Prize Capital, LLC - Innovative Financing Techniques to Facilitate Radical Environmental Breakthroughs

Prize Capital Chairman Lee Stein Profiled in San Diego’s The Daily Transcript

Fri, 9 Jul 2010 08:42:47 -0700

Close-up: Lee Stein
Serial entrepreneur changes focus toward environment

By REBECCA GO , The Daily Transcript

When the solution is obvious to Lee Stein, he acts. He doesn't just sit there; he does something about it, and he does it in a big way.

For example, when Stein and his wife of 34 years, June, tired of train horns blaring insistently past his Del Mar home office, signaling their approach to a railroad crossing, Stein started looking for an alternative. He researched federal railroad law, involved the city manager, the North County Transit Board and the Del Mar City Council, and formed a Quiet Zone Committee.

Before a year was up, the group had tested the viability of installing a quieter, stationary wayside horn that could be signaled remotely by an approaching train and was working on securing an exact cost estimate by mid-July.

Stein "is the fellow that's the spark plug," Quiet Zone Committee chair Hershell Price said. "He's a born leader."
Compared to some of Stein's other projects, however, the wayside horn -- although certainly of consequence to Del Mar's ocean-view residents -- seems to be small potatoes. Now in his mid-50s, Stein has moved through his career with a decisiveness and foresight that some would call almost prescient.

Educated as an accountant at Syracuse University and an attorney at Villanova University, Stein began his career as a Beverly Hills accountant to the stars, with a client list that included Journey, Men at Work, Gene Hackman, Matthew Broderick and Rod Stewart.

He then worked in real estate finance and development, investing in Seaport Village and developing the Ramada Main hotel at Disneyland -- and then selling his real estate interests before the market bottomed in 1990 to "retire" at 37. In 1993, within two days of being introduced to an Internet modem -- in a chance airport meeting with Internet pioneer Einar Stefferud -- Stein co-founded Internet commerce company First Virtual Holdings, which offered PayPal-like services before PayPal even existed. He eventually took First Virtual public and later sold the patents to eBay.

The Rancho Santa Fe resident shrugs it off, for the most part.

"I can see around corners," said the mild-mannered Stein, who seems to prefer multi-tasking to sleeping and says he tracks 172 blogs. "I've always had the ability to see things early. I don't know how to describe it better than that."
Today, Stein's focus is on environmentalism -- for its economic opportunities as well as its commitment to preserving the planet.

His latest creation, Prize Capital, aims to attract capital to fund green prize competitions. Contestants will develop technology that will solve the planet's problems and vie for a prize of $10 million in cash.

The contests are modeled on those run by the X Prize Foundation, which will facilitate some of Prize Capital's contests as well. X Prize Foundation is the nonprofit behind the Ansari X Prize that sent a three-passenger vehicle 100 kilometers into space twice within two weeks.

The first of Prize Capital's contests will focus on capturing carbon and recycling it -- "solving the coal problem," as Stein puts it, by turning carbon emissions "into an asset instead of a liability." Prize Capital will act as an incubator, providing office space, research labs and access to a stream of flue gas for experiments and research.

Flue gas is gas that is produced through the combustion of fuel. Prize Capital plans to partner with a Midwest power plant for the flue gas, Stein said.

The competition relieves both capital market and regulatory burdens, Stein said. Most investors are not prepared to fund ideas that are early stage and unproven, and Prize Capital will provide incentive as well as capital for research and development.

Also, regulators would probably be reluctant to approve an individual's request to use or create a flue gas source for experimentation. A large group and a prize competition are much harder to deny.

"Prizes have to get it done when there are other impediments," Stein said. "The great thing about the prize is that there are four or five different things that won't necessarily win the market share or win the prize, but the prize gives them publicity."

Stein has spent the last four years developing a risk mitigation strategy involving options and honing in on the contest theme of carbon capture and recycling. He recently secured a sponsor as well as funding, but declined to provide details as the agreement is still being finalized.
Stein expects to announce the specifics, including the contest rules, in December.

For Stein, his work in the environmental space is obvious, even logical. There are business opportunities and job creation opportunities in optimizing a reliable but inefficient energy system, Stein points out.

Beyond that, however, companies, individuals and governments need to start implementing industry "best practices" and take into account what Stein and others are calling "natural capital." An Earth depleted of its resources is not good for humanity, let alone business.

Stein, who tends to speak in stories and anecdotes, uses fishing as an example: Going fishing and selling the fish creates economic growth. Fishing to maximize growth kills off the natural capital and halts growth entirely in the long term.

"I think anthropologists will find that our definition of GDP (gross domestic product) was improper," said Stein, who terms the present time a "resource depletion age." "We have dead zones (of ocean) around the planet. Why do we tolerate one square foot of dead space? I don't understand."
Outside of the prize competitions, Prize Capital is also working to promote sustainable business -- such as ecotourism -- on the Osa Peninsula in Costa Rica, a country whose president has committed to making it a petroleum-free zone. Stein is often part of delegations supporting various environmental initiatives and speaks at events around the world.

Stein's foray into green projects began earlier in the decade, when he became active in trying to bridge the gap between business professionals and environmentalists. He co-founded the Southern California chapter of Environmental Entrepreneurs, or E2, and played a role in helping state Sen. Fran Pavley pass a "clean cars bill" that would aim to reduce greenhouse gas emissions from passenger vehicles.
"You have a lot of people who do not talk to each other. I like to get them around the table and help them find a solution," Stein said. "The easiest way to find consensus is to get people talking to each other."

Those who know Stein well or who have worked with him say he has an uncanny ability to make connections between seemingly disparate ideas and bring talented people together to work toward a common end.

"When I think of Lee, the word that always comes to mind is 'Rolodex,'" said Bob Epstein, who sat on the board of First Virtual in the mid-1990s and is the co-founder of E2 and a green bank in San Francisco. "He's the master of maintaining relationships and knowing when to use them."
Stein agrees that he's not afraid to "cross-pollinate" between different groups of people. His early experience solving a myriad of problems for rock stars helped him become a "general contractor of special services," Stein quipped.
He admitted his approach has only gotten better with time. He is far more process-oriented; he has a handbook for his administrative assistant. He likes to "build concentric circles" when solving a problem: Stein starts with a core group and then reaches out to include more and more people to achieve the best solution.

The event that changed Stein's life, however, was when he learned at 37 that he had an inoperable cerebral aneurysm, in which an artery in the brain swells due to weakening in the vessel walls. Stein had an 85 percent chance of dying or having a stroke at any moment. The aneurysm inexplicably healed, but the situation forced Stein to re-evaluate how he spent his time.

"It was the ultimate concept of living in the moment," Stein said. "I wouldn't wish it on anybody, but it was life-defining."
So, where will Stein spend his time next? He sees wireless health as an exciting opportunity, but says he prefers to be "monogamous" in his projects. Whatever the case, Stein is sure that his insatiable curiosity will lead him to new ideas, information and people, and his need to improve upon the status quo will see him offering up another solution once again.

http://www.sddt.com/Finance/article.cfm?SourceCode=20100709tbe#

http://m.sddt.com/article.cfm?SourceCode=20100709tbe

Lee Stein to Participate in Prestigious Panel Discussion of Clean/Green Industry

Wed, 3 Mar 2010 16:07:01 -0800

Prize Capital Chairman and CEO Lee Stein will participate on a panel of experts on Friday March 26, 2010 at The University Club in San Diego to discuss the importance of the clean/green industry.

Joining Stein on the panel will be Irene Stillings, CEO Center for Sustainable Energy, and Lisa Bicker, CEO, Clean Tech San Diego. The moderator for this event is Stephen Mayfield, Associate Dean, Kellogg School of Science & Technology.

More information can be found at: http://www.clubcorp.com/club/scripts/calendar/view_club_calendaritem.asp?CID=771867&GRP=10&NS=PCH&MFCODE=UCAST&src=w

Prize Capital Speaking at and Sponsoring the 3rd Annual Algae Biomass Summit

Mon, 5 Oct 2009 21:08:27 -0700

Prize Capital will be speaking about the Algae Fuel Prize and the opportunities it presents at the 2009 Algae Biomass Summit, on October 7 at 5:30 PM at the Marriott San Diego Hotel in San Diego, California. Prize Capital is also sponsoring the opening night reception, which immediately follows its presentation, and serving as an overall Silver Sponsor of this three-day event.

The Algae Biomass Summit is the official conference of the Algal Biomass Organization (ABO) and the algal industry's premier global conference. The ABO is expecting to draw more than 800 attendees for this event, which lasts between October 7-9, exploring the development of algae-based solutions to global energy, environmental, and economic issues.

