Facebook itself will not add any money to the fund, which will be called fbFund. Initial grants will range between $25,000 up to $250,000. Unlike venture capital funding, the grants will not require the start-ups to concede any equity in the businesses they form. Facebook said that even non-profit projects would be eligible for grants.
Projects need not be entirely profit-focused but will be judged based on their overall contribution to Facebook, company officials said.
The only fine-print that comes with the grants is that the recipient has to build specifically on the Facebook platform. Facebook made the announcement at the TechCrunch 40 Web start-up conference in San Francisco earlier this week.
Facebook is the most popular of several social networking sites that help people connect professionally or personally. Other popular sites include MySpace, LinkedIn, and Friends Reunited.
Facebook saw its active user base spike 70% to over 41 million members in the four months since it allowed third-party developers to build applications inside of it. According to Facebook, over 400 applications have been built.
One area for new development could be security. According to the latest research by emedia, nearly two-thirds of networking site users say they are worried about the safety of their personal data and identify held on sites like Facebook. According to emedia, this is causing over 30% of users to enter false information.
Our View
This is an interesting ploy by Facebook because it twists the classic venture funding model that provides upfront financing to start-ups in return for a large equity stake. Rather, Facebook’s is a far more patient model that doesn’t come with and strings attached. Arguably this model allows start-ups to concentrate more on developing innovative technology, rather than fretting over the dilution that is part and parcel of venture funding schemes.
