A Brooklyn-based trio has secured $10 million in funding for a startup aimed at supporting open-source developers in monetizing their work.

• Open-source developers are being rewarded by Merit Systems to address a persistent issue in tech.
• A $10 million seed round has been raised by the startup, with Andreessen Horowitz's crypto fund and Blockchain Capital co-leading the investment.
• The Domino Sugar Refinery in Brooklyn, which has been transformed into a contemporary office building, serves as the headquarters for Merit.

In the Domino Sugar Refinery in Brooklyn, three engineers have converted 3,000 square feet of the old factory into a workshop for their new startup, Merit Systems.

Merit, a software solution aimed at rewarding open-source developers, has secured $10 million in funding from Andreessen Horowitz's crypto fund and Blockchain Capital, five months after its inception.

Sproule claims that Merit is attempting to solve the "attribution problem" in software development. In the realm of open source, which powers over 97% of the apps used daily by consumers, both tech giants and independent developers contribute to products that are freely accessible and open for anyone to enhance.

Ragsdale, Merit's CEO, stated that the lack of attribution and a sustainable set of economics due to the zero price point makes it difficult to keep the product alive. Previously, Ragsdale worked as a software engineer at and spent three years at Andreessen Horowitz.

Open-source code is widely available in various software frameworks, databases, web browsers, and mobile operating systems. Notable open-source projects include Android (owned by Google), GitHub (acquired by Microsoft), and Apache Spark, which powers Databricks' data analytics technology.

There is no standard method for compensating individuals or small teams of contributors who frequently provide valuable work on open-source software.

Andreessen's crypto fund's managing partner, Chris Dixon, stated that open source is underfunded and overly dependent on altruistic contributions.

Dixon wrote on X that Merit is developing a protocol that fairly compensates contributors based on the value they contribute.

Sproule, who first met Ragsdale at Washington University in St. Louis, later worked with him at a venture firm. Afterward, Sproule joined Blockchain Capital in San Francisco, where he teamed up with Hall, who was also on Andreessen's crypto team.

Although the project is still in development, the company claims to have obtained a post-funding valuation of $55.5 million. The majority of the current users are friends and acquaintances of the founders. Merit plans to launch a broader release by the end of February after collecting and integrating feedback from its initial testers.

Sproule, Merit's CTO and a former Web Services engineer, believes the startup can act as a mediator, linking software customers and end-users with the developers of the technology.

By resolving this attribution issue, you can effectively persuade users to pay for the software that developers create.

Three entrepreneurs in a sugar factory

The Williamsburg community in Brooklyn, New York, where the Merit team is located, has evolved from an industrial district to an arts and music hub and then to an affluent neighborhood with high-rise apartments and luxury retail.

The Williamsburg Bridge, two blocks south of the old Domino factory, is now a symbol of the past, with the refinery being the last industrial facility on the waterfront to close in 2004.

The once-neglected building has been transformed into a hub for innovation, featuring panoramic views of Manhattan through the original brickwork. The facility opened as a modern office complex in 2023 and now offers both shared startup space and full floors for larger organizations.

Ragsdale says the building's history is important to the startup's story.

Ragsdale stated that Merit Systems is a name that harkens back to the companies of the '60s and '70s, which had names that clearly conveyed their purpose, and Merit is intended to be a succinct description of the company's objective.

There's also a coveted view of Manhattan.

Through the old brick in the windows, the skyline is visible, as Ragsdale stated.

The office contains four desks and eight chairs. Whiteboards with notes and math equations occupy the only corner in use, while 3D printers from Ragsdale's home produce prototypes, including the company's tesseract logo.

"Ragsdale stated that we won't be utilizing the entire 3,000 square feet; we'll use it gradually."

Merit is seeking to hire seven new employees in the near future and is particularly interested in candidates who prefer an in-person work environment.

"Sproule emphasizes the importance of idea flow between people when working in close proximity. He believes that a fully decentralized remote work model may not be suitable for an early-stage company."

WATCH: CNBC's full interview with Andreessen Horowitz general partner Chris Dixon