Offer Prizes To Entrepreneurs To Solve Problems

You?ve heard of The X Factor but chances are slim you?ve heard of The F Factor. Last month, Simon Cowell (yes, that Simon Cowell) turned his judging eye to a group of entrepreneurs looking for funding. Ten teams competed for the ?10,000 prize which eventually went to Gyroglove, a wearable technology that helps counteract tremors in Parkinson?s patients.

If Cowell is on the scene, you know the prize economy has arrived.

Government and philanthropies have been using cash prizes to spur innovation for hundreds of years. In 1714, the British government offered a cash prize to anyone who could build a device to tell longitude at sea. In 1927, a $25,000 prize contest inspired Charles Lindbergh to make his famous flight from New York to Paris.

Today, prizes are becoming an increasingly important tool for entrepreneurs looking for attention, mentorship and funding. In 2011 President Obama signed a law authorizing all government agencies to conduct prize competitions. In 2012 the government sponsored 49 prizes. Last year that number jumped to 97 prizes worth a total $25 million.

Images of team Crucial as they compete in the WS Oil Cleanup XPrize Challenge, at the Omsett research and testing facility in New Jersey

Images of team Crucial as they compete in the WS Oil Cleanup XPrize Challenge, at the Omsett research and testing facility in New Jersey

The best-known private sector player in the prize economy is XPrize, a non-profit that operates global incentive competitions including a $30 million prize sponsored by Google GOOGL -1.01% for a privately funded team to land a rover on the surface of the moon. Another contest: a $15 million prize sponsored by Elon Musk for teams to develop software to bring children in the developing world (with no access to schools or teachers) to basic literacy in just 18 months. Founded in 1996, the XPrize was originally created to spur the private sector to build commercial space flight. Since then, there have been XPrizes to build more fuel-efficient cars, create better health sensors and improve surface oil spill clean-up technology.

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