Looking for 2-12 people to take advantage of our collective buying power to greatly reduce our hosting costs (in the long run). We would purchase two rack mountable (1U each) and host them in a local data center.

To give you an idea of the numbers, lets take the example of 6 people joining the co-op. 6 people could buy two largish servers for about $5500.00 (total, ~$900 each for initial outlay) and host at Smartt.com for about $25-$35/month.

What would you get for your ~1200 (first year)?

You would receive 4 VPS', each with 4G ram and 1VCPU (2 on each machine for safety). For comparison, Linode.com charges $159/Month each for machines with those specifications ($600/month!) which is ~85% Savings

I've also done some calculations for groups of 2, 4 and 12 people, but 6 seems to be the suite spot for costs versus VPS capabilities.

Collocation options:

http://www.smartt.com/ (2U 99/month)
http://www.square.ca/ (5U ??/Month)
http://www.in2net.com/ (5U 175/Month)

Lastly here are some existing/past groups that have done something similar:

California Community Colocation Project (Defunct?)
http://www.hatters.org.uk/
http://www.crosswired.org.uk/ (Site is broken, hopefully they fix it!)