Untangling the Open Collectives

Name collisions aren't just a problem for software development—organizations, projects, and software that have the same or similar names can cause serious confusion. That was certainly the case on February 28 when the Open Collective Foundation (OCF) began to notify its hosted projects that it would be shutting down by the end of 2024. The announcement surprised projects hosted with OCF, as one might expect. It also worried and confused users of the Open Collective software platform from Open Collective, Inc. (OCI), as well as organizations hosted by the Open Source Collective (OSC) and Open Collective Europe (OC Europe). There is enough confusion about the names, relationships between the organizations, and impact on projects like Flatpak, Homebrew, and htop hosted by OCF, that a deeper look is warranted.

What's in a name?

The Open Collective story starts with Open Collective, Inc. a US-based for-profit company. It was founded in 2015 by Xavier Damman, who was joined by Pia Mancini and Aseem Sood in 2016. Sood left in 2018, Damman is now listed as an advisor on the team page, and Mancini is the current CEO.

OCI develops and supports the Open Collective platform that allows groups to take donations, manage money, provide a public page of transactions, publish updates, host events, and more. Groups, called "collectives" in OCI parlance, might be local mutual-aid projects, political organizations, user groups, open-source projects, or some other type of grassroots organization that seeks to raise money for its cause.

The idea is that the Open Collective is OCI's Software-as-a-Service offering that provides all the tools that a group needs to take donations, manage funds, and provide a public accounting of its budget. OCI promises that it will never sell its groups' data or lock them in, and it provides the software for the hosted platform under the MIT license on GitHub. In theory this means anyone can stand up their own version of the Open Collective platform, in practice it's unclear that anyone has done so or that there's any real effort toward supporting self-hosting. A setup guide for developers is available here. The developer documentation contains a section on deployment, but it's specific to the Open Collective deployment on Heroku. Deploying the software to other platforms to become independent of OCI seems to be an exercise left to the reader.

The Open Collective hosted platform makes it simple for groups to take donations without having to stand up their own payment infrastructure. But it does leave a large gap that needs to be filled: namely, having a legal entity with a bank account that can receive money and deal with one of life's inevitabilities—taxes. So OCI's founders helped create OCF, OSC, and OC Europe as fiscal hosts. The fiscal host is the legal entity that holds groups' funds and is responsible for compliance, accounting, paying expenses, and filing taxes. The goal is for the fiscal host to take on all of those responsibilities so that hosted groups can focus on their mission, whatever it may be.

OCF, the host that is shutting down, is a 501(c)(3) non-profit for collectives in the US. The 501(c)(3) designation matters for a few reasons: it means that the organization is recognized as tax-exempt in the US and donations can be tax-deductible. The 501(c)(3) status does limit the types of activities the organization can conduct (for example, it places restrictions on political lobbying) and its activities should not benefit private interests. It also, in this case, means there are restrictions for OCF on transferring money to other organizations as it dissolves.

The OCF charter included, but was not limited to, open-source software projects. OCF also hosts mutual-aid groups, civic technology organizations, arts and culture groups, and more. In fact, only 57 out of 544 groups under OCF's umbrella, are categorized open-source. These include OpenMined, Homebrew, Flatpak, and many regional meetup and user groups.

OSC is a 501(c)(6) non-profit. This type of organization is a trade organization. Donations to a 501(c)(6) are not tax-deductible, but the organization is tax-exempt. It is still a non-profit, but it can engage in activities that benefit for-profit businesses. The Linux Foundation is a good example of this: it serves the interests of the larger Linux community and that includes many for-profit entities. OSC serves collectives around the world, and is exclusively focused on the open-source software ecosystem: software projects, meetup groups, events, advocacy efforts, and research related to open source. OSC's web page states that open-source projects "with at least 100 stars on GitHub and at least two contributors" are likely to be immediately approved for acceptance.

OC Europe, a non-profit registered in Belgium, is similar to OCF in its mission. It has been certified 501(c)(3) equivalent by NGOsource, so donations to OC Europe from the US can be considered tax-deductible. It hosts initiatives focused on "the sustainability of the social and solidarity economy as well as open source technologies". It lists open-source projects like F-Droid, EndeavourOS, Manjaro ARM, and a number of other related projects or efforts. It also hosts collectives with little to no connection to open-source software.

Note that there are two more fiscal hosts listed with Open Collective naming. Open Collective Brussels, was absorbed by OC Europe in 2022. Open Collective NZ was founded by Alanna Irving in 2020. Irving also held a role as executive director of OCF until October 2023. Open Collective NZ has not released a statement on its blog about the shutdown, nor any other update since 2022.

The Open Collective platform lists more than 1,600 fiscal hosts, such as Women Who Code, and All For Climate, but they are more easily distinguished from the hosts and platforms sharing some variant of the "Open Collective" naming.

The OCF surprise shutdown

The organizations with Open Collective in their name share more than a name: at least one person has been active in a leadership role across multiple organizations. Mancini, in addition to being co-founder and current CEO of OCI was listed as part of the OCF board of directors on its website through September 2023, and is still listed as part of the OC Europe team.

Despite Mancini's recent tenure on OCF's board, news of the shutdown was met with surprise in statements from OCI, OSC, and OC Europe. It was definitely a surprise to the hosted collectives. Before OCF posted anything publicly, it sent out a notice to hosted groups, which was shared by Daniel Lange of the htop project, stating that its board of directors had made the decision to dissolve OCF by December 31, 2024. Several comments on Lange's post indicated disappointment and surprise with the shutdown, and Lange wrote "this all seems rushed and badly coordinated (if at all)".

