The book Abundance talks about the important leverage that incentive prizes can provide. Describing the prize that inspired Charles Lindbergh to cross the Atlantic, Kotke and Diamandis write:

Nine teams cumulatively spent $400,000 to try to win Orteig’s $25,000 purse. That’s sixteenfold leverage.

Now some businesses are getting in on the act. Shopify used a $100,000 prize to generate $12,000,000 in sales. Look for incentive prizes to become one of the major drivers of start-up growth in the years to come. If done correctly, they provide a return that no other approach can touch.

The biggest challenge appears to be the legal hoops that one needs to jump through in order to validly offer a contest across multiple jurisdictions. I wonder if the problem emerges from the fact that Shopify promoted their competition as a “contest?”

Most incentive prizes are set up as very straightforward offers. Ortieg’s competition amounted to the following:

I’ll give $25,000 to the first pilot who flies from New York to Paris or vice versa.

The X prizes are similarly fairly simple offers to pay upon being first to achieve a certain outcome. I wonder if the X Prize foundation deals with legal issues surrounding running a contest in multiple jurisdictions?