Sometimes the best startup ideas come from playing in someone else's sandbox. Earlier this week, Web-based movie rental company Netflix announced the winners of a three-year long contest designed to enhance its recommendation system. That same day, Netflix launched another competition, his time to develop a system that will predict what films customers will like based on specific algorithms and data. Contest leaders at the six- and 18-month mark will receive $500,000 but the true potential rewards of this contest can't be measured in dollars.

Though much -- if not all -- of the new contest's winning model will become the intellectual property of Netflix, every participating contestant or team of contestants will gain vast amounts of experience along the way. Indeed, perhaps the contestants that don't win will have the greatest advantage since they'll be free to parlay their effort into a new business of their own.

Launching a startup is always a risky proposition and there will be at least a modicum of failure along the way. For some entrepreneurs, working out the kinks of a great business idea may be at least psychologically easier when bumps along the way can be attributed to the consequences of participating in a competition instead of seeing it as a personal setback.

For someone who has the time to invest in a contest like the one sponsored by Netflix, the advantages can be enormous. It can also add tremendous value to the Research and Development portion of existing small businesses by giving teams incentive and encouraging collaboration.

Arnab Gupta, CEO of Opera Solutions, led a New York-based team of researchers vying for the top Netflix prize. Though they didn't win, the experience was well worth it because his company plans to use the knowledge they accumulated to improve the products and services they currently offer. Despite a two-year investment in the previous Netflix contest, Gupta told the New York Times,"?We?ve already had a $10 million payoff internally from what we?ve learned."

If you've been noodling around the notion of launching a startup but are (understandably) worried about taking the plunge, consider entering a contest that will let you tinker with your idea and get your feet wet. At worst, you'll walk away with great some experience. At best, you'll take home a chunk of cash that can help get you started on your next big idea.

Flickr image courtesy of Caveman 92223 ? On the Long Road Home.



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