For more information and to register to attend this event, click here.

Build a Better Bulb for a $10 Million Prize

Thu, 24 Sep 2009 10:11:03 -0700

By ERIC A. TAUB and LEORA BROYDO VESTEL
The New York Times

The ubiquitous but highly inefficient 60-watt light bulb badly needs a makeover. And it could be worth millions in government prize money — and more in government contracts — to the first company that figures out how to do it.

Right now, that company could be Philips, the Dutch electronics giant. The company announced on Thursday that it had submitted the first entry for the L Prize, an Energy Department contest that will award up to $10 million to the first person or group to create a new energy-sipping version of the most popular type of light bulb used in America.

As the first entrant, Philips will win the prize if its claims hold up. Testing of the Philips lamp will take close to a year to complete as the department independently evaluates the company’s claims.

“Philips is confident that the product submitted meets or exceeds all of the criteria for the L Prize,” Rudy Provoost, chief of Philips Lighting, said in a statement.

The $10 million is almost beside the point. More important, the contest winner will receive consideration for potentially lucrative federal purchasing agreements, not to mention a head start at cracking a vast consumer marketplace.

The L Prize has garnered significant attention in the lighting industry because 60-watt incandescent lamps represent 50 percent of all the lighting in the United States, with 425 million sold each year. The Energy Department says that if all those lamps were LED equivalents, enough power would be saved to light 17.4 million American households and cut carbon emissions by 5.6 million metric tons annually.

For decades, incandescent light bulbs continued to bear a strong resemblance to Thomas Edison’s creations, but new energy standards that go into effect in 2012 — and would effectively outlaw today’s incandescent bulb — have brought about a period of fertile innovation in the lighting industry.

One of the first attempts at greater efficiency was the now-maligned compact fluorescent bulb, but there have also been efforts to modify incandescent technology to conform to the new standard. LED bulbs are now available in stores, but those models have limited output and high prices. A faithful reproduction of an incandescent bulb’s light from an inexpensive and efficient source has been the industry’s ultimate goal.

Philips has delivered 2,000 prototypes of its bulb to the Energy Department for testing. The company says the bulbs meet all the criteria of the contest, which specifies a bulb that reproduces the same amount and color of light made by a 60-watt incandescent bulb, but uses only 10 watts of power. The bulb must also last for more than 25,000 hours — about 25 times longer than a standard light bulb. In a nod to economic concerns, at least 75 percent of the bulb must be made or assembled in the United States.

If the new bulb passes the department’s testing regimen, it will be an even more efficient, longer-lasting lighting device than today’s compact fluorescent bulbs. The department considers the introduction of compact fluorescents, today’s alternative to standard bulbs, to have been a debacle.

At first, the department set no standards for compact fluorescent bulbs and inferior products flooded the market. Consumers rebelled against the bulbs’ shortcomings: the light output from compact fluorescent bulbs was cold and unpleasant, their life was much shorter than claimed, many were large and undimmable, they would not work in cold environments and they contained polluting mercury.

By setting rigorous criteria for the L Prize, the department hopes LED bulbs can avoid a similar fate. That also means rejecting current LED bulbs that can claim some technical similarities, but fall far short of the L Prize’s goals.

“We’ve probably eliminated almost 25 products that were horrible,” said James R. Brodrick, manager of the Solid State Lighting Program of the Energy Department. “We test LED bulbs today that claim on the package that they’re equivalent to 40 watts, but are really like 20-watt bulbs.”
“This will be the most publicly tested bulb ever,” Mr. Brodrick said.

The Philips LED lamp represents “a significant energy savings,” said Nadarajah Narendran, the director of research at the Lighting Research Center at Rensselaer Polytechnic Institute. “This has now leapfrogged what C.F.L.’s can do.”

The Energy Department will also award $5 million to the creator of an LED reflector lamp (no entries have yet been made) and a new, “21st-century lamp,” the specifications of which are yet to be defined.

General Electric — along with Philips and Osram Sylvania, one of the world’s biggest lighting suppliers — said that it would introduce a new LED module next month that would make it easier to replace traditional light sources with LEDs. Osram had no comment about its plans.

The first certified products, due in about a year, will not be cheap. Today’s LED-based bulbs cost up to $100 each, and while there is plenty of optimistic talk about reducing that price, a clear path to affordability remains elusive.
To lower the cost, Mr. Brodrick has enlisted 27 utility companies around the country as L Prize partners, with the hope that utility subsidies, along with mass production, will help cut the cost. One such utility, Southern California Edison, will both test the bulbs and offer rebates to consumers, according to Gregg Ander, the company’s chief architect.

“There’s a potential for LED lamps to be much more acceptable to the consumer than compact fluorescents,” Mr. Ander said. He said he expected that eventually, an LED substitute for a 60-watt bulb would cost the same as its compact fluorescent equivalent, factoring in its longer life.
Kevin Dowling, vice president for innovation at Philips Solid State Lighting Solutions, is confident that the LED light bulb can become an affordable option. “Over the long term, we can absolutely get the cost down to the $20 to $25 range,” he said.

http://www.nytimes.com/2009/09/25/technology/25bulb.html?_r=1&th&emc=th

A $1 Million Research Bargain for Netflix, and Maybe a Model for Others

Mon, 21 Sep 2009 10:41:30 -0700

By Steve Lohr
The New York Times

Even the near-miss losers in the Netflix million-dollar-prize competition seemed to have few regrets.

Netflix, the movie rental company, announced on Monday that a seven-man team was the winner of its closely watched three-year contest to improve its Web site’s movie recommendation system. That was expected, but the surprise was in the nail-biter finish.

The losing team, as it turned out, precisely matched the performance of the winner, but submitted its entry 20 minutes later, just before the final deadline expired.
Under contest rules, in the event of a tie, the first team past the post was the winner. “That 20 minutes was worth a million dollars,” Reed Hastings, chief executive of Netflix, said at a news conference in New York.

Yet the scientists and engineers on the second-place team, and the employers who gave many of them the time and freedom to compete in the contest, were hardly despairing.
Arnab Gupta, chief executive of Opera Solutions, a consulting company that specializes in data analytics, based in New York, took a small group of his leading researchers off other work for two years. “We’ve already had a $10 million payoff internally from what we’ve learned,” Mr. Gupta said.

Working on the contest helped the researchers come up with improved statistical analysis and predictive modeling techniques that his firm has used with clients in fields like marketing, retailing and finance, he said. “So for us, the $1 million prize was secondary, almost trivial.”

Indeed, since it began in October 2006, the Netflix contest was significant less for the prize money than as a test case for new ideas about how to efficiently foster innovation in the Internet era — notably, offering prizes as an incentive and encouraging online collaboration to tap minds worldwide.
The lessons of the Netflix contest could extend well beyond improving movie picks. The researchers from around the world were grappling with a huge data set — 100 million movie ratings — and the challenges of large-scale modeling, which can be applied across the fields of science, commerce and politics.

The prize model is increasingly being tried on work like new science and freelance projects in design and advertising. The X Prize Foundation, for example, is offering multimillion-dollar prizes for path-breaking advances in genomics, alternative energy cars and private space exploration.
InnoCentive is a marketplace for business projects, where companies post challenges — often in areas like product development or applied science — and workers or teams compete for cash payments or prizes offered by the companies. A start-up, Genius Rocket, runs a similar online marketplace mainly for marketing, advertising and design projects.

“The great advantage of the prize model is that it moves work away from the realm of the beauty contest to being performance-oriented,” said Michael Schrage, research fellow at the Center for Digital Business at the Sloan School of Management at the Massachusetts Institute of Technology. “It’s the results produced that matters.”
The emerging prize economy, according to some labor market analysts, does carry the danger of being a further shift in the balance of power toward the buyers — corporations — and away from most workers.

Thousands of teams from more than 100 nations competed in the Netflix prize contest. And it was a good deal for Netflix. “You look at the cumulative hours and you’re getting Ph.D.’s for a dollar an hour,” Mr. Hastings said in an interview.

Netflix, Mr. Hastings said, did not do a crisp cost-benefit analysis of its investment in the contest. But several crucial techniques garnered from the contest have been folded into the company’s in-house movie recommendation software, Cinematch, and customer retention rates have improved slightly. Better recommendations, Netflix says, enhance customer satisfaction.

“We strongly believe this has been a big winner for Netflix,” Mr. Hastings said.

The prize winner was a team of statisticians, machine-learning experts and computer engineers from the United States, Austria, Canada and Israel, calling itself BellKor’s Pragmatic Chaos. The group was actually a merger of teams that came together late in the contest.

