Open source is already known as a force multiplier, a factor that makes a company's staff, financing, and resources more effective. However, in the last few years, open source has started pairing with another force multiplier—crowdfunding. Now the results of this combination are starting to emerge: the creation of small, innovative companies run by design engineers turned entrepreneurs. Although the results are just starting to appear, they include a fresh burst of product innovation and further expansion of open source into business.

Since the turn of the millennium, open source has been a stock resource for established companies. It has influenced the rise of technologies like OpenStack and the autonomous car, capable of halving the time to return on investment. As venture capitalist Lisa Lambert summarized to me over a decade ago, "Speed to market, speed to revenue."

However, until now, the community that produces open source software had received few of the commercial benefits of their product. Often, the community has viewed commercial uses for open source as plundering by outsiders.

The addition of crowdfunding challenges this conventional division. Originally a way for artists and hobbyists to fund their projects by appealing to many small backers instead of a handful of investors, crowdfunding is now a means for open source participants to enter business on their own terms or to expand the influence of their existing but small engineer shops.

What this trend means is that those who are the sources of innovation are also starting to implement it. Erich von Hippel long ago observed that consumers are a major source of innovation for established companies, and ne noted that the reason for open source's rapid development is that participants are both developers and consumers. However, with crowdfunding, open source developers can now monetize ideas themselves.

Funding Innovations

Compared to venture capitalism, the amounts of money raised by crowdfunding are low—more often, a matter of a few hundred thousand dollars rather than a few million. A few years ago, Canonical, the company behind the popular Ubuntu Linux distribution, received almost $13 million in pledges in its effort to develop a luxury smart phone, but the campaign came nowhere near its goal of $32 million. Most open source campaigns have considerably smaller goals and do not need more thanks to the reduced development costs associated with using open source.

Not only are examples of this trend becoming increasingly common, but a small industry is starting to emerge to support it. In 2015, Kickstarter and Indiegogo (the traditional crowdfunding sites) were joined by a smaller site, Crowd Supply. In addition to fundraising, Crowd Supply also advocates open hardware and teaches would-be entrepreneurs the basics of business while providing an online marketplace for their products.

This union of open source and crowdfunding is made easier by the fact their advocates share a similar combination of work practices and high ideals. As Josh Lifton, Crowd Supply's CEO, points out, "Both rely on a widely diverse group of people, most of whom have never met. Participants in both often get their start because of their own interests, and both, too, are motivated by a degree of idealism."

New Innovations

Emerging from this joint open source and crowdfunding partnership are the first new products coming to market. Already, they are demonstrating how powerful the combination can be by displaying a range of innovations unmatched by long-established corporations.

For example, Design Shift (an already existing company) used crowdfunding and open source to produce ORWL—a physically secure computer that requires both a password and a key for operation. If the key is moved too far away, the computer stops working. In addition, to prevent an intruder from breaking through the metal mesh surrounding the hard drive, ORWL can be set to erase itself.

Similarly, with the help of crowdfunding, Pi-Top is producing laptops powered by the Raspberry Pi single-board computer. The company is focusing on the educational market and is also developing lessons about programming, including a game with retro graphics.

Another example is Purism, which has funded a series of high-end laptops with emphasis on security—of which use only free software. In October 2017, Purism made headlines by confounding critics and raising over $2 million to develop a secure phone. The new phone will run on a Linux distribution—rather than Android—include hardware kill switches, and use end-to-end encryption for communication. With security concerns being discussed in mainstream media, Purism is counting on a growing audience that will appreciate its emphasis on security rather than a large app store.

Still, another example is Keyboardio, which has just released its Model 01—an ergonomic, highly customizable, programmable keyboard that is mounted on two slabs of maple and advertised as being "heirloom quality." The keyboard is so sophisticated that it requires an Arduino single-board computer—with open source firmware—to operate. As the first pre-orders are being received by backers, a search on Twitter suggests that these customers are receiving their new keyboards with the same levels of excitement that accompanies the release of a new iPhone.

Growing Pains

The trend of expanding open source with crowdfunding is not without problems. As Lifton notes, many open source entrepreneurs struggle to release their products, as they undergo a forcible education in the realities of the marketplace.

Likewise, when developing open hardware, many of these entrepreneurs have trouble finding manufacturers willing to work with what is still a niche market. While European and North American manufacturers often seem too expensive, the alternative of working with apparently cheaper Asian manufacturers comes with its own problems. The blogs of Keyboardio and that of the would-be maker of EOMA68 (a recyclable laptop with bamboo frames) illustrate these challenges in often harrowing detail. Simply finding a manufacturer willing to work with an unproven vendor with small quantity orders can be a challenge. Dropped contracts, cultural difficulties, missed deadlines, and inconsistent quality control often require repeated visits by entrepreneurs to handle problems face-to-face. Nonetheless, entrepreneurs are overcoming these difficulties with persistence and with the increasing help of local business guides. At the same rate, many products are being released months after they’re originally and optimistically scheduled—although, still years sooner than if they had been developed using proprietary in-house methodologies.

Developing Influence

The new companies that are taking advantage of both open source and crowdfunding are less than likely to become the new Apple or Google, at least for now—as their products are generally aimed at niche markets, and most have less than fifty employees. Nevertheless, if they can continue at their current level of innovation, they are on track to develop an influence far beyond what anyone might predict from their sales or size in the here and now.