In the past, the advent of cloud computing forced the open-source community to address the question of how to license software that isn’t intended to run on individual devices but rather over the network. The Free Software Foundation’s AGPLv3 covers this. Yet, an intense misunderstanding of the license persists, and this debate has recently resurfaced across social media and the YCombinator forum, sparking lively threads between founders, investors, and open-source proponents. While the initial post stemmed from Bear switching to a source-available license on the blogging platform, the debate soon shifted to whether it is possible to make money and attract investors when your software is under the AGPL. Ignoring the fallacy of switching from open source to a custom license, here are my thoughts on why investors are generally OK with the AGPL.
Disclaimer: Multiple of the startups I have invested in, as well as Univention, use the AGPLv3 for their products. However, these thoughts are my own and not officially endorsed or sponsored by any of them. Please note that this is not intended as legal advice, but rather my personal thoughts on the issue.
What is the AGPL
For those less versed in the acronym-rich world of open source, the AGPL (GNU Affero General Public License) is a strong copyleft license designed with network software in mind. Its particular claim to fame is “closing the Networked Software loophole.” Under older licenses, such as the GPL, software-as-a-service providers could modify and run GPL code on their servers without ever “distributing” it in the legal sense, thereby sidestepping obligations to share source code. The AGPL changes that. Suppose software is run on a server and users interact with it remotely. In that case, the operator must provide the complete source code, including modifications, to those users.
While the AGPL’s requirements may be stringent, they are also clear and well-documented. It permits the use and modification of code for commercial purposes. It allows the redistribution of the original code and all modifications, provided that all changes remain under the AGPL and users have access to these changes if the software is made available over a network. The license cannot be closed off via sublicensing. Thus, the openness of the original code is preserved through every iteration and update.
Interfaces and Copyleft: AGPL Myths and Facts
The fear that simply “calling” AGPL software over an interface, whether an API, database connection, or remote network call, might taint the entire calling system with AGPL obligations might make investors anxious. But this anxiety is rarely justified by legal precedent or by the license’s actual text.
AGPL’s copyleft “triggers” only when a modified version of the program is made available to users over a network. Suppose a proprietary application merely interacts with unmodified AGPL software, as would be the case for a client connecting to an AGPL database. In that case, this does not automatically enforce copyleft on the entire system. The hypothetical doomsday scenario where proprietary code becomes forcibly open simply by interacting with AGPL tooling at arm’s length exists mainly as a specter in internet arguments, rather than in the reality of technical due diligence.
AGPL-based software must be included as part of the final product to enforce its terms on the resulting product. For example, including an AGPL-licensed library will undoubtedly lead to this result. Thus, most concerns about “whole system infection” typically boil down to a misunderstanding of how derivative works are defined in copyright law.
Company Culture: When AGPL is an Advantage
Yet, a licensing strategy is never an isolated decision. It reflects the culture, intent, and how a company perceives itself within the broader ecosystem. Companies that choose the AGPL do so for reasons beyond paranoia or defensive lawyering. Sometimes, it is a deliberate, positive choice. It reflects a shared philosophy about keeping improvements open, redistributing innovation, and planting a flag as stewards of communal advancement rather than proprietary gatekeepers.
A coherent company culture that embraces open-source sends a strong message to customers and to the market: “We are confident in the value we create, and we welcome the scrutiny and collaboration that true openness brings.” This message can yield real-world benefits in recruiting, reputation, and building a vibrant community of contributors. Selecting the AGPL is not always an act of self-sabotage, but frequently one of brand differentiation, community building, and strategic alignment with long-term goals.
Customers Matter More Than Licenses
Investors looking for signals of risk and opportunity would do well to shift attention from licensing dogma to actual customer relationships. Most users adopt software for its utility, reliability, and problem-solving capacity, not for the license attached to the source code. The most valuable asset of any startup is not licensing structure but trust, customer satisfaction, and traction in the market.
Customers are not sitting down to parse AGPL clauses. They want assurances that the software meets their needs, that their data will be safe, and that the solution delivers as promised. Legal risk is manageable when the terms are understood, communicated honestly, and integrated into a robust compliance process. Most license debates evaporate in the face of real customer pain points and the earnest effort to resolve those, day after day.
Solutions and Assurances Over Code Alone
Moreover, in the B2B world, we need to recognize what customers actually want to buy. In most cases, they buy more than a solution. They purchase assurances. Whether the code is open or closed, the promise of support, security patches, integration help, and a responsive partner when problems arise is the basis for the buy-in. In this regard, AGPL companies have as much latitude as any others to provide warranties, service agreements, or commercial licenses that meet the desires of enterprise buyers.
In fact, AGPL-based software can go further and promise that the software will always be available. After all, the customer has access to the source code and can modify it to meet their needs. With most startups failing, this access to the source might open up opportunities that are otherwise too risk-averse to try a new solution.
Yet, a startup’s destiny doesn’t rest on a misconstrued model of the software business. In reality, code is a tool used to build customer-facing solutions and to offer credible assurances, backed by contracts and reputation, not simply to fulfill licensing obligations. Companies that understand this and communicate it plainly thrive regardless of what flavor of copyleft sits on their GitHub repo.
Follow Your Vision And Values
The AGPL is not a barrier for startup investors. It is a framework reflecting a specific vision of openness. A vision that, when paired with thoughtful business practices, vibrant company culture, and deep customer relationships, becomes just another ingredient in the recipe for success. Licensing debates are important, but they are not the decisive factor for investment. Culture, customer satisfaction, and the ability to deliver solutions consistently matter far more in both the short and long term. For investors and founders alike, the AGPL is not a specter to be feared, but a decision you made. As long as it was deliberate, contextual, and always with the customer in mind, it will be in your favor.
