A Russian internet investor who quit his PhD in physics and made a billion dollars from social networking and other investments has established the most lucrative annual prize in the history of science.

With each award worth $3m (£1.9m), the monetary value dwarfs that of the prestigious Nobel prize, which last year stood at $1.1m.

Milner, who has homes in Silicon Valley and Moscow, announced nine immediate winners of the prize, which is worth a combined total of $27m. The nine will now form a committee to select a winner, or winners, for next year. The prize will be given in the first quarter of each year, unlike the Nobels, which are awarded in October.

In an interview with the Guardian, Milner said the prize was for the "greatest minds working in the field of fundamental physics", and specifically for recent advances. In emphasising fresh achievements, Milner hopes the prize will help physicists who are still highly active in research and capable of major contributions in the future.

When the Nobel prize is awarded for fundamental physics, the recipients are often at the end of their careers – or worse – because it can take decades for theoretical advances to be proved right by experiments. The discovery at the Cern physics lab in Geneva this year of what looks like the Higgs boson came 48 years after the particle was first proposed by Peter Higgs, who is only now in line for a Nobel prize, at the age of 83. His name is absent among the prizewinners announced by Milner because his work was done so long ago.

According to Milner, the new prizes are not intended to compete with the Nobels, and differ in crucial ways. They can go to younger researchers because experimental verification of theoretical breakthroughs is not required. And, unlike a Nobel prize, which can be shared by three scientists at most, the Milner prize imposes no limit.

The prize differs in other ways, too: anyone can nominate a winner online, and the selection panel is public, in contrast to the secretive gathering and closed voting process that decides the Nobel prizes each year.

Alongside the main prize, Milner's foundation will give two further awards, the first being an annual New Horizons in Physics prize for promising junior researchers, and a special ad-hoc fundamental physics prize that can be awarded at any time, forgoing the usual nomination process. Milner said the latter prize might, for example, recognise experimental results that are clearly and immediately groundbreaking.

Milner, 50, left Moscow State University in 1985 with an advanced degree in theoretical physics. He later abandoned a PhD at the Russian Academy of Sciences for an MBA at the Wharton School of Business at the University of Pennsylvania. Asked if the prizes intentionally trumped the Nobels, at least in monetary terms, he said: "The best minds in fundamental physics deserve that level of recognition.

"There's no mathematical formula of how I came up with that number, but I wanted to send a message that fundamental science is important, so the sum had to be significant."

On whether the awards made amends for his departure from physics, he added: "There's definitely an element of that. It's hard to deny."

The prizewinners are encouraged to give annual public lectures as part of a concerted effort to raise the profile of fundamental physics and communicate the real meaning of the advances to as wide an audience as possible.

The nine prizes recognise work that is often as difficult to pronounce as it is to explain. Maxim Kontsevich, at the Institute of Advanced Scientific Studies, near Paris, was honoured for the development of "homological mirror symmetry and the study of wall-crossing phenomena". Alexei Kitaev, at California Institute of Technology, won for work on using "topological quantum phases with anyons and unpaired Majorana modes".

Four physicists at the Institute for Advanced Study, in Princeton – the former home of Albert Einstein – earned individual prizes, with three going to string theorists, who work on a model of reality that casts particles as vibrating strings of energy. The fourth, Nima Arkani-Hamed, was recognised for "original approaches to outstanding problems in particle phsyics".

Speaking of the prize, Arkani-Hamed said: "Obviously, I'm biased, but I think it's a fantastic thing for the field. It puts a spotlight on the subject of fundamental physics, which we all have a sense is important.

"Prizes don't motivate people to do physics. The rush of discovery is typically the greatest pleasure we have in this game, but this will be an opportunity to really showcase the subject."

When asked what he planned to do with the $3m, Arkani-Hamed said: "I need to think about it some more."

Two winners, Alan Guth at MIT and Andrei Linde at Stanford University, won separate awards for their work on the inflationary model of the universe, which proposes that the newborn cosmos expanded at a spectacular rate before slowing to a more sedentary pace. Though widely accepted among cosmologists, the work has not earned either scientist a Nobel prize.

Reached at his home in the US, Guth said he hoped the new prize would raise the profile of fundamental physics research, as societal attitudes had an impact on young people's career choices. He pointed out that, had the prize been around a century ago, Albert Einstein might have won it for relativity, his greatest contribution to physics. He won the Nobel prize instead,for the photoelectric effect, in 1921, after it was confirmed by experiment.

Guth, whose own work describes why the universe is the way we see it today, said he was unsure what to do with the $3m prize money. "It's awfully hard to think about," he said. "It took me a while to get accustomed to thinking about the inflation of the universe, and it will take me a while to become accustomed to thinking about this."

The winners

Nima Arkani-Hamed, Institute for Advanced Study, Princeton. For original approaches to outstanding problems in particle physics, including the proposal of large extra dimensions, new theories for the Higgs boson, novel realisations of supersymmetry, theories for dark matter, and the exploration of new mathematical structures in gauge theory scattering amplitudes.

Alan Guth, MIT. For the invention of inflationary cosmology, and for his contributions to the theory for the generation of cosmological density fluctuations arising from quantum fluctuations in the early universe, and for his ongoing work on the problem of defining probabilities in eternally inflating spacetimes.

Alexei Kitaev, California Institute of Technology. For the theoretical idea of implementing robust quantum memories and fault-tolerant quantum computation using topological quantum phases with anyons and unpaired Majorana modes.

Maxim Kontsevich, Institute of Advanced Scientific Studies near Paris. For numerous contributions that have taken the fruitful interaction between modern theoretical physics and mathematics to new heights, including the development of homological mirror symmetry, and the study of wall-crossing phenomena.

Andrei Linde, Stanford University. For the development of inflationary cosmology, including the theory of new inflation, eternal chaotic inflation and the theory of inflationary multiverse, and for contributing to the development of vacuum stabilisation mechanisms in string theory.

Juan Maldacena, Institute for Advanced Study, Princeton. For the gauge/gravity duality, relating gravitational physics in a spacetime and quantum field theory on the boundary of the spacetime. This correspondence demonstrates that black holes and quantum mechanics are compatible, resolving the black hole information paradox. It also provides a useful tool for the study of strongly coupled quantum systems, giving insights into a range of problems from high-temperature nuclear matter to high-temperature superconductors.

Nathan Seiberg, Institute for Advanced Study, Princeton. For major contributions to our understanding of quantum field theory and string theory. His exact analysis of supersymmetric quantum field theories led to deep new insights about their dynamics, with fundamental applications in physics and mathematics.

Ashoke Sen, Harish-Chandra Research Institute, Allahabad. For uncovering striking evidence of strong-weak duality in certain supersymmetric string theories and gauge theories, opening the path to the realisation that all string theories are different limits of the same underlying theory.

Edward Witten, Institute for Advanced Study, Princeton. For contributions to physics spanning topics such as new applications of topology to physics, non-perturbative duality symmetries, models of particle physics derived from string theory, dark matter detection, and the twistor-string approach to particle scattering amplitudes, as well as numerous applications of quantum field theory to mathematics.