Venture capitalists, tech luminaries, app developers, and politicians gathered last week at the IAC Building in lower Manhattan to honor the winners of the New York City BigApps Competition.

The City of New York opened 170 data sets from 30 agencies to app developers and offered the carrot of $20,000 in prizes in the hopes of spurring technological innovation. The judges for the competition included Mahalo CEO Jason Calacanis, Kevin Ryan, chairman of Gilt Groupe, and Fred Wilson of Union Square Ventures, among others.

'It's a hugely successful economic engine,' Brandon Kessler says of the competition. The CEO of ChallengePost, the company that organized the competition for the City, calculates that 'you take the average dollar amount spent on an app by a government agency and you're talking a minimum of $50,000 per app, so at 85 apps that's $4.25 million worth of innovation created in exchange for $20,000 in prize money.'

But it was more than the pecuniary reward that piqued the interest of 112 teams that submitted apps, only 85 of which were eligible. 'People are motivated not just by money, but by status and recognition and altruism and the competitive spirit and intellectual stimulation,' says Kessler.

The app makers retain their intellectual property, but they must make their submissions available for free for a year after the competition, though they are encouraged to create premium versions. Asked if any of the apps had a bright commercial future, Calacanis responded, 'I'm considering reaching out to some of these for investment, so yes.'

The grand prize went to WayFinder NYC, which utilizes augmented reality to help users locate the nearest transit options. Second prize went to Taxihack, an app that allows riders to submit real-time feedback on their cab rides, and third prize was awarded to Big Apple Ed which allows anxious parents to compare vital statistics of city schools such as diversity and student-teacher-ratios. Other notables included the quirky Trees Near You, which provides a Noah's Ark-style accounting of the city's arboreal inhabitants and NYC Way, which took the Investor's Choice Award for bundling 30 tourist-friendly services into a tidy package.

Another perk of the competition for developers is that it helps them stand out from the crowd. With 140,000 apps and counting, the App Store is more crowded than Grand Central at rush hour. 'If you're lucky enough to get featured [by the App Store] that's great,' says Kessler, but 'these developers have gotten tremendous exposure from NYC Big Apps.'

Calacanis believes that even though the space is so crowded, there is a broad array of opportunities for savvy entrepreneurs. 'It parallels, in large part, the number of problems in the world.  So, the sky is the limit in terms of number of applications. Of course, being able to make an application profitable is another story.'

Kessler started a profitable record label in college that he ran for 12 years, but he went to business school at Columbia on the weekends. There he got the idea for ChallengePost, which he views as a sort of eBay for crowdsourced innovation.

The company launched six months ago and it charges clients between $20,000 and $70,000 per challenge. Other sectors of government have been getting excited about this type of contest. Recently San Francisco and Washington D.C. have begun releasing government data to developers. Kessler is in talks with the United States Department of Agriculture about running a federal challenge.

But there's potential for more than just governments to throw their hats into the ring. Calacanis envisions, 'People with archives of data or media can really leverage this creativity. So, imagine if a movie company said ‘make the best application you can think of with our content and we will split that with you.''