Business models


#1

Business models

Date: 03/23/2017
Attendees: Shams, Pierre, Joel, Bethan, Fernan, Shingo, Jorge, Maria, Ali, Greg, Ryan, Tara, others?

Introductions:

We started off by going around the circle describing participants’ businesses/business models/ideas:

  • selling STEM kits
  • environmental monitoring equipment
  • CNC machines, 3D printers
  • health and wellness devices (heart rate monitor, EEG)
  • Biomaterials
  • PhotosynQ (sell devices but longterm plan is to make money from network transactions
  • Independent FabLab (membership based)
  • Hackscience (automated tools for labs) charging for software
  • Consulting to finance open source work
  • PCR machine
  • Sensorica (distributed design, network resource planner, tracking contributions, etc.)
  • Artists need start a business for tax purposes
  • Interest in how open hardware can be applied to traditional business model canvas (worksheet to help figure out your business plan)
  • How is your business going to make money: hardware (e.g., electronics, consumables, etc.) vs software vs services (e.g., teaching, workshops, consulting)
  • Survey (how are companies represented in this group funded):
    • Bootstrapped: ~10
    • VC: 4
    • Kickstarter: ~10

Recommended Resources:

Case studies of businesses that have reached “sustainability”

Shams (The Tech Academy)

  • Started 4 years ago in Bangladesh
  • Started wanting to teach everything (didn’t work)  narrowed focus to teaching robotics  open science hardware
  • Originally stared as an education model, long term goal is to transform into an innovation centre
  • Bootstrapped funding
  • Taking investment has strings attached (need to pick the right people)
  • Important to wait until your company has focus before looking for investment
  • Common tension when starting an OSH business is worry about people copying
  • if you are making a product for the masses, someone will copy it before you can reach everyone
  • if you are making something more custom, you don’t have to worry about it as much
  • ethics issues:
  • if someone copies your work, the expectation is that they will add value (but not everyone will follow this ideal)
  • need to keep 1 step ahead

Pierre (3D printers)

  • 3D printers in Peru
  • Started by giving workshops and selling kits
  • Sourced 50% of the parts locally
  • First workshop (5 people x $500 each), second workshop >10
  • Benefit is that people can access replacement parts locally, fix it themselves
  • Even a cheap printer (e.g., $100-200) is too much for many people
  • Jorge: consider models where you give away printer under contract to buy x amount of filament

Joel (Pulse sensor, OpenBCI)

  • Selling stuff (software is free)
  • Crowdfunded (good way to test market)
  • Need to have working prototypes, quotations for manufacturing at scale, etc.
  • Successful campaign should pay enough to build product and pay you
  • 2011 pulse sensor (~$250 to make prototypes)
  • Working with contract manufacturer
  • Cost $5 to make PCB, cable, kit, bag, labels, shipping  charge $25 (5X margin)
  • Need to have a margin! (cover overhead: salary, transaction fees, shipping, returns, etc.)
  • Only very recently started to find anyone interested in funding open-source hardware companies
  • Things that VCs might consider funding: service, keeping some part of it closed
  • Getting investment is about building relationships and takes a lot of time
  • Question from Ali: would you consider an open and closed version?
  • OpenBCI owns their trademark
  • Working with another company doing biofeedback for ADHD
  • This company will seek FDA approval, produce hardware, and license the OpenBCI trademark
  • Importance of having a strong community (can help mitigate negative impact of knockoffs)

Andrew (OpenROV)

  • Original ROV model is fully open source kit version
  • 2nd model ROV is ready to use out of the box (not a kit)
  • internal debate about how much of it will remain open
  • decided to keep software and many other parts open but some of the electronics are not
  • did everything backwards
  • doesn’t want to be a hardware manufacturer
  • was a freelance writer but had to incorporate for tax and liability reasons
  • being incorporated opened up other opportunities for consulting
  • 25% working with OpenROV
  • 50% consultation with NGOs, government, etc.
  • 25% running workshops
  • Helping schools apply for grants to fund workshop

Bethan (bento.bio)

  • DNA analysis equipment (e.g., PCR, gel electrophoresis)
  • Used outreach money to prototype devices, hold workshops
  • Used student grants to build 20 prototypes and sold under-value to beta testers
  • Kickstarter campaign > $200k (1.5 years to fulfill orders)
  • Didn’t get good quotes from manufacturers
  • Would have like to have done more user testing
  • Did a good job creating narratives around what people can do with their product
  • Trying to decide what to keep open
  • Have an online platform, could sell reagents, etc.
  • $250k over the last year, paid 2 people just above living costs
  • outsource a lot of development to contractors (important to build long term relationships)
  • tooling costs > 50k pounds
  • 3X markup (not enough to grow team, etc.)
  • Distribution channels post kickstarter:
  • Distribution companies charge 30-60% markup
  • have a varied market
  • academics (purchase orders)
  • educators
  • community products
  • hobbyists
  • Challenges: how do we scale? Want to diversify product line
  • Pressure to scale (people need to make a personal decision about what kind of company they want to create)
  • As part of startup incubator, forced to discuss product with lots of investors
  • Very valuable exercise
  • What aspect of our product is interesting to you? etc.

