Here's why investing in an open source software startup during an economic downturn is a good idea, according to one of the top lawyers in the field

• Open source licensing lawyer Heather Meeker says that the next big company will likely be an open source software company that launches during the current economic downturn, and that's where venture capitalists should put their seed money.
• As more people work remotely amid the coronavirus pandemic, and many even lose their jobs in Meeker says developers will have more time to start and contribute code to open source projects.
• Meeker points out that companies like Red Hat experienced significant growth during the Great Recession, even as the open source Linux operating system boomed in popularity. She expects to see similar patterns during the current downturn.
• Meeker is a veteran of the open source software industry, and advises many startups and larger companies in the space.
• Visit Business Insider's homepage for more stories.

The coronavirus pandemic has led to economic turmoil, as stocks go up and down, startups lay off workers, and investors hit the pause funding on making big deals.

But Heather Meeker, founding portfolio partner of OSS Capital and a lawyer who advises software startups, says that she's still betting on open source startups - and maybe other investors should, too.

"Nothing can stop open source now - not any downturn, not anything," Meeker told Business Insider.

Open source startups often have a similar business model: They maintain open source software projects, which are free for anybody to download and use however they'd like, from hobbyists on up to Fortune 500 companies.

The money comes from building commercial versions with additional features and customer support to make IT departments happy. This model was pioneered and arguably perfected by Red Hat, now a subsidiary of IBM after a $34 billion acquisition.

Indeed, Red Hat experienced big growth during the Great Recession of 2008, even as the open source Linux operating system that it helped maintain only surged in popularity. In times of economic insecurity, Meeker says, even the largest companies turn to free open source software as a way to save money without sacrificing reliability or scalability.

That means that the time is right for investors to put seed money into those types of startups, Meeker says. She says the next big open source software startup probably doesn't even exist yet, but will likely be born amid this next downturn.

"The one that's going to be started tomorrow will do really well," Meeker said.

'It doesn't require a huge amount of investment'

Meeker had similar experiences working through the dotcom bust and the Great Recession. When she launched her career as a law firm partner in 2002, she says many of her peers lost work or got laid off as work in mergers and acquisitions and commercial licensing slowed down.

However, more companies started becoming interested in using open source software. They were cutting costs, and open source software was often cheaper to use than proprietary products from the likes of Microsoft or Oracle. Soon, Meeker had a steady stream of work that lasted even through the Great Recession.

Another advantage open source software startups have is that they can be launched with very little money, Meeker says. Once developers put their software to the public, it can spread quickly without sales or marketing teams since the software is free for anyone to try out.

"It doesn't require a huge amount of investment," Meeker said. "If money is scarce, they may have an advantage over another company that has more resources to get started."

Meeker also says open source software projects can grow faster because developers have more time during an economic downturn. They may be in between jobs and looking to learn new skills to help them land their next one, motivating them to contribute code to these projects.

From working through two major financial crises, Meeker says to remember during the current downturn that in the long run, economic cycles will "even themselves out."

"It's very easy to get overwhelmed about being concerned about the economic cycle," Meeker said. "Things will sort themselves out eventually. That's the way economic cycles work. At this point, open source software is so well accepted that nothing can stop it either...It's just that I think open source is a little more resistant to downturn than other kinds of businesses."

Got a tip? Contact this reporter via email at rmchan@businessinsider.com, Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request.