In late June, the team finally surpassed the threshold to qualify for the prize by doing at least 10 percent better than Cinematch in accurately predicting the movies customers would like, as measured against actual ratings. Under the contest rules, that set off a 30-day period in which other teams could try to beat them.

That, in turn, prompted a wave of mergers among competing teams, who joined forces at the last minute to try to top the leader. In late July, Netflix declared the contest over, and its online leader board showed two teams had passed the 10 percent threshold: BellKor and the Ensemble, a global alliance with some 30 members.

Netflix said the contest was too close to call, and the leader board showed a slight edge to the Ensemble. However, the teams’ software had to go through two data sets — one public, which was the basis for the leader board, and another hidden one, which determined the outcome of the contest.

The second data set was there to ensure that the winning solution really was the best at making better movie recommendations in general, and was not just tailored to get the best score from the public data set.

Win or lose, researchers agreed that they entered the contest in good part to get access to the Netflix data. “It was incredibly alluring to work on such a large, high-quality data set,” said Joe Sill, an independent consultant and machine-learning expert who was a member of the Ensemble.

Chris Volinsky, a member of BellKor, who is a scientist at AT&T Research, said Netflix “made a brilliant move by realizing that there was a research community out there that worked on these kinds of models and was starving for data.
“Netflix had the data, but only a handful of people working on the problem.”

Netflix was so pleased with the results of its first contest that it announced a second one on Monday. The new contest will present contestants with demographic and behavioral data, including renters’ ages, gender, ZIP codes, genre ratings and previously chosen movies — but not ratings. Contestants will then have to predict which movies those people will like.

Unlike the first challenge, the contest will have no specific accuracy target. Instead, $500,000 will be awarded to the team in the lead after the first six months, and $500,000 to the leader after 18 months.

The winners of the first contest said the money would be split seven ways, according to a formula they declined to disclose. The amounts each received, they said, would certainly help with a car, house payments or children’s college educations — but were not life-changing.
When asked if he planned to take on the second Netflix prize, Bob Bell, a scientist at AT&T Research, said, “I like the notion, but I think I’m too tired.”

http://www.nytimes.com/2009/09/22/technology/internet/22netflix.html?_r=1&th&emc=th

Interest in algae's oil prospects is growing

Thu, 17 Sep 2009 21:39:27 -0700

By Tiffany Hsu
The Los Angeles Times

Firms and scientists are racing to figure out how best to separate the oil produced in the organisms for biofuel. The San Diego area has become a hotbed for these efforts that are drawing investors.

To many, algae is little more than pond scum, a nuisance to swimmers and a frustration to boaters.

But to a growing community of scientists and investors in Southern California, there is oil locked in all that slimy stuff, and several dozen companies are racing to try to figure how best to unleash it and produce an affordable biofuel.

The companies and several research labs have set up shop in the San Diego area, many of them in an area nicknamed Biotech Beach. There, about 200 biotech companies of all kinds are clustered near La Jolla on the mesa above Torrey Pines State Beach.

Together, the firms and organizations conducting algae research employ nearly 300 people with more than $16 million in payroll and bring $33 million annually into the local economy, according to the San Diego Assn. of Governments, and local officials see the potential for much more.

"It's a critical industry, and it's kind of exploded," San Diego Mayor Jerry Sanders said. "There's a long pattern of huge companies being spawned out of [UC San Diego] and our other research centers, and it's going to create a tremendous number of jobs."

National energy companies are converging on the fledgling industry. Exxon Mobil Corp. announced a $600-million partnership with La Jolla biotech company Synthetic Genomics Inc. in July. San Diego companies General Atomics and Science Applications International Corp. have received nearly $50 million from the Defense Department for algae fuel research.

Last year, $176 million was invested by venture capitalists to develop biofuel from algae, according to industry publication Biofuels Digest in Miami.

With the region's proximity to the ocean and its history with biotech businesses, San Diego is a familiar spot for clean-energy investors, Biofuels Digest editor Jim Lane said.

"It has all the magic conditions for the emergence of business life," he said. "San Diego wants to be associated with algae, while other cities have other fish to fry and think of algae as just one of many things."

Supplementing the research is experimental aquaculture, as farming in fresh- and saltwater is known. The arid Imperial Valley to the east is now home to several massive algae farms, one with nearly 400 acres of ponds in all shades of green being swirled by paddles to expose the organisms to more sunlight.

All of this activity has drawn its share of doubters.

Skeptics say that it's a beachcomber's fantasy, that it's too costly to cultivate any significant amount of algae, that fuel inside -- whether in the form of oil, ethanol, gas or hydrogen -- is too expensive to extract or produce on a large scale.

But in recent years, San Diego, along with Silicon Valley, St. Louis, Seattle and a few other cities, have disregarded the skeptics and emerged as hotbeds of algae biofuel research.

One of the nascent industry's major annual events, the 2009 Algae Biomass Summit, is headed to San Diego next month. It is put on by the Algal Biomass Organization, a Preston, Minn., group that seeks to promote commercial uses of algae products.

Seeking to unite and enhance much of the algae work underway in San Diego County is a new research consortium. It aims to help clear barriers to commercializing algae biofuels by identifying new algae strains and harvesting methods.

The San Diego Center for Algae Biotechnology was launched in 2008 with 16 founding partners from UC San Diego, the Scripps Institution of Oceanography, Salk Institute for Biological Studies, biofuel companies and more.

Until recently, "algae has been this complete backwater of scientific research," said the center's founding director, Steve A. Kay, who is also dean of biological sciences at UC San Diego.

"But we've all woken up with the realization that we are junking the planet."

Known as "nature's solar panels," the "amazingly clever little chemical factories" soak up carbon dioxide and sunlight, which is converted into oil through photosynthesis, Kay said.

Algae, he said, can be harvested more often and at greater yields than many other potential biofuel crops such as soybeans or grasses.

Unlike food and several other biofuel sources, algae is being eyed because it can thrive in difficult environments such as salty or polluted water or in the desert, freeing up valuable agricultural space.

Fuel from the microorganisms has already been tested in airplanes and is being groomed for use at NASA test facilities and in the Navy. Last month, San Diego-based biofuel gorilla Sapphire Energy unveiled its Algaeus plug-in hybrid vehicle, which will run on an algae-based renewable gasoline.

Scientists also envision using algae for more than just fuel, tapping it instead for fish or livestock feed, antibacterial products, foams for windmill blades and, in one futuristic vision, in cancer therapies.

In the 1990s, early research into algae biofuels stagnated as oil prices dropped and funding was siphoned off to cancer, AIDS and bioethanol studies, Kay said. Algae is now making a comeback, buoyed by the eco-friendly movement and concerns about dependence on traditional fuels. But the slimy stuff is no magic wand, experts say.

Expecting algae to make a meaningful dent in fossil fuel usage is still a tall order, experts said. The algal biofuel production process is often lambasted as inefficient by other biofuel competitors.

"We can certainly come very close, but we're not there yet and I'm not sure when we'll ever get there," said John R. Benemann, an algae biofuel consultant with Benemann Associates in Walnut Creek. "It's a significant challenge to get down to the price point, or even just the ballpark of fossil fuels."

The problem is translating successful lab experiments to an industrial scale. Mass algae biofuel production could require enormous pools or photobioreactors while growing a proportionally small amount of algae. Technology needs to be developed to systematically extract the oil from the organisms.

Algae-generated oil currently costs $20 to nearly $33 a gallon to produce, with some estimates soaring to $60. Conventional gasoline costs less than $5 a gallon.

"There's a valley of death between research and development and commercial development," said Lisa L. Mortenson, chief executive of Community Fuels in Encinitas.

Add California's heavy regulations, and algae biofuel production becomes an even more difficult business proposition, some complained.

Biofuel companies often have to wade through a tangle of permits, taxes and compliance measures in California. Aquaculture alone requires more than 15 permits, with more for waste disposal and water use.

The intensity of the algae hype is making some investors wary.

"The majority [of the efforts] are a gigantic hassle of time and capital because they're trying to make coal out of diamonds," said David Andresen, a clean-tech investment banker at Oracle Capital Securities. "There's such a high level of scientific illiteracy in the investment community that you can really wow investors."

Still, even Andresen is an investor in the industry, working with Kai BioEnergy Corp., a San Diego company named after the Hawaiian word for "ocean."

Although Kai can produce only about 20 gallons per minute while it needs 300 gallons a minute to be commercially viable on a large scale, Chairman Mario C. Larach is optimistic.

