challengepostChallengePost is a public marketplace for companies, non-profits and individuals to create contests and award prize money for solving problems. It is launching in beta today. One of the challenges currently on the site is to create a next-generation business plan with Web 2.0, data sharing and social media capabilities in mind. The winner will get $2,000 from contributor AngelSoft.

Founder and CEO Brandon Kessler said that competition and prizes tap into a human need for reward beyond traditional compensation. He cited a Harvard Business School study that shows problem-solving percentages went up by 30 percent when prizes were involved, and he pointed to Netflix’s million-dollar challenge to improve its movie recommendation system as a prime example of how hard people will work for rewards beyond salary (there are coders who have been working on that movie recommendation prize for years full-time). “Problem solvers are not just motivated by money, but by status and intellectual challenge,” Kessler said.

He came up with the idea for ChallengePost after seeing 23-year-old Colin Nederkoorn’s contest to run Windows XP on an Intel Mac in 2006. Donations poured in, bringing the cash award to more than $13,000 for winner Jesus Lopez, a San Francisco-based programmer.

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ChallengePost users can similarly add prize money to competitions they think are worthwhile or interesting. Competitions can be user generated — anyone can come up with an idea or contribute to existing one — or they can be submitted by companies, organizations or government agencies. Kessler said large companies can run competitions both on ChallengePost and their own Web sites simultaneously to maintain more control over branding.

ChallengePost takes an 8 percent cut of any prize money offered in open challenges and works on a flat fee basis with companies and non-profits.

Contest creators are the ones responsible for picking who’ll judge the results and choose a winner. So anyone entering a competition or donating prize money to one will have to do their own research to verify the credibility of the contest and its judges.

In open contests, the intellectual property remains with the winner. In closed challenges, there’s the option of transferring the intellectual property to the contest creator. Organizations can also create open source challenges where ideas and strategies are shared.

ChallengePost has raised $500,000 from angel investors including Twitter stakeholder Betaworks and Esther Dyson and has Apple co-founder Steve Wozniak and Personal Democracy Forum-founder Andrew Rasiej on its board. The New York-based company currently has two full-time employees.

The company is one of many that try to crowdsource innovation, but it’s open to a lot more fields of interest than companies like crowdSpring and TopCoder, which target designers and software developers. Another competitor may be Waltham, Massachusetts-based InnoCentive, which runs research and development competitions. Kessler says InnoCentive focuses on private initiatives mainly by Fortune 500 companies, while ChallengePost can work with individuals.

ChallengePost’s success will depend heavily on how it cultivates its broader community. Because contests can be about anything, the site runs the risk of being unfocused without a loyal and diligent user base. If Kessler wants to build a site where competitors are as persistent as the teams who have coded for three years to win the $1 million Netflix prize, the challenges need to be intellectually stimulating, with meaningful social and monetary awards at the end.

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