1w ago

Alternatives to the Sillicon Valey business model in tech?

The current model for funding advancements in tech in the 21st century is: quantitative easing-doped venture capital hungry for investments -> startup uses initial money to make actual tech advancement (this is the good bit) -> hypes up idea, does IPO -> ideally market monopolization and vendor lock-in -> which allows them to enshittify and extract arbitrary rent from both the supplier and consumer side of their user base and return money to the investors, for ever.

The fact that this funding model applies to tech in general is demonstrated by the broad range of fields where it has been used:

for software, things like Figma or Medium
for hardware, things like the Juicero (a great example of how venture capital values trendiness (juicero was wifi-connected, required an app, god forbid if AI existed at the time) over real-world utility (the juice capsules could be opened by hand))
for biotech, things like GMO golden rice, where Monsanto disabled propagation so that farmers would have to come back to them for seeds (that's not exactly what happened, but I'm trying to make a point).

The obvious alternative to this is touted to be open source, ie. people making things for free and sharing it with others.

Unfortunately, the amount of things you can achieve for free, possibly relying on donations, is very limited. If you want to become a serious business, you need a serious funding model. I am convinced that the choice between open source and the Sillicon Valey model is a false dichotomy, and other ways of funding advancements in tech must exist (after all, the Sillicon Valey model has not always been the modus operandi).

Are there any hybrid business models for funding tech developments, that eg. even allow the developed tech to be open source? Has any research been done into the design of novell funding models?

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I like the idea of a coop. Workers own everything, feast or starve based on their own success.
- The problem with this is that the first generation of most things likely won't be a success, so unless there would be a stream of donations such an organisation would be doomed to fail if it doesn't already have a working business model

Yes, there’s steward-ownership and post-growth entrepreneurship:
https://www.ted.com/talks/armin_steuernagel_transforming_ownership_to_create_a_better_economy
https://purpose-economy.org/en/whats-steward-ownership/
https://www.ted.com/talks/melanie_rieback_post_growth_entrepreneurship
https://nonprofit.ventures/

In addition to the other models people have mentioned, one I think that's an important and sometimes overlooked alternative to venture funding is a good-old-fashioned small business loan. Venture funding became super attractive to startups because it looks kinda like free money. If your startup fails, you don't have to pay it back, they take on the risk with you. However, if you succeed, they own you forever. And they are going to demand a huge return on their investment to pay for all the other ones that failed.
So in certain light, investment funding is kind of like a super predatory type of loan. With a traditional loan, you have fixed terms, you pay it back, then you're done with them. With equity investors, you're never rid of them, as you noted. They sell their piece onto someone else of their choosing, who demands you make them even more money, etc. When the startup period's over, if you're not making enough money, yeah technically you don't have to pay back the loan every quarter. But the investors will fire you and hire different management unless you lay off half your workforce, cut the quality of your product, and make a much bigger margin by next quarter.
Also, lenders can have different structures and we can improve those as well. Instead of traditional banks, they could be credit unions with particular community objectives. Local members deposit their savings, and vote on lending principles and goals, like prioritizing lending to local worker-owned co-ops in their geographic area, and/or lending to community land trusts to enable purchasing of more real estate away from asset-based markets, fund construction of new housing, etc.
Edit: Plus, a credit union could agree on how to handle cases in which the co-op/organization can't pay back their loan. How to re-negotiate terms, when to vote on forgiving the remainder of the loan (turning it into a community donation) potentially based on demonstrated non-monetary value delivered to the community, and how to distribute that loss among the depositors, etc. There might be options for depositors to opt their funds into riskier loans, or loans they're willing to turn into crowd-funded donations, maybe even loans with voluntary pay-back terms only (i.e. when the receiving organization can afford to pay it back, to enable more loans to good causes in the community), creating hybrid types of funding as well.
- Ah, very good point.
  If your startup fails, you don't have to pay it back, they take on the risk with you. However, if you succeed, they own you forever.
  I see now. I suppose small business loans favor a more tempered approach whereas venture capital better incentivizes a more frantic approach of throwing things at the wall and seeing what sticks. And with a bank loan-based business, a lot of the other incentives get corrected too (no pressure for constant growth => no need to enshittify once genuine growth stops).
  I suppose the flaw of the bank loan model is that there's no certainty that the research will pay off, so as the researcher (ie. prospective business owner), you don't want to be the one paying for that inevitable risk...
  
