Facebook Reloads fbFund (Wisely)
Just a bit of a disclaimer: as an executive/blogger, I frequently get information way before many in the media do (not bragging, just stating common sense), but for obvious reasons I sometimes step away from my Wordpress account. — Does it eat me away sometimes?
Context & Ripple Effects
Two months after deciding to sit tight rather than sell, Facebook is putting its balance sheet behind its own ecosystem: on September 17 Mark Zuckerberg unveiled fbFund at TechCrunch40 alongside Accel and Founders Fund, a grant vehicle for startups building applications on the platform.
The move lands while Facebook's momentum is peaking — third place in page views as of September 11, a valuation estimated north of $1 billion, and fresh controversy over public listing search eroding user privacy assurances. Funding the app layer is the next step in converting that traffic into a defensible developer economy.
First-order effects
- Early-stage Facebook application developers gain a new funding source that requires no equity stake, with Accel and Founders Fund gaining first look at platform-native deal flow.
- Startups already courting VCs on generic traction now compete against grant-backed peers whose cost basis is subsidized by the platform itself.
Second-order effects
- Rival networks like MySpace face pressure to stand up their own developer-funding programs or watch the strongest app builders concentrate on Facebook's social graph.
- Investors pricing thin-asset widget shops must now benchmark against fbFund grantees, compressing valuations for unfunded clones while legitimizing the app category itself.
Third-order effects
- If the pattern holds, platform owners become their ecosystems' seed financiers — a structural shift in which the social graph holder, not independent venture capital, sets which applications survive, concentrating frontier capital around whoever controls distribution.
The trend: Platform owners are moving from merely hosting third-party applications to financing them directly, tying the app economy's survival to the platform's own interests.