Bay Partners Launches Facebook-Apps-Only Fund
Here's another indication of the importance of the new Facebook platform: Silicon Valley VC fund Bay Partners has earmarked millions of dollars for investments in startups creating applications for Facebook. The new program, called AppFactory, will be officially launched on Tuesday.
Context & Ripple Effects
Two months after Facebook opened its platform to third-party developers in May 2007, the money is arriving: Bay Partners is formally dedicating millions through its new AppFactory program exclusively to startups building Facebook applications, launching Tuesday per TechCrunch.
The move caps a fast-building arc — comScore reported a flood of new Facebook traffic on July 5, analysts were already debating what a Facebook app is worth on July 3, and commentary since late June has framed Facebook as 'the new AOL,' a closed garden that could own both distribution and its developer ecosystem. A dedicated fund turns that debate into a balance-sheet bet.
First-order effects
- Startups building on the Facebook Platform gain a named, dedicated source of equity capital — Bay Partners' AppFactory — removing the need to fit a generalist seed pitch.
- Bay Partners gets first-mover access to the fastest-growing application ecosystem of the moment, competing for deals ahead of funds that still evaluate Facebook apps case by case.
Second-order effects
- Rival firms face pressure to earmark comparable platform-specific vehicles or lose deal flow, and the ongoing debate over what an app is worth will be tested by real term sheets rather than hypotheticals.
- Facebook itself gains leverage: external capital subsidizing its developer ecosystem strengthens the walled-garden dynamic critics have compared to AOL, deepening dependence on a single distribution point.
Third-order effects
- If the pattern holds, venture investing stratifies around platforms — funds raised against a specific company's API rather than a technology thesis — concentrating capital where one player controls distribution.
- That concentration revives the AOL-era structural question: whether platform owners eventually internalize their ecosystems' economics, leaving outside investors exposed to a single company's policy decisions.
The trend: Venture capital is reorganizing from technology-thesis funds into platform-anchored funds that underwrite entire ecosystems built on a single company's API.