"It's just a matter of scaling at this point," he said. "If nature can do it, we can do it."

tiffany.hsu@latimes.com
Copyright © 2009, The Los Angeles Times

http://www.latimes.com/business/la-fi-algae17-2009sep17,0,7803416,full.story

Prize Capital Presents at the California Energy Commission’s Workshop on Renewable Fuels

Tue, 15 Sep 2009 10:00:05 -0700

At the invitation of the California Energy Commission (CEC), Prize Capital’s Matt Peak presented on algae-based renewable fuels at the CEC’s Staff Workshop for the 2010-11 Investment Plan. Peak sat on a panel with Steve Mayfield, professor at the University of California San Diego and founder of Sapphire Energy, and Matthew Frome of Solazyme.

The Prize Capital presentation discussed the status of algae technology, and what is required to establish in-state algae fuel facilities.

Specifically, Peak outlined why Prize Capital is focusing on California-based algae fuel companies, specifically through its development of the Prize Capital Algae Fuel Prize. The presentation conveyed Prize Capital’s interest in investing in companies that are poised to produce (rather than simply research) algae-based renewable fuels while maintaining the highest of environmental standards (in a landscape where such standards don’t yet exist), and how the Prize Capital Algae Fuel Prize provides a mechanism to source such companies.

The uniqueness of the Prize Capital venture finance model – as it would be applied in the Algae Fuel Prize – was also discussed as a pioneering way to leverage prizes and direct more investment in algae producers who set up production facilities in California to chase the prize. The Algae Fuel Prize presents a very powerful and winning package for the state, for competitors, and for investors.

The purpose of the Investment Plan Workshop was to obtain specific information and data on market, technology and policy issues related to the production, distribution and sales of biofuels in California. The outcome will assist CEC staff in the preparation of the 2010-2011 AB 118 Investment Plan for the Alternative and Renewable Fuel and Vehicle Technology Program.

More information on the Algae Fuel Prize can be found here.

Watch a WebEx recording of Prize Capital’s testimony at the California Energy Commission’s Staff Workshop for the 2010-11 Investment Plan by clicking here.

Eyes on the Prize

Sat, 1 Aug 2009 10:26:00 -0700

By David Strom
David Strom’s Web Informant

The news last month that two groups of computational researchers have qualified for the $1 million Netflix Prize got me thinking about how other prizes have had a very influential role in technology development. For those of you that missed this nugget, several dozen different computer scientists and mathematicians have tried over the past year to improve upon the algorithms that Netflix uses to recommend new videos to its subscribers. The teams that could get better than a 10% improvement (defined very precisely by Netflix) would qualify to win the prize purse.

This is only the latest in a series of prize-motivated developments. For the past three years, a group of southern California investors have been working on a venture called Prize Capital. The effort grew out of the work of the Ansari X PRIZE Foundation that awarded a $10 million prize in 2004 for the first private spaceflight.

Prize Capital combines old-fashioned greed with socially conscious investing on a grand scale. Their concept is thrilling, with a simple idea at its core. An investment firm creates a fund that will be used to invest in the total field of competitors in a single niche market. The complexity comes about in its execution, which may be why no one has ever tried to do it on the scale that they envision before now. The first prize effort is underway to develop better biofuels.

Unlike traditional venture funds that invest in multiple companies or sector funds that serve particular markets, the prize capital model starts with this “matrix fund”. The genius behind the idea is that this fund drives an entire ecosystem for directing high-return innovations. The largest and most noticeable element is a very public science contest that all of the funded companies take part in, going after a ten million dollar prize purse and racing to be the first to establish a particular invention, task, or medical cure.

The Prize Capital notion is revolutionary and differs from existing venture or sector funds on several different dimensions. First, the combination of the matrix funding model with the prize competition is a brilliant deal-discovery mechanism. The allure of the challenge and the chance to be in the spotlight, not to mention the actual cash prize itself, can help to locate and identify potential technology solutions in a particular market niche. Because the prize is a public one, the bright light of worldwide publicity associated with the contest can help bring about all sorts of benefits to the competing companies, including attracting additional investors and management talent.

Second, “the matrix model permits investors to bet on every horse in the race,” says Lee Stein, one of the founders of Prize Capital and an early leader in the Internet payments industry in the mid-1990s. “A lot of times VCs don’t make investments because they have a short list of companies in a particular niche but can only invest in one. The matrix model enables them to play the full field and spread their risk.”

Traditional venture capital funding is not structured to take positions in direct competitors, while the matrix concept relishes this situation. Prize Capital leverages its relationship with the prize management industry to take positions with everyone in a given field. As long as the competition is attractive enough to cause everyone in a given field to enter a particular competition, the result is a new opportunity for investors to become involved with cutting edge technology. Spreading the investments across the matrix can create additional leverage and reduce the risk of the investors.

A third difference is that Prize Capital will own a royalty stream on the intellectual property generated by the teams in the competition. Even if a given company fails to win the prize, the fund has the ability to succeed.

Fourth, the prize mechanics are important part of the deal, and here is where the groundbreaking work on the Ansari X PRIZE has paid off. These mechanics have to be carefully scripted and innovation targets clearly defined. The competition also requires that the ultimate science must be repeatable and independently verifiable. This was done on the Ansari X PRIZE and is an essential element of any planned future competitions.

The prize is only awarded when a positive report comes back saying everything works. This process is more stringent than that is typically required by peer-reviewed academic journals, the current prestige venue for scientific results. Prize Capital thus could be in an interesting position of being able to set a very high bar here for how basic research is conducted in the future.

While the traditional VC trades capital for equity positions in their portfolio companies, Prize Capital can use other kinds of benefits, including the additional influence from the publicity and activities of the competitors as they work hard to meet the particular goals to win the prize, to secure stakes in the innovation on favorable terms.

Most science competitions have been funded through philanthropic means. Prize Capitalism leverages the large jumps in technology innovation and uses it to fuel an entire ecosystem of investments to take advantage of these innovations.

Look at what happened with the original X PRIZE. That initial $10 million prize purse was leveraged into over $100 million into work being done to develop two spaceports in the New Mexico and Arabian deserts. This isn’t just a lot of dot-com sock puppets or social networking startups depending on ad click-throughs. This is hard-core real estate development, new job creation and engineers building real assets on the ground.

The Prize Capital model has something for everybody. It could bring a ray of hope for many people that are looking at ways to dramatically increase basic research and kick start medical cures. It can co-opt the heavy publicity surrounding the whole prize itself and the take advantage of the spirit of invention and innovation that so often goes hand-in-hand with the best American capitalists. It has universal appeal across nations and cultures too, and can play as well with the new generation of Asian proto-capitalists and with the old crew along Sand Hill Road too. And it has some Hollywood glitz on the order of “American Idol” and yet still appeals to button-down Wall Street bottom-line sensibilities. It is an intriguing mix of investors, capitalists, non-profit charities and philanthropists working hand-in-hand, all in the name of advancing science and fostering innovation. I wish them well and hope to see the fruits of their labors soon. In the meantime, keep your eyes on other prizes.

http://strom.wordpress.com/2009/08/01/prizecapital/

The Crowd Is Wise (When It’s Focused)

Sun, 19 Jul 2009 11:19:29 -0700

By Steve Lohr
The New York Times

FEW concepts in business have been as popular and appealing in recent years as the emerging discipline of “open innovation.” It is variously described as crowdsourcing, the wisdom of crowds, collective intelligence and peer production — and these terms apply to a range of practices.

The overarching notion is that the Internet opens the door to a new world of democratic idea generation and collaborative production. Early triumphs like the Linux operating system and the Wikipedia Web encyclopedia are seen as harbingers.

In the new model, innovation is often portrayed as a numbers game. The more heads, the better — all weighing in, commenting, offering ideas. Collective knowledge prevails, as if a force of egalitarian inevitability.

But a look at recent cases and new research suggests that open-innovation models succeed only when carefully designed for a particular task and when the incentives are tailored to attract the most effective collaborators. “There is this misconception that you can sprinkle crowd wisdom on something and things will turn out for the best,” said Thomas W. Malone, director of the Center for Collective Intelligence at the Massachusetts Institute of Technology. “That’s not true. It’s not magic.”

The Netflix Prize is a stellar example of crowdsourcing. In October 2006, Netflix, the movie rental company, announced that it would pay $1 million to the contestant who could improve the movie recommendations made by Netflix’s internal software, Cinematch, by at least 10 percent. In other words, the company wanted recommendations that were at least 10 percent closer to the preferences of its customers, as measured by their own ratings.

(Cinematch analyzes each customer’s film-viewing habits and recommends other movies that the customer might enjoy. More accurate recommendations increase Netflix’s appeal to its audience.)

