Fab Labs - Business Models

Excerpted from the report by Massimo Menichinelli, Business Models for Fab Labs

The Fab Lab Business Charter

Massimo Menichinelli:

"Even the official Fab Lab Charter (drafted in 2007) recognize that Fab Labs could adopt a business model for commercial activities and roughly defines some guidelines for such models:

- Business: commercial activities can be incubated in fab labs but they must not conflict with open access, they should grow beyond rather than within the lab, and they are expected to benefit the inventors, labs, and networks that contribute to their success.

Typology

Massimo Menichinelli:

"Fab Lab Iceland reports 4 business models for Fab Labs:

1. The Enabler business model: launch new Labs or provide maintenance, supply chain or similar services for existing Labs.

2. The Education business model: a global distributed model of education through Fab Labs (with the Fab Academy) where global experts in particular topics can deliver training from local Fab Labs or even from universities/businesses via the Fab Lab video conferencing network. P2P learning among users is also a part of this business model.

3. The Incubator business model: provide infrastructure for entrepreneurs to turn their Fab Lab creations into sustainable businesses. The incubator provides back-office infrastructure, promotion & marketing, seed capital, the leverage of the Fab Lab network and other venture infrastructure to enable the entrepreneur to focus on her areas of expertise.

4. The Replicated / Network business model: provide a product, service or curriculum that operates by utilizing the infrastructure, staff and expertise of a local Fab Lab. Such opportunities can be replicated, sold by and executed at many (or all) local Labs, with sustainable revenue at each location. The leverage of all Labs in the network simultaneously promoting and delivering the business creates strength and reach for the brand."

Research Overview

Massimo Menichinelli:

"The most complete research about the business models of Fab Labs so far comes from Peter Troxler, especially in his paper “Commons-based Peer Production of Physical Goods — Is There Room for a Hybrid Innovation Ecology?“ (presented at the 3rd Free Culture Research Conference, October 2010 Berlin). Troxler found that in the current Fab Lab practice there is no single business model and the literature about it is quite poor. Studying 10 Fab Labs (out of 45), Troxler discovered that the labs were primarily offering infrastructures to students, and they were relatively passive in reaching out to other potential users (general public, companies, researchers). Usually Fab Labs are hosted at schools, research or innovation centres or are independent entities: funding comes from outside, from public sources or from their hosting institution while revenue from sponsoring or from users so far remained the exception; however, Fab Labs are requested to become self-sustaining within 2 to 4 years, but none of the labs studied had yet reached this stage. Most of the Fab Labs had their own employees, and a few were run by a faculty of their host university or were supported by volunteers.

Fab Labs usually use their own Internet presence as a marketing strategy; few of them actively engage in PR, and these ones attract also non-students as users. Furthermore, they had so far created a limited innovation ecosystem with few network and industry partners and few, if any sponsors, which got used rather rarely. All labs indicated their main business model was providing access to infrastructure that users would have no access to otherwise, but most of then indicated that giving access to knowledge of the Fab Lab network and giving access to experts were equally part of their value proposition. Troxler pointed out then that there are two main business models (or value propositions) possible, namely Fab Labs providing facilities and Fab Labs providing innovation support.

Troxler further developed the concept of Fab Labs as innovation center within another paper, written together with Patricia Wolf: “Bending The Rules: The Fab Lab Innovation Ecology” presented at the 11th International CINet Conference, September 2010 Zurich. In this paper they identified four possible business models (Table 1.), among the intersections of open and closed intellectual property and Fab Lab as facility or as innovation support. Specifically, they propose the Fab Lab innovation ecology (a network of partners) as the most interesting, a Fab Lab with open intellectual property and aimed at facilitating innovation: more design thinking and stimulating innovation than just providing access and training. The primary clientele of this model are innovators, companies (particularly SMEs) and researchers, while the general public is not really important. Revenue will come from projects, services provided and partners engaging with the lab, rather than per hour or membership fees and possible sales of products or IP. The Fab Lab innovation ecosystem add the linking with a network of knowledge and experience to cheap manufacturing technologies, creating value by capturing experience and feeding it back into the network." (http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/)

