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I have an open source project that gets ~15K views and ~2K downloads per week. I just got an email from a company willing to be a sponsor for the project. The email basically says "What's your sponsoring price?"

I never thought about offering sponsorships but I would love it if I was able to gather enough sponsors to work on my open source full time.

My first thought was to treat it as another contract and say "My rate is X/hr, how many hours per month do you want to sponsor?" but then I thought it might not be handled this way.

How is this usually done? How do open source projects come up with their sponsorship prices?

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    What are they after? Taking your idea? Or just putting their name on the website as a donor? – Canadian Luke REINSTATE MONICA Jul 23 '14 at 16:22
  • As far as I can tell it's a way for them to advertise their product on my site (their product is a beefed up version of mine). I don't have a problem with it as pretty much all sponsorships are done for marketing reasons. – Manuel Jul 23 '14 at 16:49
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    this is just a simple idea but you could try and look for a similar project on kickstarter and ask your possible investor for a contract draft (this way you can see what they are after before putting a price-tag on your application). – vortex Jul 28 '14 at 9:09
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Creating a price based on your hourly rate is certainly a valid one and the one that most groups that maintain open-source projects take. However, instead of asking them how many hours they'd like to sponsor, I'd suggest using a tiered pricing model and asking what level they'd like to contribute at.

Why tiered pricing? It allows companies to choose from a limited range of options, making it easier for a sponsor to make a choice (four choices, as opposed to "Do we want to sponsor 25 or 26 hours?"). Their marketing department can also put a name to their level of commitment. For example, which sounds better from their point of view:

  • "We're a proud sponsor of Library X", or
  • "We're a proud diamond-level sponsor of Library X"?

You can determine the pricing of the tiers based on your hourly rate (as you suggest). Of course, higher tier levels beget higher visibility on the site. Your highest-level sponsors might get prime page estate and influence on any dynamic content (such as blog posts or the like), while your bronze-level sponsors might just get a nice mention on your Thank You page.

As for determining the rate, I do suggest basing it off of an hourly rate. It can be something like this (assuming $50/hr):

  • Bronze: $100/month, or 2 hours
  • Silver: $200/month, or 4 hours
  • Gold: $500/month, or 10 hours
  • Platinum: $1000/month, or 20 hours
  • Diamond: $2500/month, or 50 hours

By breaking down each tier into a number of hours, you'll be able to track when it becomes worth it to work on your project full-time.


Examples of tiered pricing in action:

6

It's hard to say exactly, but here is what I'd do if it's a SaaS app.

Try to determine their customer lifetime value. That is, how much is each customer worth from day one to cancellation. Then apply a formula based on the amount of customers you think will be created.

For example:

If their average monthly price is $89 and on average, a customer is a paying customer for 2 years, then the lifetime value is $89 X 24 months = $2136.

Now, estimate how many of your users will convert to customers. 8,000 (downloads per month) X .01 = 80 new customers.

So, at a 1% conversion rate, they will earn 80 x $2136 = $170,880 Or at a .05% conversion rate, they will earn 40 x $2136 = $85,440

Now, these are all estimates. But, with a little research, you can probably get in the ballpark.

Next, what is their current customer acquisition cost? Again, use your best judgement. Look at Google Adwords and try to estimate what comparable traffic would cost them.

If, on average, they spend $600 to acquire a new customer, you should charge accordingly.

So, how much should you charge? Well, if you're creating $170,880 of customer value then you should charge accordingly.

Keep in mind, these companies HAVE TO pay for their users. They are looking at your project as a marketing opportunity. Charge accordingly :)

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