The contest will end next week because a contestant finally surpassed the 10 percent hurdle on June 26, and, according to the rules of the competition, rivals have 30 days from that date to try to beat the leader. The frontrunner is a seven-person team, and its members are statisticians, machine learning experts and computer engineers from the United States, Austria, Canada and Israel. It is led by statisticians at AT&T Research.

The leading team is a very elite crowd, indeed, but it is also one that was made possible by the Internet. The original three AT&T researchers (one has since joined Yahoo Research, but remains on the contest team) made good strides in the first year of the contest. But to make further progress, they went looking for people with other skills and perspectives. So they reached out eventually to a pair of two-person teams, who were among the leaders in the rankings posted on the contest Web site.

“The leader board was right there,” said Chris Volinsky, director of statistics research at AT&T. “It was pretty obvious who the top teams were.”

Though leading, his team may not win. But the teams in close pursuit are similar collaborations of skilled researchers and engineers.

The Netflix contest has lured experts worldwide not only because of the prize money but also because it offered a daunting challenge. The contestants’ algorithms must find patterns nestled in a collection of more than 100 million movie ratings. What is learned in tackling such a large-scale data analysis and predictive-modeling problem could well be applied in many industries, like Web commerce or telecommunications. “It made sense for us both from the perspective of AT&T and scientific research,” Mr. Volinsky explained.

In the Netflix contest, the winning idea is simply the one with the highest score. But often, companies rely on a contributing crowd for ideas, though management then chooses. I.B.M., for example, conducts online brainstorming sessions it calls Jams — 13 over the last seven years.

I.B.M. used one session to guide its strategy for investing in new growth fields, starting in 2006. An estimated 150,000 employees, clients, business partners and academics participated. Management sifted through the ideas and committed $100 million to invest in several opportunities to apply technology innovations to energy saving, health care and smart electricity grids.

“It starts out as crowdsourcing and it is culled to a set of action items,” said Jeffrey T. Kreulen, a researcher at the I.B.M. Almaden Research Center in San Jose, Calif.

Open-innovation models are adopted to overcome the constraints of corporate hierarchies. But successful projects are typically hybrids of ideas flowing from a decentralized crowd and a hierarchy winnowing and making decisions. In Linux’s case, anyone can submit code, but Linus Torvalds and a few lieutenants decide what code will be included in the operating system, noted Mr. Malone of M.I.T. Even Wikipedia — produced by collaborating clusters of contributors focused on particular areas of interest — relies on administrators to make final judgments on whether to delete a challenged article, he added.

“Most of the interesting examples of collective intelligence contain many different design patterns,” Mr. Malone said.

In a recent paper, “Harnessing Crowds: Mapping the Genome of Collective Intelligence,” Mr. Malone and his two co-authors, Robert Laubacher, a research scientist at M.I.T., and Chrysanthos Dellarocas, a professor at the University of Maryland, use a biological analogy in calling the design patterns of collective intelligence systems “genes.” They studied the genelike building blocks in more than 250 examples of collective intelligence enabled by the Web. The intent, they write, is to provide a systematic framework for thinking about collective intelligence, so “managers can do more than just look at examples and hope for inspiration.”

OPENING the corporate doors to ideas and inspiration from the collective crowd holds great potential, but there are pitfalls, warns Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley. To succeed, Mr. Chesbrough said, a company must have a culture open to outside ideas and a system for vetting and acting on them.

“In business, it’s not how many ideas you have,” he observed. “What matters is how many ideas you translate into products and services.”

http://www.nytimes.com/2009/07/19/technology/internet/19unboxed.html?_r=1&th=&emc=th&pagewanted=print

Exxon Sinks $600M Into Algae-Based Biofuels in Major Strategy Shift

Tue, 14 Jul 2009 17:53:56 -0700

By KATIE HOWELL
Greenwire

Oil giant Exxon Mobil Corp. is making a major jump into renewable energy with a $600 million investment in algae-based biofuels.

Exxon is joining a biotech company, Synthetic Genomics Inc., to research and develop next-generation biofuels produced from sunlight, water and waste carbon dioxide by photosynthetic pond scum.

"The world faces a significant challenge to supply the energy required for economic development and improved standards of living while managing greenhouse gas emissions and the risks of climate change," said Emil Jacobs, vice president of research and development at Exxon Mobil Research and Engineering Co. "It's going to take integrated solutions and the development of all commercially viable energy sources, improved energy efficiency and effective steps to curb emissions. It is also going to include the development of new technology."

Exxon Mobil's collaboration with Synthetic Genomics will last five to six years, Jacobs said, and will involve the creation of a new test facility in San Diego to study algae-growing methods and oil extraction techniques. After that, he said the company could invest billions of dollars more to scale up the technology and bring it to commercial production.

"We're not claiming to know all the answers," said Craig Venter, founder and CEO of Synthetic Genomics, which has so far done early work on algae strains. "There are different approaches to what is truly economically scalable, so we're testing things and giving a new reality to the timelines and expectations of what it takes to have a global impact on fuel supply."

Jacobs and Venter are mum about the specific technology the collaborative effort would employ. They said the team would investigate all options, including growing organisms in open ponds and in closed photobioreactors.

They added that they were likewise uncertain what end-product fuels would result from the collaboration. Other startup companies have announced that they were producing both synthetic crude and biodiesel using photosynthetic algae (Greenwire, April 28).

"As far as products to expect from this program, our intent is to make hydrocarbons that look a lot like today's transportation fuels," Jacobs said. "We want to produce hydrocarbons that look like today's refinery products, that can go into a refinery to be processed along with other petroleum streams and then used in the transportation fleet or even jet fuel. And we think we've got a good chance of doing that."

Exxon Mobil launched the partnership after years of being publicly opposed to investing in renewable energy. Privately, though, Jacobs said the company has been investigating the sector for years.

"It's fair to say that we looked at all the biofuels options," Jacobs said. "Algae ended up on top."

Others in the algae-biofuels industry say Exxon Mobil's investment validates the sector.

"A couple years ago, the petroleum institute said there's only a couple of years left for oil, and now they're really finally acting on that," said Riggs Eckelberry, president and CEO of OriginOil Inc. "Algae is the feedstock to overtake petroleum. It's the real alternative to petroleum."

Environmentalists were more cautious in their appraisal of the Exxon Mobil-Synthetic Genomics plan.

"They've never done anything like this before -- invested real money in the renewables sector," said Kert Davies, research director at Greenpeace. "We've always said [the oil industry] has to be part of the climate change solution. We can't solve anything without companies like Exxon helping."
He added, "I'm guarding my optimism."

Exxon Mobil's timing is noteworthy, Davies said, because of the ongoing energy and climate legislative fight.

"It's interesting timing as the oil companies are struggling to find a place at the table," Davies said.

Renewable fuels standard

While Exxon Mobil's investment marks a sea change in activity in the sector, significant challenges remain in place to achieve wide-scale commercial development.

Next-wave biofuels that could reduce carbon emissions and displace oil imports are politically popular but have not moved into commercial production as fast as supporters would have hoped. Biofuels overall got a boost through a 2007 law that expands the national renewable fuels standard, or RFS, to reach 36 billion gallons by 2022.

But Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) said the RFS expansion is too restrictive and could freeze out emerging technologies -- including algae-based biofuels. He is calling for changes that would make it more "technology- and feedstock-neutral" to accommodate fuels that could ultimately prove superior in several respects.

"Algae-based fuels are the most obvious example, which, despite having characteristics superior to any renewable fuels in commercial production today, have no home in the RFS," Bingaman said in a column about the standards published in the Politico newspaper.

Senior reporter Ben Geman contributed.

http://www.nytimes.com/gwire/2009/07/14/14greenwire-exxon-sinks-600m-into-algae-based-biofuels-in-33562.html

Copyright 2009 E&E Publishing. All Rights Reserved.

Prizes: A Winning Strategy for Innovation

Tue, 7 Jul 2009 18:50:48 -0700

By Jonathan Bays and Paul Jansen
McKinsey & Company

Back in the 18th century, the inability to accurately measure the longitude of a ship’s position made transoceanic voyages high-risk ventures—for investors as well as sailors. The answer? In 1714, the British government offered a cash award of £20,000 to anyone who could develop a way of precisely determining a ship’s longitude. Although most felt the answer would emerge from a leading astronomer, in an early example of crowd sourcing, the prize inspired the British clockmaker John Harrison to develop the marine chronometer, which by solving the problem greatly enhanced the safety of long-distance sea voyages.

Nearly 300 years later, prizes meant to spark solutions to complex problems are experiencing a renaissance. Philanthropists, corporations, and public agencies are using innovative prize designs to address an extraordinary array of challenges, from cleaning arsenic-laced water wells in India to reducing America’s reliance on imported oil to improving the governance of African countries.

