In a keynote conversation with Mike Arrington at the TechCrunch40 conference, Facebook founder and CEO Mark Zuckerberg announced that the company will be offering grants to budding Facebook platform developers, through its newly formed "fbFund".
Administered and funded ($10 million) by VCs Accel Partners and The Founders Fund, grants of between $25,000-$250,000 will be open to anyone interested in creating a startup based on the Facebook Platform. The grants will not come with any conditions except that the grantee use the funds to build Facebook applications, and that Accel Partners and The Founders Fund will have first refusal in any future round of funding. In other words, this isn't cash for equity, although one other condition apples: only individuals or companies who have not raised any formal venture funding, qualify.
Applications will be reviewed by the fbFund committee made up of Mark Zuckerberg, Facebook founder and CEO, and Chamath Palihapitiya, Facebook vice president of product marketing and operations. Facebook board members Jim Breyer (Accel Partners) and Peter Thiel (The Founders Fund) will also be part of the committee. Additionally, the fund will rely upon an advisory council that includes Reid Hoffman, founder and chairman of LinkedIn; Josh Koppelman, founder of First Round Capital; and Rajeev Motwani, professor of computer science at Stanford University and early advisor to Google.
Why is Facebook doing this?
In their words: "We are forming this fund to help grow the Facebook application ecosystem. By decreasing the barrier to start a company, we hope to entice an even larger group of people to become entrepreneurs and build a compelling business on Facebook Platform. We hope this is also a funding model that other venture capitalists will follow."
So, as per all of Facebook's recent strategy, it's all about firming up the notion of Facebook as a platform. If developers and entrepreneurs can be enticed, with a little financial and advisory help, to develop for Facebook first, then Facebook's business model will benefit. What interesting about the Facebook platform is that the barriers to entry are already pretty low, so a fairly no-stringed attached grant, even as little as $25,000, could go along way.
Picking up on the Facebook statement above, in which the company says that they "hope this is also a funding model that other venture capitalists will follow", the newly formed fbFund certainly makes other venture capital that is aimed at Facebook developers, a little less attractive.
Bay Partners decided to earmark millions of dollars for investment in Facebook applications. Bay Partners’ prospects will certainly be diminished as the result of Facebook’s move to fund applications built on its own platform.