  Exactly, 100%. Small business loans are a way to fund new businesses without ending up with non-worker owners. So once the businesses get off the ground and pay off their loans, they can get into a steady state that's good for their workers, customers, etc without needing to grow further.
  Your last point is a very good one and I think the main reason why venture capital is so much more popular than traditional loans in industries that can get access to venture capital (particularly tech). It's why I wonder if some credit unions with civic-minded members might opt for some hybrid options that have more generous terms if the research doesn't pay off.
  E.g. loans with voluntary repayment (it becomes a donation otherwise, but the lenders have less money to keep contributing to others in the community). Or at least the ability to renegotiate payment timelines collaboratively. Seems like an important thing to come up with creative approaches for, in order to make loans more attractive even for high-risk innovative research endeavors.
- Credit unions are a good idea and I don't understand why they aren't more widespread. Would the infinite growth pressure of publicly traded banks (which I assume CUs don't have) be enough to incentivize them to push all the CUs off the market?

Unfortunately, the amount of things you can achieve for free, possibly relying on donations, is very limited.
And yet here we are, with the internet running mostly on free software, the amount of work put into the linux kernel exceeding anything Microsoft could do and open source LLMs being serious competitors to companies investing 10B+ USD in research.
Open source is the biggest and most successful demonstration of what is technically an anarcho-communist effort. Communist: there is a collective ownership of the means of production (the source code) and anarchist: it is developed in the absence of a coercive structure, anyone is free to make a fork.
Are there any hybrid business models for funding tech developments, that eg. even allow the developed tech to be open source?
Public funding. Why is it always forgotten in these discussions? The funding that got us computers, space rockets, internet, deep learning is actually far more important than the "silicon valley" funding style that more often than not means "slap a nice UI on a result coming from a public lab"

Not a concrete example like your asking for but the question has a lot of overlap with the third software freedom
- This was freaking awesome. Just spent the last hour reading everything on the site. Very interesting concept
  
  Do I understand correctly that he argues that people pay for convenience, which means that by eg. charging for the convenience of using NuGet (and donating some of that to the developers) they'd be willing to pay you even though the software itself is free already?

There is the B-corp but I don’t know how successful. OpenAI’s structure seemed interesting but it doesn’t seem like it’s going to end up working out.
Mondragón is an interesting coop corpo in Spain. Co-ops do seem like a good choice.

Places like Kickstarter and Patreon show that crowdfunding can be hugely successful. Sadly the incentives of these platforms don't align well with their customers, so people have grown a bit jaded with Kickstarters recently and Patreon mostly devolved into a winner takes all attention economy that leaves lesser known creators with scraps only.
But the general idea is not bad. An ethical platform like Kickstarter that vets projects a bit and only allows coops or so would probably work well if they can convince people that those are relatively safe bets.
Sadly the payment processing side of things is a legal minefield, which makes it really hard and potentially expensive to set up an alternative.
- In my opinion crowdfunding is indeed a core piece of a post-capitalist society.

The obvious alternative to this is touted to be open source, ie. people making things for free and sharing it with others.
Unfortunately, the amount of things you can achieve for free, possibly relying on donations, is very limited. If you want to become a serious business, you need a serious funding model.
That's... obviously incorrect? Most important software is open source that was made for free. Most data centers run on freeware. And even with mass consumer facing software like youtube browsers the best options are freeware like Revanced. In academia, the whole concept of academic tenure is based on the empirical proof that professors do their job best when they don't have any obligations and they can just get a basic income to do whatever.
The best way to organize the tech industry is to make copyright and patents illegal and to give everyone a universal basic income.

For hardware it is relativly simple, as paying for that is normal. Raspberry Pi is a private company, but produces open source hardware. Probably the way to go, is to force all companies to do so. Right to repair is imho a good starting point.
For software the key seems to be large government or private customers. They do have a lot of money and the system not running costs them a lot. Hiring experts themself is also not always posdible. So buying in service from companies developing open source is an option.
For R&D a lot of that is done by universities and research institutions likr NASA today. That seems to me to be a good solution.

If anyone wants to learn about this process and enjoy it despite how horrible it is.Watch the show Silicon Valley, It does a good job explaining it all. And it's really funny.

Craigslist

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