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Open core is a hybrid software development and licensing model that includes open source and proprietary software. It typically consists of an open source core with proprietary features and functionality built around it. The open core model provides a path for commercializing open source projects. All of the code is source-available, allowing everyone to contribute to the whole, but you must pay to use certain parts of the software. An open core company must have proprietary intellectual property to monetize.

https://youtu.be/lfdXUq6y5GA?feature=shared

Open core requirements

Open core leverages an existing open source project and builds a commercial version with proprietary features around it. Think of the open source core as a distribution and R&D strategy, and the commercial, proprietary features as a monetization arm. Software companies that meet the following three criteria are considered open core.

  1. Build on open source. The open source version is actively developed alongside a commercial product.
  2. Add proprietary IP. Open core companies must have proprietary IP to monetize.
  3. Make all code source-available. Users can contribute to and modify the proprietary code in addition to the open source code, but must pay a licensing fee or subscription to use it.

Open core is not a support and services model. Support and services-based COSS companies (Red Hat) only produce open source code but charge subscriptions for support, training, and implementation services. OCV does not start support and services-based COSS companies.

Advantages of open core

Commercial open source software (COSS) companies outperform closed-source software companies. Companies built around open source software raise more money, faster, and at higher valuations than solely proprietary software companies. Open core companies benefit from:

  1. **Early signals of PMF.** Open core companies come with a pre-packaged community, making it easier to find early customers and hire passionate employees. Product adoption is faster because people can use it for free, and the free version works.
  2. **Faster R&D.** Building with open source has the benefit of a direct line of communication with the community. The community accelerates improvements through feedback, feature requests, and code.
  3. **Greater user trust.** As OSS proliferates the market, users expect to be able to inspect, modify, and contribute to the software they use, disadvantaging closed-source software companies. Proprietary code in an open core product is source-available.

[Related content: Why open core will replace proprietary software as the default](https://www.youtube.com/watch?v=Bb0gQKqjgSM)

Related content: Why open core will replace proprietary software as the default

Open core concerns

Some people believe the open core model exploits open source. We believe open core is a way to sustain open source by allowing passionate creators to monetize their efforts. Open source users benefit when a company backs an open source project via an open core business model because dedicated resources are allocated toward supporting the open source version. Contributors can get paid to work on the project.

[Related content: Open core is a misunderstood business model](https://youtu.be/lgOFmQOJse8?feature=shared)

Related content: Open core is a misunderstood business model

OCV’s perspective on common open core concerns

  1. Self-competition. A common concern is that open core companies are competing against themselves. In our experience, the opposite happens: Developing an open source version of the product accelerates adoption and acts as an on-ramp to the paid version.