Bay Partners Kicks Off AppFactory for Facebook Apps
As we've seen happening in the last few months, things like Google Gadgets, the Facebook Platform, and the iPhone have emerged for developers to build on — and perhaps even start a company for. We wrote about Google Gadget Ventures last week …
Context & Ripple Effects
Bay Partners is turning yesterday's Facebook-apps-only fund into a working program: AppFactory, an initiative to fund and support startups building on the Facebook Platform. The firm is moving within weeks of announcing the fund, racing to catch the developer land-grab CNET described last month as Facebook's app feeding frenzy.
The move mirrors what Bay Partners' peers see across the new platform layer of mid-2007 — Google Gadgets and the iPhone alongside Facebook — with Google already running its own [[e:Google Gadget Ventures|Gadget Ventures]] to pay developers building Gadgets. Dedicated funds for single platforms are becoming a recognizable venture category.
First-order effects
- Startups building on the Facebook Platform gain a dedicated source of seed capital plus operational support, lowering the barrier to founding a company rather than just shipping an app.
- Bay Partners converts its fund announcement into deal flow, positioning itself as the default backer for Facebook developers before rival firms claim that role.
Second-order effects
- Competing VC firms face pressure to launch their own platform-specific vehicles, since generalist seed offers now look undifferentiated against a fund-plus-support package aimed squarely at Facebook builders.
- Platform owners themselves get an incentive to formalize developer funding — if outside investors will capitalize apps built on their rails, subsidizing that ecosystem becomes cheap strategic leverage.
Third-order effects
- If every major platform spawns its own dedicated capital pool, venture structuring starts following platform boundaries — apps, not companies, become the investable unit — with the durability of any such fund tied to the fate of its host platform.
- A wave of thinly differentiated apps funded this way would likely force consolidation or platform-side curation once distribution on Facebook itself becomes the scarce resource.
The trend: Venture capital in 2007 is reorganizing around application platforms, with firms like Bay Partners building single-platform funds to capture developer ecosystems as they form.