Partnering with Open Core Ventures (OCV) to start a new company is an exciting opportunity to build a high-growth open core business. OCV supports founders by starting the company, leading the CEO search, providing weekly advising sessions, and guiding the fundraising process.
New OCV companies will be expected to show growth within the first nine months of formation and share progress starting on day one. Companies that fail to show growth within the first year may be recommended to wind down. Prospective founders should review OCV Operating Principles and OCV & Founder Relationship before signing an offer letter.
Venture-backed startups are different from traditional companies that focus on profitability. Taking on venture investment is analogous to powering your business with rocket fuel—your growth is expected to skyrocket, at an astronomical pace. Sustainable unit economics is important (for example, spending more than $1 on customer acquisition to generate $1 in revenue is bad business) but, VCs are not looking for profitability if the business supports strong margins and you’re investing in growth (i.e. engineering for new products and sales and marketing). Assuming the same revenue base, a business that demonstrates high growth (even with negative profitability) will receive a higher valuation than a business that grows at a lower rate even if it’s profitable.
When a company takes VC money, the potential outcome for that company in an exit can be significantly larger. It also comes with a big risk of failure, and expectations of driving on large returns. Founders should be ready to sign up for a big vision for their company when taking on venture investment. While the average outcome of a VC-backed company may be higher, it's also important to consider the median outcome, as the vast majority of companies lose their investment. Starting a venture-backed company is a big commitment. It's important to evaluate if it's the best path.
OCV starts companies that follow the Open Core Business Model. OCV companies are expected to actively maintain the existing open source project they are commercializing and contribute upstream.
We prefer to start companies with a founder who is an owner or primary maintainer of the upstream project but it is not required. Founders who do not own or have access to the upstream project may face more challenges in the beginning than project owners but we don’t expect those challenges to be unsurmountable. We generally discourage forking a project.
OCV holds the single board seat for Pre-Seed (First 18-24 Months) companies. The board composition will change after the Seed Round.
The 🧱Formation Stage typically takes a minimum of 6 weeks. OCV starts the company formation process once the founder(s) have signed the Founder Offer Letter. Once the offer letter is signed, OCV will initiate the legal incorporation process, bank account setup, and set up core business systems and equipment.
Founders will need to complete tasks throughout the company formation process even if they haven’t officially started yet. The OCV team will contact new founders via email and guide them through the required actions.
OCV uses a standard set of software to set up core business systems for new companies. Companies need to operate on the standard systems until after they have raised a Seed round. This includes systems for email, equity management, payroll, recruiting, document management, document signing, etc. OCV cannot accommodate requests to use alternative solutions.