Radically Open Security Donates 1 Million Euro to NLnet
When Dr. Melanie Rieback co-founded Radically Open Security (ROS) in 2014, she decided to make it a nonprofit computer security consultancy company. Ninety percent of ROS's profits go to NLnet, a foundation which contributes to a secure, resilient and open internet. Upon reaching ROS's 10 year anniversary, donations to NLnet have exceeded the incredible sum of 1 million euro. To celebrate this milestone, we talked with Melanie to learn why she decided to give ROS such an unusual business model.
‘Giving away’ the company: the business model
NLnet: Was it challenging to create ROS’s unusual business model?
MR: Shortly after I started ROS, I established a foundation and sold the company for 1 euro to that foundation. My goal was to prevent the company from ever being sold and to lock down the mission. My notary pushed back at my giving away the company. He couldn’t understand why I would want to do that. It was also challenging incorporating as a Fiscal Fundraising Institution (FFI): a church-inspired tax label that enforces our donating 90% of our profits to a charitable foundation (ANBI Stichting). The FFI is commonly used for tax evasion, so the tax authorities were eager to make sure we weren’t abusing the system. This required quite some communication and negotiation.
Nonprofit: eliminating harmful financial incentives
NLnet: Why did you make ROS a nonprofit when you started it ten years ago?
MR: I had ideological differences with large players in the commercial cybersecurity industry. That’s why I decided to make ROS a nonprofit, eliminating the financial incentives that drive corporate decisions to externalize costs onto society and the planet. Proprietary software, secrecy of workflow, and vendor lock-in might make sense in the context of for-profit business models, but it isn’t helpful for either cybersecurity or society as a whole. So I wanted to do things differently.
One million euro donated in 10 years
NLnet: And now ten years later, ROS has contributed 1 million Euros to NLnet’s mission. How does that make you feel?
MR: When I first started ROS, I had only a vague idea of what might be possible. Since then, all of my expectations and hopes have been exceeded. The fact that we have built a profitable business with fifty staff members and hundreds of customers is amazing. As for the donations, I would never have dared to dream of reaching this amount. And the size of our donations continues to increase each year. All in all, it is nothing short of stunning.
Returning the favor: why NLnet?
NLnet: Why choose NLnet as the beneficiary of ninety percent of ROS’s profits?
MR: I have a long history with NLnet. When I was an Assistant Professor at the Free University of Amsterdam I worked on the RFID Guardian, a battery-powered mobile device for RFID security and privacy management. NLnet financially supported the project at the time. When ROS was just founded, NLnet was financially struggling. I wanted to contribute back financially to NLnet because I felt that the world needed them. Today NLnet is in much better financial shape but our donations helped them over a bumpy patch in the road. Our donations have also contributed to NLnet growing and scaling their NGI Zero programmes (together with the European Commission), which funds literally hundreds of well known open source projects.
The way forward: Post Growth Entrepreneurship
NLnet: You call your way of running a business ‘Post Growth Entrepreneurship’ (PGE). What does that mean?
MR: When I started ROS I didn’t know much about social enterprise or economics. But along the way, I read Doughnut Economics by Kate Raworth and Prosperity without Growth by Tim Jackson. This provided a macroeconomic framework for the “nonprofit business” stuff I was doing intuitively. As ROS became more successful, I started getting requests from founders in other fields to help them start companies with a similar business model to ROS. So I wrote down the lessons I had learned by trial and error, and integrated it with the work of the New Economists. This is how Post Growth Entrepreneurship (PGE) started to take shape. The core of PGE is to eliminate financial extraction from business and finance. For founders today, “exits” (selling your company) is the definition of entrepreneurial success, which is actually quite bizarre if you consider how much short-termism harms society and the environment. PGE questions the “capital, scale, exit” ethos of Silicon Valley, and proposes “bootstrapping, flat growth, non-extraction” as an alternative. Our “Post Growth” startup incubator Nonprofit Ventures has incubated almost 60 startups so far (across 4 cohorts) with an emphasis on nonprofit entity forms, Steward Ownership, and cross-subsidizing charity with your profits (similar to ROS).
I next generalized the PGE Incubator materials and turned them into a class called Post Growth Entrepreneurship at the University of Amsterdam Business School. I recently finished teaching it for the second time to 120 third year Bachelor students. (It's worth 6 EC points, and is part of the Economics and Sustainability minor.) The class is popular and has been “sold out” (fully enrolled) two years in a row. The second business school (Autonomous University of Barcelona) has recently adapted the course ('Degrowth Entrepreneurship') for their online Masters program, and I'm currently receiving more inquiries from other business schools.
Five months ago, Nonprofit Ventures also collaborated with We Are Stewards to launch a petition for a Steward Ownership legal entity form in the Netherlands. (Steward Ownership aims to restructure corporate financial incentives by separating profit rights from voting rights.) The Dutch parliament (Tweede Kamer) then voted to approve a motion, co-sponsored by a center-left (D66) and center-right (Nieuw Sociaal Contract) party, to start work on designing the legal text for a Dutch Steward Ownership entity form the 'Rentmeestervenootschap'. We still have a long way to go to turn this into law, but it has been an amazingly great start.
Advice to Free and Open Source founders about business models
NLnet: Many of the Free and Open Source (FOS) projects we support are looking for ways to make their project financially sustainable but are averse to becoming a for-profit business. What piece of advice would you give them?
MR: Free and open source projects can greatly benefit from entrepreneurship and business, to provide long-term financial stability. But for projects to remain open source we need financially non-extractive business models. There are too many FOS projects that have transitioned to “freemium” or closed models, generally under pressure from a Venture Capitalist. This forms a huge problem for the projects' user-base and ecosystem. FOS founders should harness business in financially non-extractive ways, to ensure long-term financial viability without going down the “freemium” rabbit hole.
To learn more:
radicallyopensecurity.com
postgrowthentrepreneurship.com