A prize is a familiar and easily understood concept that has a long history of inspiring beneficial change. Besides the 18th-century Longitude Prize, for example, there was the French government’s food preservation prize that led to long-shelf life canned foods, and the 1858 Bréant Prize which, though never awarded, stimulated research into infectious diseases. As the patent and grant system matured, however, prizes seemed to become peripheral to innovation. Today, they are booming again. Since 2000, more than 60 prizes with a value greater than $100,000 have debuted around the world, representing almost $250 million in new prize money, and the total annual value of the large prizes that we tracked has more than tripled. At the same time, the use of prizes is shifting away from traditional areas, such as the arts and humanities, toward technologically complex ones—climate change, space travel, and biotechnology, to name just a few. Furthermore, innovative prize forms are emerging that have the power to build skills, strengthen networks, or even create markets.

This renaissance is driven by the simple fact that prizes work—almost by definition, since they pay only for desired results, not noble failures. The power of prizes to stimulate innovation comes from their ability to mobilize resources, intellectual as well as financial, and to draw attention, which can influence the perceptions and actions of potential solvers or society at large. These attributes are often very attractive to companies and philanthropists looking for unconventional ways to solve tough problems that have resisted traditional approaches.

Are there limits to what prizes can achieve? What are appropriate objectives for them and the best practices in their use? We took a close look and found some clear principles for creating effective prizes.

Exploiting the power of prizes to drive change

Traditionally, prizes have generated change in one of two ways. Recognition prizes seek to identify excellence—for instance, by recognizing specific individuals or innovations. In doing so, these prizes mark specific endeavors as valuable and encourage others to emulate the recipients or build on their innovations. Nobel prizes are the paradigm of this type. Inducement prizes, on the other hand, aim to spur specific innovations by focusing the energy of potential problem solvers on well-defined problems. NASA’s Astronaut Glove Challenge, for example, specifies simple criteria for higher-performing spacesuit gloves. The Challenge is open to any innovator; and in fact the first winner was an unemployed engineer.

Both types of prizes use high-profile competitions to signal the seriousness of a problem and to attract innovators. They are powerful forces for change, but our research showed that prizes can be—and are—used much more expansively. We’ve identified at least four other types of prize for promoting change.

The first are exposition prizes, to which the Internet gives new potential. These prizes use a competition to highlight ideas or opportunities within a field. In England, the Royal Agricultural Society’s 19th-century annual exhibition awarded medals for technological innovation—which frequently led to patents and further investment—are a good example. Today, prize sponsors use the Internet to achieve something similar. The Netherlands’ PICNIC Green Challenge, for example, is an exhibition that highlights green products and services and enlists other organizations to help improve and scale the best ideas. Last year, the prize attracted over 200 entrants.

Network prizes build and strengthen communities by connecting funders and innovators, creating forums for interaction, and encouraging potential leaders. The Milken Family Foundation’s Educator Awards, for example, recognize educational excellence, giving prizes of $25,000 to America’s top kindergarten through 12th-grade teachers, principals, and educational specialists. But that’s only the beginning. Much of the impact of the awards comes from the way the foundation helps these winners build a community. . Each year, for instance, it assembles them at a national conference with policy and community leaders, and it perpetuates the group through the Milken Educator Network, whose members often serve on state committees or national commissions on education.

Just competing for a prize can improve the skills or behavior of entrants, so a few sponsors have made participation a primary objective, designing prizes for which the competitive process is at least as important as the outcome. The annual FIRST Robotics Competition, for example, puts tens of thousands of American high school students through a variety of robot building challenges, rewarding team spirit and professionalism as much as finished products. The focus on reinforcing motivation and building team skills is partly responsible for the fact that participants are three times more likely than peers from similar backgrounds to major in engineering—and twice as likely to perform community service. We found participation prizes to be one of the least-used prize types, but there are enough good examples of successful ones to suggest that they should be used more often as a broader social-change strategy.

Finally, some recent prizes aim to go beyond promoting specific innovations. By emulating market incentives and exposing latent demand, these competitions attempt to stimulate an entire market. The $10 million Ansari X PRIZE, awarded in 2004, is a celebrated example; through a competition to create reusable manned spacecraft, this market-building prize helped to spur the development of the private spaceflight industry. The 26 teams that competed invested more than $100 million collectively in their efforts to win the prize, which helped mobilize new talent, drive down costs, and publicize the market’s potential. Investors have since spent more than $1.5 billion to develop the industry.

Emerging best practices

The traditional focus in creating a prize is the initial design—the topic, the judging criteria, and the reward—and the method for determining the winner. But our case studies and interviews with experts suggest that the most successful prize competitions place an equal emphasis on other elements, such as the broader change strategy, the competition itself, and post-award activities designed to enhance the impact of the prize.

Successful prize sponsors think strategically by investing significant resources in prize development long before announcing a purse. The $10 million Progressive Automotive X PRIZE, for example, went through a year-long design phase that involved extensive input from outside experts and potential competitors. Ashoka’s Changemakers competitions solicit input from hundreds of Ashoka fellows and past entrants to create a detailed “discovery framework” that defines the problems to be solved. In both cases, a generous investment of time and resources improves the odds that later investments, by the sponsors and the participants alike, will pay off in social benefits.

Much as prize sponsors can exploit the power of competition to drive innovation, they should also recognize the benefits of collaboration. A great deal of research suggests that collaboration can promote innovation substantially and some prizes actively encourage it. Changemakers, for example, encourages publication of submissions during the competition, generating conversations that often inspire participants to improve their entries before the competion closes.

Finally, much of the impact of a prize occurs after it is awarded. Prize sponsors who devote significant effort to post-prize activities consistently impressed us. Sponsors, for instance, can make their prizes part of a broader change strategy that also includes grants, contracts, or infrastructure investments to help institutionalize benefits or scale up innovations. They can transform their winners into a reservoir of human and intellectual capital for solving other vexing problems. And they can periodically review the impact of a prize, learning lessons from their experience and applying the lessons in a way that improves the prize’s effectiveness.

Strong outlook for prizes

We see a bright future for prizes. Nearly a third of the sponsors we surveyed plan to increase their prize activity. The new generation of philanthropists are embracing prizes, and the entry of new kinds of sponsors, such as governments, may further expand the resources available. Prizes are also likely to become more professional, as the emergence of full-time facilitators such as Innocentive and the X-PRIZE Foundation shows. Greater attention to best practices will make prizes more economically productive. And we expect to see a greater understanding of—and better solutions to—tricky challenges, such as the protection of intellectual property and the proliferation of prizes.

Are there limits to the effective use of prizes? Of course! Good ones require clear objectives, a rich field of potential problem solvers, and competitors willing to take risks. Prizes work best when a field isn’t already flooded with funded research and the challenge is more to create a clever application of technology than a technology itself.. These requirements, however, hardly limit the possibilities for the new prize forms and applications.

A prize is an old idea that remains surprisingly powerful today. We believe that more institutions should harness the power of this flexible, expressive instrument in their efforts to generate social and business benefits.

This piece was adapted from the McKinsey report And the winner is…Capturing the promise of philanthropic prizes, published in March 2009.

http://whatmatters.mckinseydigital.com/innovation/prizes-a-winning-strategy-for-innovation

The Science Prize: Innovation or Stealth Advertising?

Fri, 8 May 2009 07:41:39 -0700

By ROBERT LEE HOTZ
The Wall Street Journal

Are we impatient with NASA? Google offers $30 million in prizes for a better lunar lander. Do we like solving practical puzzles? InnoCentive Inc. has posted hundreds of lucrative research contests, offering cash prizes up to $1 million for problems in industrial chemistry, remote sensing, plant genetics and dozens of other technical disciplines. Perhaps we crave guilt-free fried chicken. The People for the Ethical Treatment of Animals offers a $1 million prize for the first to create test-tube poultry tissue that can be safely served for dinner.

Call it crowd-sourcing; call it open innovation; call it behavioral economics and applied psychology; it's a prescription for progress that is transforming philanthropy. In fields from manned spaceflight to the genetics of aging, prizes may soon rival traditional research grants as a spur to innovation. "We see a renaissance in the use of prizes to solve problems," says Tony Goland, a partner at McKinsey & Co. which recently analyzed trends in prize philanthropy.

Critics, though, dismiss the newest trend in prize-giving as a form of advertising that masquerades as public service -- and a clever ploy to attract top research talent at a discount.

Since 2000, private foundations and corporations have launched more than 60 major prizes, totaling $250 million in new award money, most of it focused on science, medicine, environment and technology, the McKinsey study found.

