Borrowing money from a bank is tough at the moment, but not for hackers -- they have simply started their own bank.
The hacking community and open source hardware developers
have joined forces to create a funding source.
Usually when you think "open source", software comes to mind. However, in the background, the open source hardware market is booming.
The concept is great -- eventually there will be specs published for a variety of hardware ranging from graphic cards and CPUs to laptops and desktops. Anyone who wishes will have the ability to take the designs and build upon them. This would allow for individuals to make money based on free designs, while also giving back their improvements to the community that they've benefited from.
The downside is that open source hardware development needs a lot more money than software, due to the physical materials needed for test builds, and the services of the specialised plants used to build chips and printed circuit boards.
Hardware enthusiasts often find that they have a difficult time securing funding for their projects.
When Justin Huynh and Matt Stack met at a New York event they found that they had a major common interest: open source hardware. Huynh works as a pharmaceutical consultant and saw a need for community-funded open source projects.
Huynh and Stack have now opened the Open Source Hardware Bank which they will utilize to fund hardware projects. Details of the bank and its concept are laid out in Stack’s blog
Their new bank will work to raise capital from hardware enthusiasts and then share the wealth with developers. Much like any other social network or community, this group will work to finance one another. Currently the two manage the bank using Open Office Calc
and a statistics program called R
. Eventually they want to take the banking online via their website
and provide a list of funded projects.
"This speaks to the rise of the do-it-yourselfer, someone who is not just a consumer but also a producer, inventor and investor," Huynh told Wired.com
. "But someone also ought to be thinking about the money problem when it comes to open source hardware and we are doing just that."
The Open Source Hardware Bank wants to deliver freedom from two financial issues faced by hardware developers: throwaway costs that come from having to repeatedly revise a product during the development process and the unfortunate inability to take advantage of reduced rates that come when one purchases in bulk.
Each project which the bank funds is provided with the funds to build twice as many units as there are potential buyers. This doubles the number of units which are developed, thus reducing production rates by 10 to 30 percent for each unit.
The bank received some of its inspiration from peer-to-peer lending sites like Prosper
. Prior to the current credit crisis these sites delivered borrowers and investors with a connection tool that acted as a secondary market for funds and investments.
Currently, the Open Source Hardware Bank is not fully open for business. Additionally it is not yet a federally regulated lending institution. With 70 lenders signed up with the bank it does allow individuals with interest to make investments in specific products and then ideally reap the benefit of a 5 to 15 percent return for the successful project sales.
For developers the bank is capable of delivering funds which could significantly reduce their project costs and push them to continuously be ingenious and create. For investors these returns are much greater than those you’ll find anywhere else in today’s economy.
The lenders are given their returns based on rolling six-month averages, meaning that projects that do not take off will be offset by those which flourish. The bank owners feel that it won’t take but a few deals to make great money and with the community which it is developed around being both knowledgeable and dedicated to their craft great projects will be funded with ease.
How Open Source Hardware Bank tells you to invest:
The SEC has many regulations which involve peer-to-peer lending and they are not always simple or cut and dry. Currently Open Source Hardware bank is working through these issues. Regardless the company is in business and ready to work.