Fernan

  • Works in academia
  • pushing community to do open source (easy to talk about as an academic, but harder for those people actually starting a OSH businesses since the have to deal with many issues)
  • Asymmetric relationships between different parts of the world
  • we shouldn’t all look to silicon valley for answers because it is the source of many of the problems

Shingo

  • Shenzhen can copy anything quickly and cheaply
  • Doesn’t want to be a manufacturer, but rather be a service provider
  • Allow people to test their own food, blood, etc.
  • Sell applications or consumables bought through app (these can work with different vendors’ products)

Jorge

  • Chinese model:
  • Focus on making it as cheap as possible (low margins 5-50%)
  • Make it accessible
  • European/American model:
  • Higher margins 4-5X
  • How do you make workshops/training sustainable?
  • Gave an example of business setting up low cost science labs
  • project started with grant
  • identified pain points which led to business model
  • gathering materials is hard --> sell parts

Maria (Sensorica)

  • Hard to get grants because people don’t understand the business model
  • free form, self-organized teams
  • Contribution based
  • Log contributions to each project and distribute revenue accordingly
  • Loose, fluid structure (but not widely proven)
  • Team up and collaborate with different academic institutions

Phil

  • Mycoworks
  • Silicon valley experience
  • Didn’t intend to form business
  • People asking to buy materials that he had been teaching about
  • Found another friend (neither had business experience)
  • Incorporated and hired CEO
  • Filed as Delaware Corp.
  • wanted to make a commodity at large scale
  • Pivoted after joining a biotech startup and expanded to several materials
  • Tesla model: sell premium products first to subsidize development of future commodity product
  • In 5 years, plan to sell commodity materials at 30% margin
  • Started a non-profit to teach community to make materials
  • End game is to license technology to other companies (doesn’t want to be manufacturer)
  • Need values investors (~3%) who believe in what company is doing

Ali:

  • Lab automation software
  • Suggests to try and align the impact you want your company to have (e.g., social impact, problem you want to solve) with what generates profits

Greg:

  • Need to focus on what unique opportunities being OSH brings
  • software has well-established open-source business models
  • E.g., if citizen science is producing valuable output (something that people would pay money for), this provides a unique revenue source

#2

Hi guys,

It seems that your session was very interresting. My contribution to the topic, is just this paper that I recommend you to consider in the conception of the business models. I am sure that after that, you will consider some points of business model with a critical regard.

Pablo, Herrera, et Benito Juárez. 2013. « Fabrication Laboratories: Problems and Possibilities of Implementation in Latin America. », juillet. http://repositorioacademico.upc.edu.pe/upc/handle/10757/605215.


#3

The newly launched Journal of Open Hardware also has an article that may be of interest to those considering business models for open source hardware:

Emerging Business Models for Open Source Hardwarehttp://openhardware.metajnl.com/articles/10.5334/joh.4/


#4

Hi it is me again,
I cannot wait:smiling_imp:
since your are working on a “business model”, I want to share with you my working paper (in english). I advice you to look the second part of the paper, I think there is some critical element there that you have to consider.

Mboa Nkoudou, Thomas Hervé. (2017, March 24). Benefits and the hidden face of the maker movement: Thoughts on its appropriation in African context. Zenodo. http://doi.org/10.5281/zenodo.438077


#5

Thanks for the awesome notes Ryan!


#6

Hello!

Excuse me, but I couldn’t participate of that session, even though I was really interested on it. So I got curious about some points mentioned on the notes about not opening some parts of the products. I totally missed that discussion, so I would like to see this specific topic expanded. I could notice three reports of people mentioning it:

  • Joel (Pulse sensor, OpenBCI): “Things that VCs might consider funding: service, keeping some part of it closed”
  • Andrew (OpenROV): “internal debate about how much of it will remain open
    decided to keep software and many other parts open but some of the electronics are not”
  • Bethan (bento.bio): “Trying to decide what to keep open”

So if anyone that participated of the discussion, and mainly the three mentioned above, could clarify those points, it would be really nice.

Thank you very much!