July 10th, 2007
You knew this would happen at some point. Bay Partners announces they’ll be putting aside a few of their millions into AppFactory, which will exclusively fund Facebook Apps start-ups - that is to say, start-ups who’s first foot out the door is squarely on the Facebook Platform.
So there are some good reasons to launch this fund:
- young developers like Facebook and will be attracted to this proposition because they’ll get to work on something they like
- the Facebook platform is pretty greenfield, and the upside is not quantifiable (and therefore presumed to be huge)
- it’s a small amount of spend compared to their overall fund, but it gets Bay some good PR (in terms of volume) and puts them into the sphere of funds getting buzz
The best thing Bay has going for them are YouTube and Photobucket. Photobucket and YouTube, two of the larger hits in the past two years, were both built on the back of MySpace. So at a super high-level, it’s not inconceivable that the Facebook platform will ultimately result in a couple of major hits. And that’s what the VC’s are swinging for anyways.
There are reasons to be skeptical of the fund as well, including potential returns to the founder vs. different scenarios, and the uncertainty surrounding whether Bay can provide “insider” access and support into Facebook vs. other funds. The risk of Facebook centrality being a complete waste of time is probably low. Overall, it’s not a terrible bet for a VC, given the risk/return ratio and the PR upside.
More coverage over at Venture Beat and TechCrunch.
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