Establishing a research prize is a form of investment in progress only available in the philanthropic world. At the very high level it is easy to say that philanthropists pay people to work on specific tasks. This is simple enough for smaller amounts: transfer a few thousand dollars to a research group and you have bought a very small slice of the time and equipment needed to achieve any particular goal. When we start talking about much larger amounts of money, millions or tens of millions, then there are important secondary effects that occur when making such investments. In these amounts money has gravity, money makes people talk, and money changes behavior and expectations in a far larger demographic than just the recipients. This is well known, and thus investment activities, philanthropic and otherwise, become structured to best take advantage of this halo of effects. Most of the experience in doing this comes from the for-profit world: it doesn't take too long spent following the venture capital industry to see that investment is a lot more complicated than choosing a target and writing a check, and this is exactly because there are many secondary effects of a large investment that can be structured and harvested if investors go about it in the right way.
I theorize that the reason why research prizes remain comparatively rare is that firstly they are an investment strategy restricted to philanthropy, and thus people with the money to burn have little direct experience, and secondly the whole point of the exercise is not in fact paying people to do things directly, but rather creating a situation in which near all of the benefit is realized through the secondary effects generated by the highly publicized existence of a large sum of money. A research prize works by being a sort of extended publicity drive and networking event conducted over a span of years, a beacon to draw attention to teams laboring in obscurity, attract new teams, and raise their odds of obtaining funding. Connections are made and newly invigorated initiatives run beneath the light of a large sum of prize money, but at the end of the day that money becomes more or less irrelevant. It wasn't the important thing, it was merely the ignition point for a much greater blaze of investment and publicity. By the time a team wins, they are typically in a position to raise far more funding than the prize amount provides.
The ideal end result is that a field of science and technology is rejuvenated, taken from obscurity and thrust into the public eye, made attractive to investors, and numerous groups are given the attention and funding they need to carry on independently. This is how it worked for the Ansari X Prize for suborbital flight, and more quietly, for the Mprize for longevity science: in both cases the entire field changed as a result of the existence of the prize and the efforts of the prize organization to draw attention, change minds, and build new networks. But the award of money wasn't the transformative act, and in fact that award didn't really occur at all for the Mprize, but rather change was created through the sum of all of the surrounding effects.
So consider this: people who arrive at the state of being wealthy and wanting to change the world through philanthropy, often after decades of for-profit investment participation, don't have much in the way of comparable experience to guide them in the establishment and operation of research prizes. Thus creation of a research prize falls low in the list of strategies under consideration by high net worth philanthropists. Few people do it, and so there are few examples from which others can learn. It is the standard vicious circle of development, in which steady, grinding bootstrapping is the only way to create change.
Why care? Because research prizes work well. They work exceedingly well. Depending on how you care to plug numbers into equations, a well-run prize of $10 million will generate $150 to $500 million in investment in an industry, and that is just the easily measured result. Just as important is the following change and growth enabled by that initial burst of attention and funding. The Ansari X Prize spawned a number of other prizes in various industries, but I think it remains the case that medicine and biotechnology is poorly served in this respect. Outside of the efforts of the X Prize Foundation, the New Organ prizes, and other independent efforts such as the Palo Alto Longevity Prize, there is little going on. Given the proven utility of prizes there should be many more of them, and yet there are not.
In this context it is interesting to see the X Prize Foundation promoting the prize approach to a scientific audience, one of the demographics that should be more hospitable to prizes and participation in these efforts than is in fact the case.
Some inventors and innovators find themselves in a difficult spot, having advanced products beyond basic research - so that they do not usually qualify for government funding - but not near enough to commercialization to appeal to venture capitalists. To avoid this mid-stage "Valley of Death," life-science and technology innovators are spending more of their time searching for new funding sources. The Internet, with its reach and speed powered by social networking, provides a platform for crowdfunding, an area that is expected to grow over the next 10 years. Contributions from angel investors - typically well-connected, wealthy individuals who invest their own money - and incubator sources have doubled since 2007 in the U.S. and increased more than fivefold in Europe. However, these sources have high aversion to risk. There is another way to fill the funding void left by shrinking government budgets and tightening investor belts: incentivized competitions, which can catalyze innovations and accelerate their real-world impact.
At XPRIZE, formed in 1995, we create and foster high-profile competitions that motivate individuals, companies, and organizations across disciplines to develop innovative ideas and technologies to solve humanity's "Grand Challenges." Two of our prize competitions are specifically focused on medical technology. The XPRIZE model is different from that of governments, venture capitalists, or private investors. Our goal is to identify a health-care problem, define what needs to be addressed, and incentivize the development of a solution. There is often a commercial outcome, allowing the developers to get a return on their investment and provide a benefit to the general public. We are trying to focus on areas that are practical and that serve an existing market or will ultimately create a market that does not yet exist. In so doing, we provide an economic incentive for companies to redirect existing technologies towards new and relevant commercial opportunities. At the same time, we help innovators garner attention from investors and attract capital, support, and team members by creating consumer awareness and providing the general public with an early glimpse of performance. We are also able to connect teams with potential funding and sponsorship opportunities through various networking activities. And the evaluation of the products themselves allows for the assessment of competing technologies in a way that would be unlikely to happen until a product actually went to market.
In short, XPRIZE and other incentivized competitions are objective, unaffiliated, third-party catalysts for innovation, creating a channel for science and technology development in between early-stage work funded by the government and late-stage worked picked up by investors. By focusing on major needs in health that have not been met and incentivizing solutions with real commercial potential for delivery in the next three to five years, we can accelerate the pace of health-care improvements.