their technology is available for anyone to download, modify and use for free. The concept has come into the spotlight in the past few years with high-profile startups ranging from France’s Mistral and Germany’s Black Forest Labs to Elon Musk’s xAI all offering open-source products.
The report, which analysed 850 VC-backed COSS companies between 2000 and 2024, found they raised $26.4bn globally last year, representing nearly 5% of all VC investments in software. This was largely driven by monster rounds like US-based Databricks’ $10bn Series J, and marks a jump from the average $9bn raised annually between 2019 and 2024. Ten years ago COSS startups were raising less than $2bn per year.
Most of the action is happening across the Atlantic: 65% of COSS companies are currently headquartered in the US, found the report, compared to 25% in Europe. That’s a disproportionate share given that the US holds 33% of the overall software sector, and Europe 20%.
“The US are much more exposed,” says Serena partner and report lead Matthieu Lavergne. “They are a generation ahead in terms of understanding open source in a commercial context.”
Building businesses with open source
Open source, which relies on providing free code, can be perceived to be at odds with business. “It is seen as a sub-optimal business model,” says Lavergne. “There is a collective belief that you should sell, rather than give, part of the software.”
There are several business models that enable COSS companies to monetise free code. Typically, an open “core” is provided but the functionalities around that core (like governance and security) are sold as a commercial service.
Serena’s report found that COSS companies deliver significant value for investors compared to closed-source (or proprietary) software businesses. COSS companies take 20% less time to raise a Series A after a seed round, according to the research, and achieve a valuation at Series A that is 1.33x higher.
COSS companies also deliver more value when they exit. Out of 850 businesses analysed since 2000, Serena identified 110 exits through IPO and M&A; the median valuation of companies at IPO was $1.3bn, compared to $171m for proprietary software firms. The largest listing was US-based software development platform GitLab’s IPO at $15bn in 2021.
The median valuation for COSS companies for M&A was $482m, compared to $34m for closed-source businesses. Last year, US tech giant IBM acquired open source cloud infrastructure company HashiCorp for $6.4bn.
Europe’s lag
Despite this, Europe has been slow to capitalise on the potential of COSS companies.
“There aren’t many investors in Europe who understand the dynamics of open source,” says Lavergne. “The US is ahead in terms of seeing how it can create value.”
This is slowly changing, he says, as European investors start noticing the success of open source businesses.
There are notable COSS companies emerging in the region — including Mistral and Black Forest Labs, but also Berlin-based text-to-speech startup Coqui, French financial infrastructure developer Formance and Spanish generative AI startup Zylon.
Lavergne says that most early-stage COSS companies can find funding in Europe, but are still likely to leave when they need to raise larger rounds or start developing commercially.
Serena’s research found that while 25% of COSS companies that IPOed since 2000 were founded in Europe, only 8% listed on European markets. US stock exchanges received 91% of COSS companies’ IPOs.
“50% of the total addressable market for software, whether open source or not, is in the US,” says Lavergne. “Companies develop commercially in the US, and they end up listing there.”
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