Open source product-centric business model

  1. Build a community around a specific free thing.
  2. With that community’s help, design some products that people want, and return the favor by making the products free in raw form (source code).
  3. Let those with more money than time/skill/risk-tolerance buy the more polished version of those products. (That may turn out to be almost everyone)
  4. Do it again and again, building a 40% margin into the products to pay the bills.

(Adapted slightly from The time/money formula of free).

That pretty much summarizes the business model for sleepycat, MySQL, etc. You could also call it the “provide free lunch for volume, with a fractional but large up-sell” model.