Making free software development profitable

Question

OK, this maybe rather off the topic of GNU/Linux but bear with me
Free software has come a long way and all thanks to generous contributions of numerous souls who have put in their most valuable asset, time, to develop a huge body of software we can all enjoy.
Now a good number of free software developers work for commercial companies and get paid to do what they do. That is cool too. In fact that is great! If one could live off money earned by developing free software ... I mean that is fantastic. Financially benefiting in addition to helping the community is certainly better than one or the other alone. But this kind of job is rare.
What if more (or every) free software developer could be financially compensated for their contributions? I'm sure there is a good amount of pessimism about the idea of expecting money for something that can otherwise be obtained for free. And that's justified, except there is always the assumption that the developer makes something and then asks for money. That is the trend (and perhaps has been). I'm referring to donations. There is always the software before the donation button. There are two issues with donations:
1. you have to have something first before getting paid for it (which provides little to no motivation for those able to contribute but whom don't have time due to their commitments to their paying jobs)
2. donations are not directed at anything specific, you don't know if the $5 you sent to that great girl/guy is going to his project A or B (which provides little motivation for users to pay because of uncertainty)
Now a model like that of kickstarter.com would solve less than half of the issues here. I personally think that kickstarter like services are geared towards creative projects, projects for which there is not necessarily a need at first. In free software communities however, it's very prevalent for users to be looking for something they need but not quite finding it. It could be a feature they need, a bug that needs fixing. Do you see where I'm going with this? Yep. Issue trackers with a twist!
A service which allows users to submit bugs/requests/ideas and offer money to whoever can get it done. But (a big but), the end result of the software has to be free software (otherwise you got yourself a rentacoder kind of service). A simple (or complicated if necessary) reputation based system would create trust in developers not to steal money and in users to pay what they pledged. This sounds like fundraising and that's exactly what it is. The difference is: it's focused and streamlined. You know who/what/why you're paying.
What's the incentive for the user to pay? Well they *need* something that doesn't exist. They can file a bug report and hope someone will take notice. Or they can get attention by offering to pay for what they need. From view point of some, this kind of transactional environment goes against the values of free software. It may seem unfair for those who can't afford (or want) to pay as much to get equal attention. This and other kind of issues are what I like to discuss with you.
I believe a well thought implementation of such system can change face of free software and accelerate its development.
Thoughts?

Answer 1

karol wrote:http://www.fossfactory.org/
This is interesting. I hadn't come across these guys before, either because they have poor SEO or I am incompetent in searching
Having looked at some of the projects, it seems to be more or less active (not sure if they're thriving). I also had a read of their process and FAQ. What I have in mind seems to differ quite significantly with what those guys are doing in regards to the funding and the general process. They're doing it in a collaborative manner using an organic approach of allowing change to requirements and funding along the way. I'm thinking of the same type of collaboration in planning and design stages, but with a more stable state past the funding stage. In particular, I think kickstarter.com method of goal based time limited fundraising to be more successful in attracting developers to work on a project. I would describe the process I have in mind as follows:
- a user/developer submits a project idea (could be as big as an entire app or as small as a bug fix)
- other users can discuss the project, or create sub-projects and discuss those
- users also indicate on each project how much they're willing to contribute financially (without commitment)
- developers can submit proposals on any (sub) project
- proposals must have clearly indicated specs and deliverables as well as a funding goal and deadline
- proposals can be discussed just like project ideas and developers amend the specs as necessary to reflect the discussions
- developer decides it is time to finalize and start fund raising
- at this point the specs are frozen and a time limited fund raising window is open for users to "pledge" (kickstarter's term)
- if the funding goal set by developer is met, all the funds are transferred from users' accounts to the developer's account, otherwise no one's charged
- developer starts to work on the project, checking in regularly to post status updates
- a reputation system awards or takes away reputation points from developers based on their ability to meet deadlines, deliver what they promised, etc.
- developers can be permanently banned (based on their billing details) from the site if they simply don't get any work done or otherwise violate a term
- developers are limited on how much funding goal they can set based on their reputation (this helps building trust)