TCS Daily


Ultimate Prize Fights

By Dominic Basulto - October 25, 2004 12:00 AM

There is no doubt that the $10 million Ansari X Prize competition, which led to the creation of the world's first privately funded manned spacecraft, was phenomenally successful. Not only did the X Prize competition spur 26 teams to submit competing designs for commercial space travel in a Darwinian, winner-take-all prize format eventually won by the SpaceShipOne team -- it also sparked hope that similar prize competitions could find solutions to timeless technological pursuits. Until now, these so-called 'Holy Grails' -- such as artificial intelligence, cold fusion, virtual reality or teleportation -- have thus far been beyond the reach of traditional government-funded and even private venture capital-funded initiatives. The success of the X Prize competition, though, hints that technology's 'Holy Grails' may one day be within the grasp of private sector innovators.

Days after the X Prize had been awarded, the London-based World Technology Network (WTN) announced plans to partner with the X Prize Foundation to offer new prizes in as many as 20 different disciplines, ranging from nanotechnology to biotech to alternative energy. During the next six months, the WTN will receive requests and ideas from the broader public in the hopes of formulating prize competitions that are exciting, ambitious and "sufficiently focused to have a good chance of succeeding within a reasonable timescale." The ultimate goal, of course, is to jumpstart private sector investment in areas of science and technology that are ripe for disruptive innovation.

These prize competitions could be successful for a handful of reasons, not the least because the big, cumbersome hand of government will not be present. As more than one observer has pointed out, the idea that a manned spacecraft could be built without the assistance of NASA would have been unthinkable just a few years ago. Now it is a readily accepted fact that private sector innovation - especially innovation developing along many different parallel tracks at the same time - trumps almost anything that government-funded efforts can create. If the new WTN X-Prize competitions are also successful, sparking a major breakthrough such as a cure for cancer, they will lead to a wholesale rethinking of how to catalyze innovation in the private sector.

Thus far, the first X-Prize competition has already provided some insights about how prize competitions can be successful in the long-run in helping researchers solve previously insurmountable R&D challenges.

First of all, technology's 'Holy Grails,' almost by their very definition, are beyond the reach of any one company, government, or academic institution. Cognizant of this fact, the World Technology Network set itself up as a 'virtual think-tank' comprised of hundreds of individuals and corporations around the world. It is not hard to see that winners of prize competitions sponsored by the WTN and the X Prize Foundation will also arrange themselves into similar types of 'virtual' consortia. The consortium structure ensures fresh thinking across multiple disciplines and representation from academia, the corporate world, and even the broader public. If nothing else, these prize competitions will spur greater adoption of peer-to-peer and collaborative technologies as part of broad-based efforts to knit together far-flung teams.

Similar to the Ansari X-Prize competition, future prize competitions must be structured such that competing teams are not developing "technology for the sake of technology." According to the WTN, a fundamental idea of the new prize competitions is that any goal must be attainable and promote a worthy social cause with a global impact. Developing a cure for cancer or a new source of alternative energy, for example, would certainly meet that criterion. A more subtle point is that the underlying technology itself is not the focus of attention -- the only focus should be on the underlying results. In the Ansari X-Prize competition, for example, the underlying technology was not important. All that counted was being the first team to fly 3 people 100 kilometers into space and back two times within a 14-day period.

Finally, the X-Prize competition underscored the need for long-term partners and a stable source of financing over a multi-year period. Historically, this has been difficult -- if not impossible -- when there are negligible sources of revenue along the way. Contrast this multi-year development model with the traditional VC model, which attempts to take a seed-stage start-up from zero to fifty in three years or less. Not all problems -- and especially not the so-called technology 'Holy Grails' can be reduced to 3-year problems, though. The initial concept for SpaceShipOne, in fact, dates back to 1996, while design work and limited testing began approximately 3 ½ years ago.

In the final analysis, the WTN X-Prizes could stimulate the leading researchers in the world to seek out technology's 'Holy Grails.' In much the same way, the $25,000 Orteg Prize inspired Lindbergh to cross the Atlantic in 1927, opening up the age of transatlantic, non-stop air travel. Competitions in areas from biotech to nanotechnology will refocus innovative individuals within the U.S. on long-term problems without the interference of government bureaucrats or the need to win the imprimatur of fickle venture capital investors. Moreover, these competitions will create a type of 'multiplier effect' in which $1 in prize money can lead to additional private sector R&D outlays. If the WTN X-Prize competitions turn out as hoped, five to ten years into the future, the technology 'Holy Grails' that have tempted dreamers for generations may finally be within our grasp.

The author is a TCS contributor who writes frequently about venture capital and technology.


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