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The original was posted on /r/opensource by /u/codeandfire on 2024-10-15 15:59:32+00:00.

Hi,

Why do we still see SaaS firms with high valuations when - I guess it’s not supremely difficult to come up with an open-source alternative for the software product that they are selling?

I’m not talking about LLMs which are pretty sophisticated tech. As in, I can understand why companies like the-company-headed-by-Sam-Altman (can’t mention the name directly since it gets the attention of the AutoModerator bot) are so valuable, because it’s going to take time for an open-source effort to reach the same standard as their proprietary LLMs.

But I’m talking about companies like Postman. I know that they do open-source some of their software but I believe the main client is proprietary. And this startup was once valued at $5.6B (recently they have seen a cut).

I guess it’s not that difficult to build an open-source alternative to something like Postman (and there must already be open-source alternatives available for it). Then why are such SaaS firms valued so high? Is it:

• the commercial support,
• or that they’ve been established as the market leader and nobody sees any reason to use anything else,
• or that it’s difficult for an open-source effort to replicate all the functionality that they’ve built into their product so far (the open-source effort is always a few features behind),
• or that people are willing to pay for features like cloud hosting, etc.?

The same thing goes for say, Slack and Zulip. I don’t think Zulip’s parent (Kandra Labs) is very valuable but Slack’s parent (earlier Slack Technologies and now Salesforce) certainly is (of course Salesforce has many products besides Slack, but you get the point).

Thanks!