This is a topic based on today’s chatroom discussion regarding a revenue sharing model proposed for Hostea. Here is a draft of what could be proposed for inclusion in the Governance and decisions category.
Revenue sharing model
Hostea is a non-incorporated, horizontal collective of individuals and organizations that provides services (hosting and clinic) on Gitea. For each Gitea instance hosted on Hostea a recurring income will be received and for those healed in the Clinic, the doctors will receive payment. How is this income accounted for and how is it shared among Hostea members?
The following rules define a revenue sharing model that aims to:
- Compensate everyone in proportion of the work they do and the expenses they incur
- Dedicate a share of the income to develop Hostea so that it can evolve over time
- Dedicate a share of the income to sustain the Free Software projects that Hostea depends on
- Rely on the decision making process defined by the Hostea governance to resolve disputes between members and prevent abuse
It is a declarative (i.e. each member declares their income and expenses) and informal understanding between Hostea members. It has no legal implication (i.e. if a member does not comply, there is no legal recourse). When members indirectly derive an income from Hostea it is their decision to submit this income to the Hostea decision process. If they chose not to, they must publicly explain why in a public declaration of financial interest.
Work
There are three categories of work:
- Servicing Hostea (e.g. restoring backups after an outage at Hostea.org, working a Clinic case, etc.)
- Improving Hostea (e.g. developing new functionalities, adding new features, refactoring to improve maintainability, etc.)
- Contributing to dependencies (e.g. contributing to Gitea, librepages, Enough, etc.)
The work performed by members is measured in hours. For a member to claim that they spent X hours working in the context of Hostea they must file an issue in the organization repository including:
- The number of hours
- Permalinks to proofs of work (commits, discussions, etc.) for auditing purposes
- The category of work (Servicing Hostea, Improving Hostea, Contributing to dependencies)
Accounting
Each member is responsible for updating a spreadsheet in the organization repository with their own Hostea related income and expenses. Expenses are either:
- Invoices related to Hostea, or
- Work hours as defined in the organization repository multiplied by a fixed hourly fee of 60€.
Example: Loïc Dachary’s spreadsheet
When a member chose to not mention an income derived from Hostea, directly or indirectly, they must publicly explain their decision in a declaration of financial interest published on Hostea. If they fail to do so, their expenses are not eligible to be paid.
Payment
Members are entitled to receive payment for their expenses, from the account in which the income was earmarked for the corresponding category:
- Servicing Hostea
- Improving Hostea
- Contributing to dependencies
If the money held in the account is not enough to pay for all expenses, it is distributed equally.
Example: Hostea has 100€ in the Improving Hostea account. First member ask for 20€, second 80€ and a third 90€. Each member receive 20€. There is 40€ left and the second still needs 60€ and third member still needs 70€. They get 20€ each and are still owed another 40€ and 50€ respectively. In the end the first member was paid in full for 20€, the second an third member were not paid in full and got an equal share of 40€ each.
Since Hostea is a non incorporated collective, it is ultimately for each member to invoice each other. A spreadsheet compiled from the individual spreadsheet of each member is updated on a regular basis to show which member owes how much to other members.
A Hostea member is required to pay what they owe to other members at least once a year.
Income
A Hostea income is money held by a member and earmarked to be spent according to the Hostea revenue sharing model. This money may originate from payments made by people renting a dedicated Gitea instance on Hostea.org, services provided via the Clinic, donations etc.
Example: Easter-Eggs received 250€ for upgrading a Gitea instance.
Example: Easter-Eggs donated 2,000€ to Hostea
All income is divided in separate accounts earmarked with a category of work:
- 50% Servicing Hostea
- 25% Improving Hostea
- 25% Contributing to dependencies
Dependency right to veto
The owners of a Hostea dependency have a right to unilaterally veto a claim of work from a Hostea member. Their veto must be expressed with “I veto this work” in the issue associated with the claim in the organization repository with an account linked to the email that proves they own the dependency project.
The right to veto expires eight weeks after the claim of work was published.
Expense dispute
Members who dispute a claim of work must do so by commenting in the issue associated with the claim in the organization repository. Eight weeks after being published, the claim of work cannot be disputed anymore.
Members who dispute an invoice submitted as an expense by another member must do so by opening a new issue in the organization repository.
Disputes are settled by a vote to decide if the expense is legitimate or not. An expense that is ruled to not be legitimate cannot be added to the member spreadsheet and cannot be paid.
FAQ
Would it be simpler to dedicate a fixed percentage of the income to dependencies?
It would actually be more complicated because:
- The percentage would have to be agreed upon on a regular basis, for each project
- Figuring out how much money a project needs to move forward is time consuming
This is to be compared to the decisions members need to make with this model:
- Each member donates as they see fit, globally capped at 25%
- A collective decision is only required when a member feels there is a problem
How can this provide a stable income for a given dependency?
It requires that two conditions are met:
- There is enough income to provide such a stable income
- Hostea members collectively decide to donate money to the dependency that translates into a stable income
It is ultimately up to each member to donate and submit this donation as an expense, for the benefit of the dependency. The stability is therefore only relative to how members value the dependency.
What if a member claims money that would otherwise go to a dependency?
If a Hostea member claims payment for doing work contributing to a dependency, it may mean less money for the dependency. Since the global amount dedicated to dependencies is capped to 25%, the following situation can happen:
- The total income of Hostea is 100 and 25 is dedicated to dependencies
- Hostea member A donates 25 to a dependency
- Hostea member B contributes to the same dependency and claims a payment of 25 for that work
- The dependency gets 25/2
- Hostea member B gets 25/2
For that to be fair, the Hostea member work must be open to a third party audit. This is a requirement as per the Hostea governance since all work done requires radical transparency. And also because each Hostea member is required to submit a Declaration of Financial Interest. If there is any suspicion of a conflict of interest, the work done by Hostea member B is audited and can be disputed.
Why measure work in hours at a fixed rate?
Because it makes for a simple revenue sharing system.
How is the hourly rate revised?
The revenue sharing model is subject to the decision process defined by the Hostea governance. So is the hourly rate because it is included.
