Open Source Hardware Reserve Bank

URL = http://www.oshwbank.org/

Description

"The mission of the bank is to fund and invest in Open Source Hardware. It helps open source projects achieve scale discounts at low quantities of production, where most DIY happens. The objective of the bank is to break-even, and sustain and grow Open Source Hardware."

Background

More details in our entry on the Open Source Hardware Bank

From Wired:

"So far nearly 70 people have signed up as lenders for the bank. Huynh and Stack are managing the process through an Open Office Calc spreadsheet and an open source statistics program called R. They soon hope to bring it online through the Open Source Hardware Bank website that lists some of the initial projects that have been funded.

Lenders are offered returns based on a rolling six-month average so dud projects will be offset by sales of profitable ones. It takes just a few deals to strike it big, Huynh and Stack say, and because it is a community that is not just passionate but also knowledgeable, better projects are likely to get funded." (http://blog.wired.com/gadgets/2009/03/open-source-har.html)

Discussion

Regulatory Hurdles in the U.S. context

"A promising idea it may be, but in this case the geeks are likely to face serious opposition from the financial regulators, says Paul Kedrosky, angel investor and a senior fellow at the Kauffman Foundation, which focuses on entrepreneurship and innovation. The Open Source Hardware Bank founders don't have to flip the pages of history too much to see the fate of peer-to-peer lending ideas in the United States, points out Kedrosky.

Last year, major community lending startup Prosper was forced to shut down by the U.S. Securities and Exchange Commission for not registering with regulators.

"If I put money into a project and am offered some kind of return on a system-wide basis, that requires issuing a security," says Kedrosky. "Which means the open source hardware guys will have to go through the same kind of securities registration as Prosper was forced to."

Zopa's Pitts agrees that the Open Source Hardware Bank needs to figure out how to navigate through the financial rules of the U.S. market. "These guys do not have a regulatory strategy and they need one," he says.

The SEC regulations around peer-to-peer lending SEC issue aren't cut and dry. Prosper, for instance, was in business for nearly three years and made $178 million in loans before the SEC intervened. With the open source hardware bank, says Pitts, all depends on the kind of promises and the system that is built. Zopa did not have any SEC related issues as it created a quasi-community lending model and used credit unions as intermediaries." (http://blog.wired.com/gadgets/2009/03/open-source-har.html)