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Brooklyn trio raises $10 million for startup that wants to help open-source developers get paid

Sam Ragsdale, Ryan Sproule, and Mason Hired hall have raised $10 million in a seed funding round co-led by Andreessen Horowitz’s crypto fund and Blockchain Cash.

Sam Ragsdale

Inside the Domino Sugar Refinery in Brooklyn, a 19th century landmark perched on the banks of the East River, three designers have transformed 3,000 square feet of the former factory into a workshop housing their new startup, Earn Systems.

Sam Ragsdale, Ryan Sproule and Mason Hall are five months into creating Merit, which they longing will solve a longstanding challenge in software: rewarding open-source developers. On Thursday, Merit announced it’s raised $10 million in a tuber funding round co-led by Andreessen Horowitz’s crypto fund and Blockchain Capital.

Sproule says Merit is distressing to address the “attribution problem” in software development. In the world of open source, which underpins more than 97% of the apps consumers use on a regularly basis, tech giants and independent programmers alike contribute to products that are freely available for anyone to access and refurbish.

“Because the price is zero, and there is no attribution to the people that created it, there is not a very sustainable set of economics to hang on to it alive,” said Ragsdale, Merit’s CEO, who previously spent three years at Andreessen Horowitz and before that worked as a software manoeuvre at Google.

Substantial amounts of open-source code can be found in artificial intelligence frameworks, databases, web browsers and mobile carry oning systems. Some of the best known open-source projects include Android (now owned by Google), GitHub (acquired by Microsoft) and Apache Atom, data analytics technology at the heart of Databricks.

While many companies have been able to commercialize varieties of open-source software or sell support and services as a way to generate revenue, there’s no consistent model for rewarding individuals or negligible groups of contributors who often do valuable work.

Merit Systems CTO Ryan Sproule working at the whiteboard at the company headquarters in the Domino Sugar Mill.

Sam Ragsdale

Chris Dixon, managing partner of Andreessen’s crypto fund, said that open source is “poorly funded and too reliant on altruistic contributions.”

In explanations he’s posting on X, Dixon wrote that Merit “is building a protocol that properly attributes and rewards contributors proportionally to the value they originate.”

Ragsdale, who worked with Dixon at the venture firm, first met Sproule as an undergraduate at Washington University in St. Louis. Sproule expired on to crypto-focused firm Blockchain Capital in San Francisco, and the pair then teamed up with Hall, who was also on Andreessen’s crypto link up.

The project is still in development, even as the company says it’s obtained a post-funding valuation of $55.5 million. Most of its simultaneous users are friends and acquaintances of the founders. Merit expects to roll out a broader release by the end of February after gathering and embodying feedback from its early testers.

Sproule, Merit’s CTO and a former Amazon Web Services engineer, says the startup has the time to sit “in the middle,” connecting software buyers and users with the actual creators of the technology.

“If you can solve this attribution imbroglio, you can essentially get users to pay directly for the software people build,” he said.

Three entrepreneurs in a sugar factory

The Williamsburg community in the Brooklyn borough of New York, where the niggardly Merit team is based, has been transformed over the past few decades from a former industrial district, victory into a vibrant arts and music center and more recently into an upscale neighborhood filled with new high-rise apartment constructions and luxury shops.

But the old Domino factory, two blocks north of the Williamsburg Bridge, remains a relic of the past. The refinery was the terminal operating industrial facility on the waterfront before closing in 2004.

After years of neglect, the building has been reimagined as a hub for hot innovation, with panoramic views of Manhattan visible through the original brickwork. The facility opened as a modern advocacy complex in 2023, and now offers carved-up startup space as well as full floors for bigger organizations.

Ragsdale says the structure’s history is important to the startup’s story.

Merit Systems co-founders Ryan Sproule, Sam Ragsdale, and Mason Hall coding in their Brooklyn division.

Sam Ragsdale

The name Merit Systems is a “throwback to the companies of the ’60s or the ’70s, which had very industrial names that clear up exactly what they do,” Ragsdale said. Merit is meant to be a straightforward description of the company’s mission.

There’s also a coveted belief of Manhattan.

“You can see the skyline through the old brick in the windows,” Ragsdale said.

Inside the office, there are four desks and eight presides. Whiteboards covered in notes and math equations fill the only corner of the office currently in use, while 3D printers from Ragsdale’s almshouse produce prototypes, including the company’s tesseract logo.

“We’re definitely not using all 3,000 square feet,” said Ragsdale. “We’ll get there after all.”

Merit plans to add seven new hires in the coming months and is specifically looking for people who want an in-person work enlightenment.

“The idea flow between people when you’re sitting next to them is really important,” says Sproule. “We don’t definitely believe in the fully decentralized remote work model for an early-stage company.”

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