Open Hardware Distribution and Documentation Working Group: Pyramids versus circles — the need for more cooperative/collaborative business models for OScH
This is the 14th post of the series of the Open Hardware Distribution and Documentation Working Group. The group aims to produce a proof of concept for distributed open science hardware (OScH) manufacturing, exploring key aspects like quality, documentation, business models and more using as a starting point a paradigmatic case study. We hope the experience motivates others to discuss and implement new strategies for OScH expansion.
By Ryan Fobel
One of the biggest challenges in scaling open science hardware is finding the right business model. It’s a topic that has come up at every GOSH event I’ve been to, and it’s something we as a community need to figure out if we hope to “make OScH ubiquitous by 2025”. I’ve been thinking about this problem deeply over the past 5 years as part of my entrepreneurial journey at Sci-Bots where I’ve been working to commercialize DropBot, an open-source digital microfluidics controller that was the product of my PhD research. Starting a business is hard even in the best-case scenario, but it can be especially difficult when the type of business you are trying to create doesn’t follow the traditional narrative.
There are an ever-increasing number of University-sponsored startup incubators and business accelerators popping up everywhere you look; most of them attempts to replicate the successful Silicon Valley-inspired programs like Y Combinator and the SOSV family (e.g., HAX, IndieBio). The playbook for venture capital-backed, academic spin-offs looks something like this:
1. File one or more patents around publicly funded, University sponsored research.
2. Talk to customers to identify a market for the technology (i.e., find product-market fit).
3. Develop a pitch deck that articulates a credible plan for building the next market-dominating, billion-dollar tech company (based on synthetic biology, blockchain, AI, etc.).
4. Raise several million dollars from venture capitalists (VCs) to make the dream/vision a reality.
5. Hustle like your life depends on it for 5–10 years pursuing hockey stick growth so that you can eventually “exit” with tens or hundreds of millions of dollars.
I have participated in several startup incubators/accelerators, which usually combine free working space, business training, mentorship, and sometimes funding (often in exchange for equity) to help turn scientists with a new and innovative technology into the next Google or Facebook. I am grateful for these experiences. Without their support, I never would have felt remotely qualified to start my own business. Through these programs, I met some amazing founders and mentors, many of whom have been extremely generous with their time and advice, and I benefited enormously from their collective wisdom and experience. But beneath the surface, I struggled with philosophical conflicts around approaches to innovation (i.e., a “winner-takes-all” intellectual property arms race vs open-source collaboration) and in the definition of “success” (e.g., creating a mission-driven, equitable, and environmentally conscious business vs a quest for exponential growth and maximizing investor profits at all costs).
There are certainly benefits to the VC/Silicon Valley model for certain types of businesses; venture capital originated as a financial innovation to raise the massive amounts of investment necessary to launch and grow the information economy. Without this model, we may not have computers, the internet, or maybe even the concept/philosophy of open-source. The problem I see is that this model was so successful that it came to be seen as the “one true path” to technology commercialization. This is fundamentally at odds with core values of the GOSH community, which celebrates diversity and imagines “multiple futures for science”. With the rise of digital fabrication and a thriving open-hardware community, there has never been a better time to start a business developing open tools to improve access and accelerate scientific progress; but I also think it’s safe to say that many such companies will not be a good fit for VC investment, and that’s ok.
Traditional tech startups are structured like a pyramid. Startup founders and early-stage investors sit at the top of this hierarchical structure. They have the authority to allocate resources and delegate power, and because they’ve taken on the largest risk by investing sweat and/or money at the beginning, they demand the lions’ share of the profits if the business is successful. There are several problems with this model, especially in the context of businesses based on open-source technology. Pyramids usually rely on intellectual property to prevent competition and the “winner-takes-all” mentality is often not compatible with community-defined values to democratize science, empower users, and to equitably share the benefits of technology with the broader society. There’s growing evidence that big tech (the model everyone seems to want to emulate) is driving inequality to historic levels by employing far fewer people while extracting five to ten times more profit per employee compared to other types of businesses.
