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OCV partners with company founders to provide guidelines and suggestions intended to help you be successful. Our guidelines are informed by previous experience, and we’re consistently adapting them as we receive new learnings and information.
Our handbook is our source of truth for official recommendations. Giving OCV visibility into decision-making can help us provide the guidelines and suggestions we think will be informative and make you successful. When working with OCV, we ask founders to:
Even though OCV companies operate differently from the traditional venture-funded model, founders are still the final decision-makers. As CEO/CTO, you run the company. OCV does not override the decisions of the highest C-level person at the company.
Ultimately, you are accountable for the decisions and outcomes of the company. As a leader, all decisions and outcomes stop with you. The CEO makes final decisions and can never point up. You don’t want to be in the position where you are explaining to your reports that the reason you did something is “someone higher up said to do it.” For example, a company has layoffs and the CEO says “The board made us do it.” That would be a very weak stance to take. Either you own the decision or don’t do it.
Our operating principles are our framework for making decisions and taking action. They are built on years of experience and learning what success looks like for OCV’s portfolio companies. Our operating principles ensure efficiency and effectiveness for the firm and our companies.
Many project maintainers or potential founders ask us early on about our expectations. For example, they ask if we will demand they become profitable early, or if we “flip” companies quickly, etc. Like other venture firms, we only have one goal: when we start a new company, we expect that the company eventually has the potential to become huge and achieve venture-scale returns. This usually means $1B+ valuations or IPO, and over $100M in revenue.
OCV companies strive to build big companies that achieve high revenue targets and growth rates—founders are signing up to swing for the fences and push the pace on how fast they can grow the company. Raising venture capital is a vital tool needed to accelerate and fund growth. Founders need to be prepared to fundraise.
OCV starts open core companies around existing open source projects. Building an open core company requires having a vision for building paid features around the open source core without degrading the original project or features. The recommendation is to make software functionality used by individual contributors free and to charge around features and functionalities their managers mandate. This pricing framework is called buyer-based open core. Solely providing support services for the open source project is rarely a viable business strategy.
OCV companies are expected to build on top of the original open source project the company was started around. Ideally, the company is the owner and primary maintainer of the project. Traction around an open source software project (i.e. usage, # of active monthly pull requests (MPRs), growth) is key to evaluating a company’s potential. It indicates utilization interest and active users are a great resource for gaining feedback and marketing the company. When companies move away from open source, we have yet to see success.
We can't promise to never fund competitors—even if we wanted to. We never share competitive information between companies; it's unethical, and it would destroy our credibility.
There are countless factors that determine a startup's success, and the "idea" or "initial product" is just one element. It would be shortsighted to reject an exciting project simply because its initial product or target customer overlaps with another OCV company. The initial product and target customer typically evolve significantly by the time a company reaches IPO. We can't predict how startups will transform on their path to becoming massive businesses.
We aim to launch 2,000 companies annually in the future. Some overlap is inevitable. Many successful investors—including key backers of GitLab and WePay (like YC)—regularly invest in competitors, sometimes even within the same batch. Real competition rarely comes from other startups. Most companies fail from internal issues, not external threats. Focus on your own company. If a founder is fixated on competing with another tiny startup, they've already lost focus. The real external threats are established industry giants and market indifference. Lack of visibility is a much bigger risk than OCV funding a similar company.