"There certainly are many, many more prizes now than a decade ago," says Daniel Socolow, director of the MacArthur Foundation's Fellows Program, which every year awards $500,000 "genius" grants to about two dozen promising people in the arts, sciences and humanities.

All told, more than 30,000 significant prizes are awarded annually, collectively worth $1 billion dollars. The prize economy has rarely been more rewarding. The total value of purses from the 219 largest prizes has tripled in the past 10 years, the McKinsey analysts reported.

Moreover, three-quarters of the new prize money is for awards designed to solve specific problems, whether it is a knotty question of protein chemistry leading to an AIDS vaccine, as in the $150,000 International Aids Vaccine Initiative Challenge or for a more reliable way to weld plastic pipe, as in InnoCentive's $100,000 Challenge #8244892.

For private philanthropists, it's a way to use charitable giving to force a breakthrough. The Virgin Earth Challenge, for example, promises $25 million to the first among us who can cheaply remove a billion tons of greenhouse gases from the air every year. The Prize4Life contest offers up to $8.5 million for breakthroughs leading to a treatment for Amyotrophic Lateral Sclerosis (ALS).

In growing numbers, corporate sponsors are embracing the prize challenge as a safe, inexpensive way to farm out product research, at a time when tight credit and business cutbacks have slowed innovation. Venture-capital investments have dropped by almost half since last year, reaching the lowest level since 1997, the National Venture Capital Association recently reported. "Here is a mechanism for off-balance-sheet risk-taking," says Peter Diamandis, founder of the X Prize Foundation. "A corporation can put up a prize that is bold and audacious with very little downside. You only pay the winner. It is a fixed-price innovation."

Netflix, for example, now offers a $1 million prize to the person who measurably improves its computerized movie recommendations. At least 34,000 people are competing. WellPoint Inc. is organizing a $10 million prize for a better health-care system.

Spending about $150 billion on research and development this year, the federal government dwarfs such efforts. It underwrites most basic science through competitive grants and other more traditional funding channels. The National Academy of Sciences, though, is urging the federal research agencies to endow incentive prizes of up to $30 million each. Congress has toyed with the idea too.

By itself, prize money isn't enough, though; nor is imagination or ambition. "There is an art and a science to designing a prize," says Dr. Diamandis. Ineffective organization or a poorly conceived goal can undermine good intentions.

Consider the fate of the largest research incentive prize in recent memory. With considerable fanfare in 2004, Las Vegas-based Bigelow Aerospace announced the $50 million America Space Prize, to foster private U.S. manned space flight. It quietly folded recently after it failed to attract enough contestants.

Earlier this year, the Gotham Cancer Prize Foundation suspended its annual $1 million cancer prize, which sought to foster innovative ideas for cancer treatment, after awarding it only once. "The project wasn't working the way we had hoped and we only wanted to continue funding an effort that was going to be effective and have a big impact," said Gary Curhan at the Harvard School of Public Health, who helps administer it. They hope to resume it next year

Done properly, though, a prestigious award like the Nobel Prize can transform an unassuming scientist into intellectual royalty with a fairy-princess kiss of publicity and cash. "Awards shine a light on areas of research," says Maria Freire, president of the Lasker Foundation, which has given annual awards for basic and clinical medical research discoveries since 1946. Last year, each of its prizes included a $300,000 honorarium.

New fields are generating new prizes. Last year, the Kavli Foundation endowed three $1 million prizes to recognize basic discoveries in astrophysics, neuroscience and nanoscience. The first Kavli awards highlighted insights into quasars, quantum dots and embryonic neurons.

Awards also can warp what they honor, skewing personal and professional priorities, says sociologist Joel Best at the University of Delaware. In a broader sense, awards help shape the public's perception of science. For better or worse, they affect the conduct of science itself, by prizing some efforts at the expense of others.

"I hate these inducement prizes and their language of social benefit," says University of Pennsylvania prize scholar James F. English, author of "The Economy of Prestige: Prizes, Awards and The Circulation of Cultural Value." "It's a cover for what they are really about, which is getting attention. I don't think that kind of small-scale frantic prize-chasing investment is the best way for us to solve big problems."

All in all, those who prize renown are engaged in a quest for recognition that has not changed very much since Achilles and Beowulf sought a warrior's lasting fame. Reputation is still the ultimate prize in modern intellectual combat.

In the Grove Street Cemetery at Yale University, the competition for prestige has a life after death. There, two chemistry professors -- John Kirkwood and Lars Onsager -- are buried side by side. The tombstones of these former colleagues vie for academic superiority.

Dr. Kirkwood's tall grave marker attests to a lifetime of accomplishment with a list of a dozen awards, appointments, medals, degrees and titles. Dr. Onsager's more modest monument, erected 17 years later, notes his name, birth, marriage, and death. It summarizes his life in two words: "Nobel Laureate."

That's followed by an asterisk that draws the visitor's attention to the lower right hand corner of the grave stone.

There, the chiseled footnote reads: "*Etc."

http://online.wsj.com/article/SB124173078482897809.html

Recommended Reading
More than 30,000 prizes are awarded every year, many of them designed to solve specific research problems, according to McKinsey & Co. report called "And the Winner Is."

InnoCentive Inc. uses cash prizes of up to $1 million to generate solutions to practical and commercial problems from a network of 160,000 freelance experts.

Prize4Life offers $8.5 million in incentive prizes to create breakthroughs in effective treatments for amyotrophic lateral sclerosis.

The Google Lunar X Prize is a $30 million competition for the first privately funded team to send a robot to the moon, travel 500 meters and transmit video, images and data back to Earth. (See video on one contest submission)

The Virgin Earth Challenge offers a $25 million prize to the first who can demonstrate a commercially viable design that can remove enough greenhouse gases to help stabilize the climate.

PETA is offering a $1 million prize to the first scientist to produce and bring to market in vitro meat.
The Mprize competition awards a cash prizes to the longevity research team that breaks the world record for the oldest-ever mouse.

The X Prize Foundation has organized a series of $10 million inducement prizes for space flight, genomics, health care and energy-efficient automobiles. (See video from the X Prize Foundation)

Prize Capital Sponsors, Presents at Imperial Valley Renewable Energy Summit

Wed, 6 May 2009 15:02:35 -0700

Demonstrating its support for efforts to catalyze growth of the Southern California algae-to-fuel industry, Prize Capital is sponsoring the Imperial Valley Renewable Energy Summit. Prize Capital also presented an overview of its Algae Fuel Prize competition to local stakeholders during an afternoon plenary session.

With its sun-drenched and dry climate, many perceive California’s Imperial Valley to be the next great renewable energy frontier - ideal for solar, geothermal, and algae energy development, among others.

This three-day summit focused on these and related issues by facilitating networking, information exchanges between stakeholders, and regional tours. Prize Capital’s efforts centered on the first day, which highlighted and discussed the region’s algae-to-fuel production efforts.

The first half of the day consisted of tours of local algae production facilities. These facilities included Carbon Capture Corporation (http://www.carbcc.com/) SunEco Energy (http://www.sunecoenergy.com/), and Earthrise (http://www.earthrise.com/home.asp).

The second half of the day consisted of presentations by experts and stakeholders on algae fuel development efforts. Prize Capital presented on the status and details of its Algae Fuel Prize.

More information on the 2009 Imperial Valley Renewable Energy Summit can be found at: http://www.ivedc.com/?pid=1001.

San Diego, Silicon Valley of Algae Innovation?

Thu, 30 Apr 2009 08:50:47 -0700

By GigaOm

San Diego, Calif., has one very high-profile player in the algae game — Sapphire Energy, which counts Bill Gates and the Rockefeller family among its backers and has the ambitious goal of producing a million gallons of algae-based diesel and jet fuel per year by 2011. But does the San Diego region have what it takes to become the Silicon Valley of algae innovation?

San Diego Mayor Jerry Sanders, along with scientists and administrators from UC San Diego and the local Scripps Research Institute, seem to think so. They announced plans this week to build up a broad public-private effort to develop transportation fuels from algae, primarily through the recently created San Diego Center for Algae Biotechnology.

Of course, innovation happens all over the world — but those who reap the rewards of it in a particular industry at a particular time in history tend to be centered in a relatively tight geographic area. As reporter Pascal Zachary put it in a 2007 New York Times piece that’s still well worth the read, “Give birth to an information-technology idea in Silicon Valley and the chances of success seem vastly higher than when it is done in another ZIP code.”

