Could someone please explain the business model of such open source based startups in general?
There are a few different models: for example, "open core" where part of the overall product is open source, and then layers of proprietary stuff are put on top and the aggregated "thing" is sold (but can't be redistributed). Then you have "dual licensing" where the product is purely under a F/OSS license (often times the GPL or another "copyleft" license) and the company sells commercial licenses that offer different terms (such as the right to redistribute a derivative product without needing to make your own product F/OSS).
And then there are the "pure play" OSS firms... everything is F/OSS, but they test/certify certain builds, and ship binaries for money even though you can download something which is probably 99.999% bit identical (images and copyright notices being the main differences). In this model what the customer is paying for is - arguably - not software at all, but "peace of mind," indemnification, certification, the "somebody to sue" factor, support, etc. Red Hat are a good example of this latter model. JBoss binaries are freely available, and CentOS is nearly identical to RHEL, but yet people still pay Red Hat for JBoss and RHEL.
In all three cases, there are also supplemental things the firm can sell for revenue, such as training classes, certifications, professional services work, T-shirts, etc.
There are probably still some other variations that I'm forgetting at the moment, but I think those are the big three.
There are a few different models: for example, "open core" where part of the overall product is open source, and then layers of proprietary stuff are put on top and the aggregated "thing" is sold (but can't be redistributed). Then you have "dual licensing" where the product is purely under a F/OSS license (often times the GPL or another "copyleft" license) and the company sells commercial licenses that offer different terms (such as the right to redistribute a derivative product without needing to make your own product F/OSS).
And then there are the "pure play" OSS firms... everything is F/OSS, but they test/certify certain builds, and ship binaries for money even though you can download something which is probably 99.999% bit identical (images and copyright notices being the main differences). In this model what the customer is paying for is - arguably - not software at all, but "peace of mind," indemnification, certification, the "somebody to sue" factor, support, etc. Red Hat are a good example of this latter model. JBoss binaries are freely available, and CentOS is nearly identical to RHEL, but yet people still pay Red Hat for JBoss and RHEL.
In all three cases, there are also supplemental things the firm can sell for revenue, such as training classes, certifications, professional services work, T-shirts, etc.
There are probably still some other variations that I'm forgetting at the moment, but I think those are the big three.