Open-source software can affect company value, but its presence alone does not create a valuation premium. For a business that uses third-party open-source software internally, the relevant value is the operating benefit it helps produce. For a company selling an open-source-based product or service, investors and buyers may also assess revenue, growth, profitability, technology, and the strength of its project or community position. In either case, governance and license readiness can matter during due diligence.
Start by separating software use from an open-source business
The valuation question changes depending on what the company does with open-source software (OSS). A business may rely on third-party OSS to run its operations without selling that software. Or it may build a commercial offering around an open-source project. Those are different economic situations, and the evidence for one should not be applied to the other.
| Company’s relationship to OSS | What may contribute to value | What a buyer or investor needs to understand |
|---|---|---|
| Uses third-party OSS internally | Measurable effects on efficiency, delivery, innovation, interoperability, or other operating results | How the software supports the business, and whether the company can identify and manage the components it uses |
| Sells an OSS-based offering | The offering’s revenue potential, growth prospects, sustainable profitability, technology, services, and relevant project or community position | How the business earns revenue and whether its technology, operations, and OSS practices can support the business over time |
As Toby Crick explains in the chapter “Corporate Concerns: Audit, Valuation, and Deals”, when a company uses third-party open-source components to run its operations but does not earn revenue by making them available to others, the technology’s value is tied to the value it drives for the business—not to the software as a standalone product. The same chapter frames valuation around the return an investor or buyer expects.
Does using open-source software increase a company’s value?
It can contribute to value if it helps the company perform better, but use alone does not establish that the company is worth more. The cited valuation literature does not provide a general percentage or formula for converting internal OSS adoption into enterprise value. A company therefore needs to connect its use of OSS to business outcomes rather than assume a premium simply because its software stack is open source.
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For a commercial OSS company, conventional measures of proprietary software businesses may not capture every relevant factor. Revenue and profitability still matter, alongside growth prospects, the technology and services the company controls or provides, and—where relevant—its standing in the project and community. Community health may be associated with valuation in the commercial OSS segment, but association does not show that community measures alone cause a higher valuation.
What the 2025 commercial open-source study found—and what it does not show
The Linux Foundation, COSSA, and Serena’s State of Commercial Open Source 2025 examined 25 years of venture data covering 800 VC-backed startups. Its comparison concerns commercial open-source firms and closed-source peers—not every company that uses open-source components internally.
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| Transaction milestone | Commercial OSS firms | Closed-source peers | Reported comparison |
|---|---|---|---|
| IPO | $1.3 billion median valuation | $171 million median valuation | Commercial OSS firms averaged seven times the valuation of peers, according to the Linux Foundation’s 25 August 2025 release |
| M&A | $482 million median valuation | $34 million median valuation | Commercial OSS firms averaged fourteen times the valuation of peers, according to the Linux Foundation’s 25 August 2025 release |
The figures are observed outcomes in the study’s comparison groups, not forecasts or causal estimates for a particular company. They do not show that adopting an open-source dependency will multiply any company’s value. Company selection, sector, business model, revenue, profitability, and community measures all affect how such comparisons should be interpreted. The report highlights infrastructure software as a particularly relevant segment.
How buyers may assess open-source use in due diligence
Open-source diligence is broader than running a code scan. The Linux Foundation’s M&A assessment checklist covers discovery, license obligations, review and approval, policies, staffing, training, contributions, vulnerability tracking, inventories, verification, and compliance processes. It calls knowing what is in the code “the golden rule of compliance.”
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- Inventory and provenance: Can the company identify OSS components in its code and products, including their origins and versions? Are any components of unknown origin or license?
- License review and distribution: Are licenses understood, and is there a review and approval process for use? When software is distributed, are relevant obligations—such as notices, written offers, or source code—handled where applicable?
- Security response: Does the company track vulnerabilities in its OSS components, assign responsibility, and have a process for response?
- People and process: Are policies, training, staffing, audits, verification, and records appropriate for the company’s size and development pace?
- Community contributions: Are contributions to external projects managed through documented processes?
The checklist is a due-diligence resource, not a law or a guarantee that a transaction will succeed. Obligations depend on the particular licenses, how software is used, and whether and how it is distributed. For a live transaction or a specific compliance question, seek advice from an appropriately qualified specialist.
How to improve readiness without confusing tools with value
A software composition analysis (SCA) tool can support efforts to identify components and manage license-compliance challenges. It is one part of a governance process, not proof that a company is compliant or worth more. The Linux Foundation’s overview of open-source license compliance describes SCA as one compliance strategy; it does not establish that buying a tool by itself raises company value.
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- Build a usable inventory. Record components, versions, origins, and known licenses across relevant codebases and products.
- Assign ownership. Define who reviews and approves OSS use, who handles vulnerability response, and who maintains compliance records.
- Connect policies to distribution. Identify how the company checks and fulfills applicable obligations when it ships software to customers.
- Keep the process current. Set a practical cadence for reviewing components, vulnerabilities, contributions, and records as products and teams change.
These practices can make the company’s OSS use easier to explain and verify. Their business value depends on how well they support operations and reduce uncertainty for the company and its stakeholders; they do not substitute for evidence of revenue, profitability, or operating performance.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Further reading
For a deeper treatment of audits, valuation, and deals, Oxford Academic lists the print edition of Open Source Law, Policy and Practice, 2nd edition (ISBN 9780198862345), published 20 October 2022. Toby Crick’s chapter, “Corporate Concerns: Audit, Valuation, and Deals,” addresses corporate OSS diligence and valuation.
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