Of course, we need to be careful about painting all for-profit companies with the same brush. There are several companies in the open-hardware ecosystem that I greatly admire (e.g., Adafruit, Prusa Research, and Sparkfun), each demonstrating a viable alternative to the traditional “tech startup” narrative. These companies were all bootstrapped by determined, open-hardware enthusiasts and their business models allowed them to grow organically without the need for huge amounts of upfront capital. As a community, we should be seeking out and learning from organizations that have pursued alternative commercialization paths. We need mentorship/advisory programs to support would-be entrepreneurs who are interested in creating organizations that are more democratic, less hierarchical, and purposefully designed to benefit from collaboration rather than competition.
One structure that seems particularly interesting in the context of distributed production of open-hardware is the cooperative model. A cooperative (or co-op) is defined by the International Cooperative Alliance (ICA) as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise”. Most co-ops adhere to the Rochdale Principles (as adopted by the ICA):
- Voluntary and Open Membership
- Democratic Member Control
- Member Economic Participation
- Autonomy and Independence
- Education, Training, and Information
- Cooperation among Cooperatives
- Concern for Community
Principles one through four ensure that decision-making and profits are shared equitably among members, while principles five and six seem well suited to open-source collaboration (e.g., across a network/federation of hardware co-ops). The final principle, “Concern for Community” supports the pursuit of social purpose beyond maximizing shareholder value.
An Old Idea with a New Twist
The co-op movement is over 175 years-old and most people are probably familiar with various examples of consumer co-ops (e.g., grocery, housing, utility providers, credit unions) and worker co-ops (i.e., employee-owned businesses). Following the 2008 financial crisis and the Occupy Wall Street movement, co-ops experienced a cultural resurgence in reaction to shareholder capitalism run amok. Some prominent examples born out of this period include Loomio (a worker-owned co-op that develops a democratic decision-making platform popular amongst activists and local governments) and the platform co-op movement which reimagines the sharing economy with a more equitable lens (think Airbnb and Uber if they were owned and controlled by hosts/drivers). But I’d never heard of a hardware co-op until this year’s Open Hardware Summit where I saw a talk by Chris Chronopoulos in which he briefly mentioned Interstitial Technology. My interest piqued, I fired off an email and invited Chris to our next working group meeting to tell us more about it.
From their website, “Interstitial Technology is a full-stack engineering firm that builds solutions for a better world.” Interstitial is a worker cooperative and a Colorado Public Benefit Corporation with explicitly stated purposes to promote open-source development, education, environmental sustainability, and human rights, to which they are legally accountable beyond simple maximization of profits. Chris explained that Interstitial is a network of freelancers who are worker-owners with equal voting rights and equal claim to capital. Each member is responsible for finding their own work and they contribute 20% of their wages to cover shared overhead (e.g., legal aid, marketing, IT). Anything left over at the end of the year is redistributed to each member according to the number of hours worked (i.e., patronage dividends). Chris admitted that it was scary investing so much time and effort in setting up the co-op and then giving up control, but he seemed genuinely pleased with the result and I believe these types of risks/experiments are necessary to build a better future.
An OScH co-op that manufactures, markets, sells, and supports a suite of scientific tools has many important differences relative to a freelancer/consultant network like Interstitial. There’s added complexity due to the higher degree of codependence between members/projects, questions about the roles/boundaries/responsibilities of membership, and unresolved issues for deciding how to equitably distribute profits based on hardware sales (e.g., royalty splits) versus hours worked (e.g., doing support, manufacturing). But the whole idea seems a lot less intangible and a lot more possible after our conversation with Chris. Since then, I’ve been reading a book called “Better Working Together” about a New Zealand-based co-op network/community called Enspiral. The book contains “a collection of real stories and tools from the front lines of the future of working together”. It provides an honest portrait of the successes and failures experienced over a decade of experimenting with new models of open-source, purpose-driven, cooperative entrepreneurship. After all this, I still find myself with more questions than answers, but I have the feeling that we are stumbling in the right direction. If you have thoughts/ideas on the application of cooperative models to open science hardware, please get in touch and join us in reimaging different possible futures for science!