Fab Fund: bringing distributed manufacturing technologies to companies

Massimo Menichinelli:

"Since Fab Labs have so far been dependent on fundings and have been rarely self-sufficient, Gershenfeld’s brother Alan and fellow venture capitalist Michael Angst founded a for-profit project called Fab Fund in 2007. The wiki at Fab Lab Iceland describes Fab Fund as:

- a double-bottom line investment fund that seeks market financial returns through investments that empower individuals to create small enterprises and sustainable-livelihood businesses. The Fab Fund focuses exclusively on products and services that enable or are enabled by the democratizing effect of personal fabrication.

Fab Fund is a sort of “micro-venture capitalism“: its $200,000 capital has been invested in for-profit businesses that prototype or manufacture their products in Fab Labs around the world, in order to make distributed manufacturing a viable business model. The fabcompany.com website is currently down and the status of this project is unknown; anyway it seems that the Fab Academy program is currently collaborating with Fab Fund “to help global capital find local inventors and local inventions find global markets”. (http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/)

Distributed Fabbing: other similar business models

Massimo Menichinelli:

"Beside Fab Labs, there are more initiatives about distributed manufacturing and that are worth considering. This initiatives show different business models that can also be used within Fab Labs.

Shapeways is a company that started within the Lifestyle Incubator of Philips at the beginning of 2009 (they then decided to be independent from Philips). With Shapeways, users can 3d print their projects or selling and buying them in a marketplace (user themselves can decide the markup of sold projects: some of them gets $1,000 in profit every month). The price of a product depends on the actual volume (cm³) of material used and includes shipping (some materials have startup costs ranging from $ 1.50 to $ 5.00; most orders are between $50 and $150 but the minimum order amount is $25 per order. Shapeways’s growth has allowed them to drop prices to a third of what they were at their start: they want to be a low-margin business in order to leverage their community. The company generated 244,000 € in revenue over 2009, but at the same time it lost 1,400,000 €. In September 2010 Shapeways received a $ 5,000,000 fund from VC Index Ventures and Union Square Ventures (the same firm that backed Twitter and Etsy) in order to open a manufacturing facility and headquarter in the USA.

Ponoko, a New Zealand company that started in 2007, is a marketplace for fabbing, sharing, selling, and buying products with laser cutting, 3d printing (with many materials) and hardware in the same project. Ponoko started offering only laser cutting, and the other technologies have been added in 2010. 5 digital factories in Wellington, San Francisco, Berlin, Milan and London were established in 2008: each hub is locally owned and operated; therefore pricing, materials, support, delivery and business terms may vary between them. Ponoko gets paid based on the cost of the materials plus $2 for every minute the laser cutter is used. Ponoko now offers a Prime month subscription (at $ 39,00 per month), which has more advantages, services and lower prices compared to the Free account (though Prime is only available for orders made at the NZ and US making hubs). Unlike Shapeways, Ponoko does not require any setup fees or minimum order size. In 2009, Ponoko was reported to have a revenue of $250,000 a year.

100k Garages is a community of workshops with digital fabrication tools (most of them are located in the USA and Europe), supported by machine manufacturer ShopBot and the digital fabrication service Ponoko. 100k Garages provides a marketplace for professional manufacturing services with zero fees (transactions amongs designers and fabbers are in US $), rather than offering shop access to makers. A similar but non-commercial(and open source) service called MAKERFACTORY has opened recently.

TechShop is a chain of member-based workshops in the USA equipped with typical machine shop tools (welding stations, laser cutters, milling machines) and corresponding design software. Access to the workshop is through monthly ($ 125) or yearly membership ($ 1200) for individual membership, but there are also student, family, corporate or one day memberships available. TechShop also offers services like Personal Prototyping, Personal Consulting and Personal Training at $95.00/hour, with a 2-hour minimum (up to 3 additional attendees to Personal Training are permitted at $30/hour each one)." (http://www.openp2pdesign.org/2011/fabbing/business-models-for-fab-labs/)