Great call!
Inspired me to write up a full RFP vs prizes comparison…
RFPs vs Prizes
| Request for Proposals | Crowdfunded Prizes |
|---|---|
| 1. Builders bid down | 1. Funders bid up |
| 2. Funder chooses who works on it | 2. Builders decide amongst themselves who works on it |
| 3. Guess who will do the best | 3. Choose who did the best |
| 4. One entity is chosen to build it | 4. Multiple entities can compete or merge into one team |
| 5. Pay per hour or in milestones | 5. Paid for how much demand is fulfilled |
| 6. Funds have been sent whether a failure or a success | 6. Funds awarded after evidence of success, or refunded if not |
| 7. Traditional and established | 7. Fun and engaging |
Let’s unpack that.
1. Who Bids + 2. Who Chooses the Pursuer + 3. How to Choose the Winner
A request for proposals (RFP) works like so:
-A company, community, or government releases a description of what they need built
-Builders respond with a “bid” describing how much they would need to be paid, a time estimate, and why they should be trusted to do a good job. (1. Builders bid down)
-The company chooses one of the builders to take the contract (2. Funder chooses who works on it) who they believe will do the best job at a reasonable price. (3. Guess who did it best)
A crowdfunded prize works like so:
-
A company, community, or government releases a description of what they need built and a deadline for when it should be done
-
They and others may add funds to a prize for building it, and depending on whether capable builders respond with interest, they may add more to incentivize builders (1. Funders bid up)
-
Builders who expressed interest may communicate with one another to decide who will pursue the prize (2. Builders decide amongst themselves who works on it)
-
Funders choose the winner(s) (3. Choose who did the best)
4. One Pursuer or Multiple
Unlike in an RFP where one group or person is chosen to take the contract, prizes are open for multiple teams to pursue and submit evidence of their work.
At viaPrize we have found that when multiple teams want to pursue a prize, about 1/3 of the time they decide that it would be fun to compete.
This could lead to a redundant duplication of effort and result in a disappointed builder who doesn’t win, but so far this has gone well because some builders just want the experience and they were informed if there were others also working on it. We also make it possible to split the prize amongst multiple winners.
However, most of the time builders don’t compete. Maybe a 1/3 of the time the builders decide to work together and around 1/3 of the time they decide amongst themselves who would be the single best person to work on it.
In other words, a prize leaves it more open for interested builders to both decide to compete or collaborate by merging into a new team. Additional builders can also participate in the efforts and be added to the team throughout the process because who is working on something is not decided upfront by the group posting the idea.
5. Pay Style
RFP also tends to pay builders per hour or in milestones.
A crowdfunded prize however is a pool of proven demand showing how much money people committed to an idea that they want to be turned into reality.
Whoever makes that happen collects the award and thus is paid for the amount of demand they fulfill rather than per hour, which is closer to an entrepreneurial model of work.
6. When Funds Are Sent
Builders also take on more entrepreneurial risk because if they do not succeed, they will not receive the award because the funders have the guarantee that they will either receive what they asked for or they get their money back.
7. Motivation
We’ve found that the format is fun and celebrates builders while also providing guarantees to funders, and this often motivates incredible results. One of our earliest prizes consisted of 2 people each adding $50 to build a productivity app which someone from Ukraine built, donated the money, and it has now received over 10,000 downloads. (See Intenty in the Google Play store.)
In the future we could add voting or quadratic funding to disburse matching funds into a prize, but it’s fascinating to note that a prize is already quadratic psychologically even if the amount of money added to it isn’t. We’ve found that a potential prize pursuer is far more motivated if they see that multiple people are supporting an idea. In other words, their motivation is quadratic.
RFPs are more established and traditional than prizes, and both RFPS and prizes have their own strengths and weaknesses…
What do you think?
Would you prefer to add money to an RFP or a prize?
Would you rather work on an RFP or a prize?
At viaPrize we are not just founding a company. We are pioneering an entire new economic mechanism. However, anyone can do this. Just like how Gitcoin pioneered quadratic funding, we welcome anyone to join this endeavor and we will share what we discover along the way.