Inside Facebook

As most everyone knows by now, fbFund is a program recently set up by Facebook and funded by Founders Fund and Accel to give grants to promising entrepreneurs building on Facebook Platform. The first set of 10 fbFund grant recipients were announced in July, and round 2 has now begun.

Last week, Facebook announced that it received over 600 applications from developers like GroupCard, Socialfly, and RealGifts hoping to land between $25k and $250k to build their businesses on Facebook. Today, Facebook said that it will announce the 25 $25k winners for Round I of the competition on October 10th. Those 25 winners will also move on to Round II, where five $250k grants will be awarded. Facebook users will have a say in deciding the winners of Round II.

While applying for fbFund grants may be the best/only path to seed capital for many entrepreneurs, it’s important for all interested developers to weigh the terms of the grants against the terms of other fund raising alternatives. While they are non-recourse grants (and not investments), fbFund grants do come with some important stipulations. According to those familiar with the details of fbFund grants, these include:

• Phased grant release based on application performance. fbFund recipients get 25% of the grant upon signing the agreement, 25% at 1k weekly active users, 25% at 5k WAU, and 25% at 10k WAU.
• Right of future investment. If you raise more than $500,000 in a future round, Accel and Founders Fund have the right to make the first offer before you talk to other investors.
• Even if you choose to go with other investors, Accel and Founders Fund have the right to join at up to 50% of your investment round.

Obviously there are many unique advantages to taking fbFund money. Recipients get to “Learn best practices and receive valuable feedback from Facebook engineers and other fbFund developers,” and get special press attention at f8 and on the Developer website. Of course, entrepreneurs should always take all terms and options into account when examining financing alternatives.

The 11th London Facebook Developer Garage took place last night at Sun Microsystems, the gold sponsor of the event. Here’s a quick rundown of highlights from the night’s speakers:

Chris Thorpe from MySpace gave us a quick introduction to their platform:

• MySpace would love to see more developers on their platform
• Make sure any applications you develop are complying with the terms of service as the approval process is more stringent than with Facebook applications

Duncan Arbour and Jon Marks from LBi on the agency and brand perspective:

• Brands producing applications can be a hit-and-miss affair
• Advertising on existing successful applications may be a more viable and predictable way forward

Toby Beresford from Nudge on an Englishman at F8:

• Applications are treated as viable businesses in their own right, which is less common in the UK
• People with money and developers mix much more freely in the US than they do in the UK

John Cole from Adknowledge (which includes Cubics) gave an introduction to the company:

• Adknowledge are currently serving 8 billion impressions a month

Reto Lämmler gave an introduction to the Doodle application:

• Doodle provides users with a common, shared calendar to easily arrange social or work events
• Currently serving around 1 million users a month via the Doodle website
• Recently launched Facebook application provides integrated functionality with the main website, and users can switch between the two transparently

Max Niederhofer from Atlas Venture gave us some valuable insight from the venture capital world:

• Before engaging with VCs, make an effort to understand their needs. (“Read a book FFS.”)
• VCs are interested in £1m plus, business angels in lower amounts, so there is something of a gap if you’re looking for £500k
• Make sure you can explain your idea in simple terms
• Although the undoubted main thing that VCs bring is money, there is often a strong network of consultants and trusted agencies that can benefit a business
• Always do due diligence on everybody involved in a deal, and hire a good lawyer who’s done VC work before

Finally, Iskandar Najmuddin from Nudge gave us a rundown on the latest technical changes on the platform and the prize for application of the month was presented by Stewart Townsend of Sun to Doodle.

The next London garage is on Wednesday October 8th. More details will be announced before the event on the garage group page.

peHUB’s Dan Primack caught the SEC filing last week that LOLApps, a provider of white label social networking applications, has raised $4.5 million Series A round from Polaris Venture Partners. Polaris’s Mike Hirschland will be taking a seat on the company’s board.

LOLApps’s two primary current products are its Gift Creator and Quiz Creator applications, which run on Facebook and Bebo. Users are able to use LOLApps’ templates to easily create customized standalone applications. LOLApps gives the service away (hence getting free distribution) and makes it back by selling the inventory for now, but the company will likely explore several potential business models. Alarm Clock says the company is already profitable and has total reach of 20 million users throughout its distributed network of applications.

White labeling popular applications has proven an interesting model for development shops serving agencies and marketers. LOLApps is simplifying the app customization process so that anyone can use it.

LOLApps was co-founded by Ariel Poler (of SpeedDate, TextMarks, and StumbleUpon), Kavin Stewart (Offermatica, Skobee), Annie Chang (BitTorrent, SquareTrade), Brian Rue (hikkup.com), and Kamo Asatryan (also of hikkup). The company has already hired some technical talent (it’s up to about 8 folks) and is looking for more.

See additional notes from Eric Eldon and Bret Terrill.

Two weeks after Facebook announced the winners of its first fbFund grants, Facebook kicked off a new $2 million fbFund competition today aimed at fueling the creation of high quality apps for the Facebook Platform.

The fbFund program awards grants to developers (not an investment for equity), with the stipulation that fbFund partners Accel and Founders Fund get a right of first refusal for any future investment rounds.

The new competition has 2 rounds: 25 round 1 winners will receive US $25,000 grants, and 5 round 2 winner will receive US $250,000 grants.

Facebook is looking for “applications that best embody our guiding principles for social applications and have the potential to become Great Apps.” Further criteria:

• Originality of Concept: Does the application introduce a great idea in a new and unexplored area?
• Market: Is this application targeted to key audiences or meet compelling market needs?
• Social/Useful: Does the application enable people to interact with each other? Does it deliver real value to users (including entertainment)?
• Expressive: Does the application allow people to share more information?
• Intuitive: Is the application compelling and easy to use? Does it have a well-thought-out user experience?
• Potential: Can it be a real business someday?
• Team: Do you believe this team can execute and is driven to succeed?

Applications are due August 29, 2008 - in less than a month!

Here’s a promo video for the new fbFund competition:

Originality from Matthew Choi on Vimeo.