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OSHWBankLogo.jpg

Hey look, here’s a bank that’s not afraid to loan. Fascinating idea. Wonder if it’ll work?

From: Why does Open Source Hardware need a bank?

Right now, the status quo, emerging trend for OSHW DIY’ers has been: build something, put up a bunch of money to build a few of them, if people like it, scale it up, raise money, realize you might lose all that money, charge a margin on top of it to cover your potential losses, start a small company to resell more, cross your fingers, maybe get lucky or maybe not. Setting up each little company takes an infrastructure investment like incorporation legal fees, Paypal transaction costs, and website hosting fees to name a few. For every small hardware project, there’s a potential to have to pay upwards of 40-50% of the initial cost of the project again in just infrastructure fees – that’s prohibitive and ridiculous for little guys like me.

From: The Solution: how the Bank will work

The Open Source Hardware Bank will work to eliminate the scaling and quantity pricing problem for OSHW projects by funding the build of 2x the quantity of any Open Source Hardware product. That means, if a project has found a way to find 10 potential buyers, the bank will put down the money needed to fund 10 more, for a total of 20 products. If a project has found 25 community members to buy in, the bank will fund another 25, to bring the total quantity down to 50. This should reduce the unit costs by around 10-30% of any hardware project, and in the case of the Illuminato, it’ll reduce costs by almost 40%!

In return, anyone who pitches in money to the bank will get a modest and sustainable return on their investment, somewhere between 5-10%. Normally, this wouldn’t be a huge amount, but given what I’ve learned about the “real” economy recently, 30-50% return on investment may never have really existed in the first place, let alone represented “sustainable growth.” This money gets paid back and cashed out when the rest of the inventory is bought as a check that Justin, Andrew, or I write and sign personally.

[Sent in to us by MAKE subscriber Robert Boerner. Thanks, Robert!]


Introducing the Open Source Hardware Central Bank

Gareth Branwyn

Gareth Branwyn is a freelancer writer and the former Editorial Director of Maker Media. He is the author or editor of a dozen books on technology, DIY, and geek culture, including the first book about the web (Mosaic Quick Tour) and the Absolute Beginner’s Guide to Building Robots. He is currently working on a best-of collection of his writing, called Borg Like Me.


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Comments

  1. stunmonkey says:

    I like the idea of an incubator for makers, but how does this work exactly? It buys up small batches of random prototypes people hope to sell, then what? Opens a Rube Goldberg museum? Tries to sell the stuff themselves?
    If this is just a traditional form of straight microloan to the makers I get that, and there are successful existing models to work from, but thats certainly not how its explained here.

    How about an incubator that cuts infrastructure (web, ability to accept credit cards, etc) and specialized knowledge/skills (legal, photographic, marketing, etc.) by simply supplying some of it?
    Sort of parts or all of an SBA/Credit union/makers gallery/Ebay/Trade assoc./Collective advertising/web host group rolled into one?
    Then simply take a percentage of sales through the websites – they’d be hosted by and payment funneled through the groups servers anyway.

  2. stunmonkey says:

    I like the idea of an incubator for makers, but how does this work exactly? It buys up small batches of random prototypes people hope to sell, then what? Opens a Rube Goldberg museum? Tries to sell the stuff themselves?
    If this is just a traditional form of straight microloan to the makers I get that, and there are successful existing models to work from, but thats certainly not how its explained here.

    How about an incubator that cuts infrastructure (web, ability to accept credit cards, etc) and specialized knowledge/skills (legal, photographic, marketing, etc.) by simply supplying some of it?
    Sort of parts or all of an SBA/Credit union/makers gallery/Ebay/Trade assoc./Collective advertising/web host group rolled into one?
    Then simply take a percentage of sales through the websites – they’d be hosted by and payment funneled through the groups servers anyway.

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