Example Cottage Industries

As banks turn on the gun industry, where will the gun industry turn? A plausible answer is to evolve into a cottage industry. Successful cottage industries exist even in heavily regulated sectors.

Here are some examples of successful cottage industries:

Ultralight Backpacking

For most of the last two (three?) decades if you wanted lightweight backpacking gear you had to find small, often one person, operations making it. Some of these companies eventually grew to become mid-sized companies (e.g., https://mountainlaureldesigns.com/, https://www.hyperlitemountaingear.com/, etc.). Still others grew to become industry giants (e.g., Osprey Packs, MSR, etc.).

Homebuilt Aircraft

The aerospace sector is heavily regulated but there is still a cottage industry catering to those that want to build their own aircraft (e.g., Airdrome Aeroplanes and other EAA-listed manufacturers). These companies will likely never be major players, but they are successful and keep up with demand in their geographic regions.

Subsets of the Firearms Community 

The firearm training community is full of small one-person shows. Even large training organizations (e.g. Gunsite Academy) tend to not be that big in the grand scheme of things. This is also largely true in the world of gunsmithing.

Pros and Cons

Pros:

• Cottage companies will often customize individual orders. Buy a gun from a large manufacturer and you're stuck with what you get from the manufacturer or whatever the aftermarket has contributed.
• Cottage companies innovate faster. Large outdoor companies are just now catching up to where ultralight cottage companies were more than a decade ago.
• Cottage companies are more willing to take risk. I don't see Ruger or Smith and Wesson accepting cryptocurrencies any time soon (ever?). According to CoinDesk, who discussed with Cody Wilson, 10% of Defense Distributed's revenue was in the form of bitcoins last year.
• Cottage companies aren't beholden to government contracts. The government often won't award them contracts anyway.
• Cottage industries are distributed. While this doesn't stop the government from clamping down, it does make it harder for the current wave of private virtue signaling to be successful.

Cons:

• Cottage companies often don't have the stock to ship quickly, particularly if they are popular. You can end up spending 6+ weeks waiting for an item to ship.
• Cottage companies are more susceptible to going out of business or shutting down for other reasons. Who will fix your gun when the small manufacturer that made it no longer exists? This may create more opportunity for gunsmiths. (Even if the manufacturer is in business they are more likely to charge for any repairs.)
• Cottage companies tend to try to fix mistakes but are less likely to take returns. Particularly if the item was customized.
• Cottage companies innovate faster. This is a pro, but also a con because there can end up being a large number of "versions" of a cottage company's products in the wild.
• Cottage companies make buying decisions harder. You end up having to spend more time finding companies and researching the companies themselves as well as their products. Having said that, popular small companies seem to always pop-up that are well known enough to be a "slam dunk" for new customers in the space.