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The term "crowdsourcing" was originally coined by Wired magazine to describe Web-based businesses and social networks that encourage input from users -- services like iStockphoto, which sells photos taken by amateur photographers, or a T-shirt maker named Threadless, which chooses its designs from those submitted by users.

A Calgary-based company called Cambrian House is trying to use the crowdsourcing model to build not just one business but a whole series of businesses. In effect, says co-founder and CEO Michael Sikorsky, the company wants to be a sort of "mutual fund" for Web-based businesses.

Mr. Sikorsky, a serial entrepeneur and programmer who got his start writing software for the Commodore Amiga, says that after he sold his last business he "got thinking about how businesses start and get going," and he also thought a lot about his experiences with the open-source community, where dozens or even hundreds of programmers collaborate on ideas.

One of the principles that came out of all this, he says, is that enabling collaboration is a way of "reducing risk and increasing capital efficiency" during the startup phase of a business. So Cambrian House was created to try and help do that. Ideas for new companies or software projects are submitted by members, voted on by members and then eventually designed, developed and even programmed by members.

As the Cambrian House website describes it: "You think it, crowds test it, crowds build it, we sell it, you profit." Ideas are submitted through a public forum, where they are first filtered by Cambrian staffers to see whether they meet certain criteria -- the company is looking for software or Web services that target a mass market (it gives examples such as Picasa, Limewire, iStockphoto and Prosper). Then users vote on and critique them.

Ideas that make it through those "stage gates" (as Mr. Sikorsky describes them) are pitted against each other in a forum called IdeaWarz. Each week, 16 ideas are submitted for the "competition" -- which has its own dedicated website at ideawarz.com -- and after each week, half of the original ideas advance to the next round. The winner gets to move on to the "market test" stage, where the community designs and puts together a prototype. From there it enters the development phase, which Cambrian automates using a testing and development process called Chameleon.

The number of useable and potentially profitable ideas that have come out of the community has been a pleasant surprise, Mr. Sikorsky says. "Let's face it, most ideas generally are crap. What surprised me was that we thought about .1 per cent would be interesting, but it turns out to be about 3 per cent, which is higher than I expected."

At each stage of the process, there is a chance to earn "royalty points" for work done or contributions made. Each idea (or "branch") starts with 1,500 royalty points, of which up to 150 are given to the person who came up with the idea. If an idea becomes a finished product and starts to generate revenue, royalty points translate into a share of that cash -- in most cases, 10 per cent of the gross profit ("glory points" are also handed out for things that help the community but won't generate revenue).

There are dozens of ideas currently being voted on and discussed at Cambrian House -- including an online auction that would automate the selling of product placement for Hollywood movies and a Web platform for use by restaurants -- but so far only two "branches" have become full-fledged businesses and are producing revenue. Prezzle is a Web service that lets you send virtual gifts to someone (which can't be opened until a certain date), and Robinhood Fund is a site where users can post wishes and the community votes on which should be fulfilled.

One of the ideas that is currently going through market testing -- called Gwabs -- is software that allows two people to play a simple video-game style battle with each other on their PC desktop, using icons and other visual elements from their desktop. Mr. Sikorsky says he personally "thought the idea was stupid, but I was happy to be proven wrong." Cambrian House got so many pre-orders for the prototype that it decided to go into production.

The two people who came up with the idea for Gwabs are making about $150 a month from their royalty points, the Cambrian House CEO says. The company has paid out a total of about $800 so far, and by next quarter will likely have paid out close to $6,000. The community that suggests ideas, ranks them and checks for bugs in the software numbers about 8,500 and Cambrian has a staff of 40 -- and is hiring to fill a new position in Silicon Valley.

The company raised $2.6-million in financing earlier this year, and is close to finishing a second round of $5.3-million. All of the original investors have bought in to the second round, Mr. Sikorsky says, including most of the founders of the company, and there are no convertible preferreds or any other complicated share structures. Everyone has the same class of stock -- common -- and all of the founders paid for their shares.

Mr. Sikorsky says his next big idea is to find some way of giving members of the Cambrian House community actual shares in the company in exchange for their royalty points, to make it a true mutual-fund style company, but securities regulations make that kind of thing very difficult. "I'm still trying to figure out a way," he says.