@article{202512.1788,

title = {Derisking the Finance of Open Source Hardware Development},

author = {Joshua Pearce},

url = {https://doi.org/10.20944/preprints202512.1788.v1},

doi = {10.20944/preprints202512.1788.v1},

year  = {2025},

date = {2025-12-19},

urldate = {2025-12-01},

journal = {Preprints},

publisher = {Preprints},

abstract = {Scientific progress is held back by the high cost of proprietary equipment and the restrictive nature of patents, which slow innovation and limit scientific novelty. Free and open-source hardware offers a proven alternative, reducing costs generally by more than 90% for equivalent or lesser proprietary hardware while accelerating technological development through collaborative design and distributed digital manufacturing as well as commercial pathways. Despite these benefits, funding for scientific hardware development predominantly follows the antiquated proprietary model, creating a gap between scientists’ ability to purchase proprietary equipment and their inability to finance lower-cost open source alternatives. This article analyzes four financial models for open hardware development: (1) philanthropy model, where funders (non-profits or governments) shoulder all design risks; (2) standard investor model, where investors assume risk for design and sales in order to earn a return on investment (ROI); (3) crowd-sourced model, where the scientific community funds development and shares risk; and (4) a new decoupled risk investor model, which separates open hardware design risk from risk of an ROI by introducing a guarantor. A case study demonstrates that the decoupled risk investor model provides success for conventional science funders at marginally higher cost while enabling global access to low-cost designs and healthy ROIs with lower risk for investors. Comparative analysis highlights advantages and limitations of each approach, providing actionable recommendations for science funders. This work aims to derisk open hardware design financing, expand adoption, and democratize access to scientific tools globally while fostering innovation and cost savings across research disciplines.},

keywords = {business model, derisk, finance, funding, open hardware, open source},

pubstate = {published},

tppubtype = {article}

}