Manufacturing
Historically, cottage industry was a system of subcontracting manufacturing work to families. This was common before the industrial revolution as a means to produce textiles, clothing, furniture and housewares. With the invention of the home sewing machine in 1846, home production of bespoke clothing remained a thriving industry well into the 20th century. These industries were popular amongst farming families as a means to make extra money in winter.Crafts
With the industrial revolution it became increasingly rare to produce manufactured goods out of the home as factories have far greater scale and efficiency. The one area that has held out are crafts whereby items are valued for their uniqueness, handmade qualities, artistic value or traditional characteristics. For example, a family that produces handmade Hawaiian quilts that command a premium price due to their uniqueness, traditional workmanship and authenticity.Services
With the commercialization of the internet beginning in the mid-1990s it has become very common to contract services to individuals working out of the home. For example, customer service that is provided by an individual at home who can connect to a company's systems using a VPN connection.Business Model
In venture capital circles, the term cottage industry is used to refer to a business model that is not scalable. Such a business is not worthy of a large investment because it will never produce large revenues. This does not invalidate the business model as it may be a worthy business for an individual that employs a few people. For example, a software developer with an idea for a niche mobile app with a total addressable market of less than a million users. This may be profitable for the developer but may be unlikely to become the type of billion dollar business that venture capitalists seek.Overview: Cottage Industry | ||
Type | ||
Definition | Small scale production of value that occurs in the home. | |
Related Concepts |