So, if you give birth to an algae idea in San Diego during the next decade (the time frame UC San Diego Chancellor laid out for the region to become “a major center for renewable energy development”), will the chances of success be vastly higher than they might be in other areas? We can’t say for sure, but according to the non-profit National Algae Association’s founder and executive director, Barry Cohen, the region will at the very least have some serious competition.

Sanders said in this week’s release from the university that San Diego boasts a “unique combination of life science research institutions, biotechnology companies and venture capital support to lead the nation in the development of this environmentally friendly source of transportation fuel.”

But Cohen thinks it’s missing a critical piece that Texas has in spades: Big Oil. Chevron, Shell, ConocoPhillips and BP have all invested in algae fuel research over the last two years, and if they manage to commercialize it, Cohen said the oil pipelines, heavy manufacturing equipment and other infrastructure in Texas could lure them to set up production in the Lone Star state.

The federal government, meanwhile, is putting its money — well, $2 million-$5 million of it each year for five years — on St. Louis, Mo. The Department of Energy announced this week that the Center for Advanced Biofuel Systems in St. Louis was awarded one of 46 Energy Frontier Research Center Awards (we wrote on Tuesday about two of the 46 awards, for carbon capture at the Berkeley Lab).

What San Diego does have is the Imperial Valley, a desert that has been used for algae ponds. But as the industry moves toward closed-loop photo-bioreactors and away from open ponds in pursuit of more algae per acre and less risk of contamination, Cohen said, that natural resource may not mean as much when it comes to building up production.

Then again, Silicon Valley doesn’t do much of its own production anymore, either. Chip-making shifted largely overseas more than a decade ago. So how about the intellectual capital? San Diego’s biotech industry and scientists could develop algae strains and processes with higher yields. They could patent them, too, Cohen said, “but somebody has to be able to produce at commercial scale for those patents to have value.”

http://www.nytimes.com/external/gigaom/2009/04/30/30gigaom-san-diego-silicon-valley-of-algae-innovation-10572.html

New Center to Focus on Algae, Biofuel

Wed, 29 Apr 2009 15:57:59 -0700

By Terri Somers, San Diego Union-Tribune Staff Writer

Background: San Diego is home to a large cluster of biotechnology companies and research institutions, including several doing work on algae and biofuels.

What's happening: The organizations are teaming up to create the San Diego Center for Algae Biotechnology, which aims to share research information and develop the technology for algae-based biofuels.

San Diego, known for its sunshine, breathtaking beaches and surfing scientists, now hopes to gain fame for another attribute – algae.

Yes, algae, the green stuff that grows rapidly in brackish water or saltwater when exposed to ample amounts of our Southern California sunshine.

San Diego and neighboring Imperial Valley are already home to some of the world's leaders in growing algae and turning it into fuel that they hope will soon curb the nation's demand for foreign oil.

Yesterday, leaders of the region's scientific, academic, biotechnology and political communities announced that they were forming the San Diego Center for Algae Biotechnology, or SD-CAB, to capitalize on this expertise.

Working together, the groups hope to attract much-needed money from federal and state governments to foster commercialization of algal fuel and other products.

“We already have a collaborative community of scientists and entrepreneurs that gave rise to a thriving biotechnology cluster in San Diego,” said Marye Anne Fox, chancellor of the University of California San Diego. “Now we want to focus on building a segment of that community to create biofuel and other products out of algae.”

The center, which will be virtual and not require a building, should help attract grants and other resources to the region, Fox said.

The announcement comes as industrializing nations such as China and India are increasing their demand for fuel at previously unseen levels, and global warming continues to advance.

“In the not too distant future, we will be confronted with a need for lifestyle changes and new technology if we are to continue with our lives as we know it now,” said Jack Jacometti, vice president of future fuels for Shell Oil.

Biofuels is an important part of the solution, Jacometti said.
Founders of SD-CAB – including UCSD, the Scripps Institute of Oceanography, The Scripps Research Institute, the Salk Institute, San Diego State University and the local biotechnology industry – predict that the cost of producing a gallon of fuel from algae can be reduced from about $30 today to less than $2 within 10 years.

Getting there will take millions of dollars in investment. The center wants a chunk of the $800 million in stimulus funds being made available to the Department of Energy, as well as state funds and private investment, said Stephen Mayfield, an algae scientist from The Scripps Research Institute.

The growing number of biofuel companies in the region includes commercial algae farms in the Imperial Valley and San Diego's Sapphire Energy, a private company that last year produced algae-based diesel used for a test flight of a commercial jet.

While many people may think San Diego is trying to position itself as the algae capital nationwide, Sapphire's Chief Executive Jason Pyle thinks it already holds that title. That is why he moved his company from the San Francisco Bay Area to San Diego two years ago, he said.

“San Diego's excellence in this field is tops in the country and maybe the world,” Pyle said.

Last year Sapphire received $100 million from private investors. Yet some people continue to question the legitimacy of fuel that is essentially squeezed out of algae.
“This is a real fuel,” Pyle said, holding up a beaker of crude his company made.

It makes jet fuel, diesel and gas, he said.

Scripps' Mayfield has been researching algae in relative obscurity for 25 years.

The green stuff needs minimal nutrients to grow, including carbon dioxide from the air and lots of sunshine, Mayfield said. It can grow in soil that would never sustain food crops, which is good news for Imperial Valley's farming community.

Algae also likes saltwater or brackish water, and may even take some pollutants out of it in the process, Mayfield said. As a fuel source, the amount of energy produced by 30 million acres of algae would require 150 million acres of corn or other plant sources needed to make ethanol.

Generally, the process for getting oil out of algae is the same as the process for turning vegetable oil into biodiesel.
This green fuel source already has started generating lots of money, according to the San Diego Association of Governments.

Research on algal biofuels employs about 272 scientists and other workers in San Diego and provides nearly $16.5 million in payroll and $33 million in economic activity for the region, according to a recent SANDAG assessment. Add to that jobs and spending related to service industries, and algae is responsible for 513 jobs, $25.4 million in wages and $63.5 million in economic output in the region, according to SANDAG.

“Like the biotech, wireless and high-tech industries, (algal biofuels) will create high-paying jobs at a time our economy really needs it,” San Diego Mayor Jerry Sanders said.

The problem is that the traditional venture capital investors who help fund the commercialization of budding technologies have not stepped up to fund biofuels. The investment to date has been about 1 percent of the funds invested in biomedicine, Mayfield said, adding, “That's abysmal.”

State and federal mandates have been put in place to cut carbon emissions and support the creation of alternative fuels. Many energy experts believe it is these mandates that may entice the private investment needed to make biofuels advance.

At the Scripps Institution of Oceanography yesterday, where the SD-CAB announcement was made, two groups of energy experts from around the globe were discussing energy policy and a contest aimed at creating a strong biofuels market. Several participants jumped between those meetings and the news conference.

In one Scripps meeting room overlooking the surf, Prize Capital, a company founded by San Diego entrepreneur Lee Stein, was working out the rules for a proposed $10 million Algae Fuel Prize. It has taken a year for the group to decide that its prize should be directed toward developing biofuel technology, specifically something to do with algae. But it is still not sure whether it will be looking for technology directed at refining the fuel, or something else.

Regardless, the winner will have an idea that is “somewhere between achievable and audacious,” Stein said yesterday. Ideally, the winner's technology could be implemented in the developing world, as well as industrialized nations, he said.

“From Charles Lindbergh crossing the Atlantic to help launch the multibillion-dollar aviation industry, to the Ansari X Prize's launch of the space tourism industry, prize competitions have sparked creativity from around the world to accomplish what many believed impossible,” said Stein, who was involved in the original X Prize competition.

Besides jump-starting an industry where venture capital is slow to get on board, Stein said, a prize competition would help focus worldwide media attention on the issue.

Stein later moved to a meeting down the hall, where energy experts from nonprofit organizations and major oil companies joined representatives of the auto industry and state and federal energy officials to discuss energy policy issues. If those groups could achieve a consensus, they could then be united when lobbying Congress and state governments on legislation.

Regulations demanding reductions in carbon emissions create the need for new technologies, including alternative fuels, said Roland Hwang, transportation program director of the Natural Resources Defense Council.

It signals to venture capital investors that a market will exist for these biofuel products, Hwang said.

No one seemed to think that San Diego was pigeon-holing itself with what could be a risky technology.

“Scientists are naturally optimistic, but they don't make random bets, and some of the best scientists in the world have found this, algae, is the path to follow,” said Steve Kay, dean of UCSD's Division of Biological Sciences.

Terri Somers: (619) 293-2028; terri.somers@uniontrib.com

http://www3.signonsandiego.com/stories/2009/apr/29/1n29biofuels005337-new-center-focus-algae-biofuels/