According to the notice sent to the groups, the OCF experienced rapid growth after being founded by OCI due to the increased demand following the COVID-19 pandemic "without taking the time to establish the appropriate systems and infrastructure to sustain that growth." It also stated that the OCF business model "is not sustainable with the number of complex services we have offered and the fees we pay to the Open Collective Inc. tech platform". In an update on March 6, OCF program officer Mike Strode said that OCF "spent several months in late 2023-early 2024 exploring alternative options to address the numerous challenges in the organization". He also said that the decision was announced "as soon as possible from a legal standpoint."

The OCI's statement said the decision to dissolve and its announcement "came as a surprise to us", and that OCI was "still grappling with the realities of this decision, which has sent subsequent shock waves through the Open Collective ecosystem and community". The statement also emphasized that all of the entities are separate, and thus OCF made its decision "completely independently". OCI said that OCF had "made us aware of increased technological needs, to which we have been responding with new features and other forms of support", but despite those efforts, OCF hasn't found a path forward.

OSC's executive director Lauren Gardner wrote that OSC is "extremely sad to hear the news and are still processing it", but reassured its collectives that it is not affected by OCF's shutdown. Jean-François De Hertogh, co-founder and CEO of OC Europe, wrote that OC Europe is independent of OCF and "mobilizing to provide solutions" for collectives that might want to work with OC Europe.

In retrospect, there were external signs that OCF might be in trouble before announcing it intended to dissolve. In March 2023 Irving wrote about delays in processing expenses due to "incredible growth in recent times" but noted that OCF was hiring an admin to help with processing expenses. OCF also stopped issuing new virtual credit cards to groups to be used for spending funds. Irving said this was because OCF needed to review its "related processes and policies" about the cards.

In September 2023, OCF paused new applications through February 2024. The blog post said that it was working to accommodate "exponential growth" it had experienced, and was pausing new applications "to move with intentionality to serve our current and future collectives better". On January 30 Strode posted an update in response to a question about reopening applications: "We do not plan to reopen our application process and I encourage you to pursue other options for fiscal sponsorship."

OCF may have experienced "exponential growth" in the number of collectives it took on, but overall donations seem to have taken a dip in 2023. According to its public page, it took in about $2 million less in 2023 than in 2022. The chart shows OCF's collectives raised $23,189,253 for 2022, and $21,267,753 for 2023, for the "all categories" tag. Note that the amounts listed on the Open Collective platform and the tax filings differ significantly. According to the public tax filing for 2022, OCF took in more than $27 million after raising $8.8 million in its 2021 tax year. This may be due to money donated outside the platform to collectives hosted by OCF, say by check. The public filing doesn't have obvious red flags like excessive officer compensation that might explain the sudden shutdown. The spend on OCI for 2022 was $641,452, a little more than 2% of what OCF took in for 2022, which does not seem like enough to make OCF's business model "unsustainable".

The bulk of that money is to be earmarked for the collectives hosted by OCF, so its budget is substantially smaller than what it takes in. Its host fee structure is tiered by type of donation and amount raised. OCF would take up to 8% of donations. What OCF spends its money on is supposed to be "completely transparent" via the platform, but the actual implementation leaves much to be desired. For the past year nearly $1.2 million in expenses are listed as "no tag", which is more opaque than one might hope. If OCF was expecting revenue to continue to grow in 2023, they may have increased expenses in ways that proved awkward when donations declined in 2023 instead. It will be interesting to see the public filings for 2023 and 2024 when they are available.

To the lifeboats

OCF's explanation for the shutdown was short on facts, but it has provided a detailed FAQ about the shutdown process. Organizations hosted with OCF have until March 15 to receive new funds from donors. After that, all the donation methods (e.g. ACH, Stripe, and PayPal) will be shut down for collectives and recurring donations canceled. For collectives with employees, the FAQ states that they must be laid off by June 30 "at the latest". Organizations can continue to spend money or transfer money to a qualifying host until September 30.

Because of OCF's 501(c)(3) status, it can only transfer funds to another host that also has qualified as a 501(c)(3). Collectives will need to provide proof of this status along with a list of grants and "a signed letter from the grantor for their release to the new entity". Funds that aren't spent by September 30 will be moved to "another qualified fiscal sponsor to support their legal or financial compliance infrastructure". The exact fiscal sponsor (or sponsors) that might receive unspent funds is not specified.

Shane Curcuru, currently a member of the Apache Software Foundation's board of directors, has posted an explainer about the situation along with a few suggestions of alternative 501(c)(3) hosts for open-source projects. Curcuru includes the Software Freedom Conservancy, Software in the Public Interest, HackClub, and others as alternatives to OCF. OCI has also shared resources in its announcement, and promised to provide a list of fiscal hosts on the Open Collective platform along with "tools and features to help with the transition".

Harder than it looks

It is disappointing, but not entirely surprising, that OCF has failed. Funding open-source projects, or public-good groups in general, is far from a solved problem. Depending on the kindness of strangers for funding is tricky business, especially in the unprecedented times we're all living through. As OCF winds down, one hopes it will share more detail on what went awry and what it might have done differently. It will be interesting to see where the collectives it will no longer host disperse to, and what types of models prove more successful in the long run.