Afternoon Session: How to Get Your Facebook App Funded

1:10pm This afternoon’s session at CommunityNext Platform is on funding – where and how do you get your apps funded? The panel includes:

  • Naval Ravikant of Hit Forge
  • Andrew Braccia of Accel
  • Lars Leckie of Hummer Winblad
  • Rob Hayes of First Round Capital
  • Moderated by Matt Marshall of VentureBeat

1:15pm Andrew: The fbFund is really intended to help people who may not have the money to stop what they’re doing to build an app. We’re taking the long view.

1:17pm Naval: My rules for successful Facebook apps are they have to be simple, social, viral, universal, and gathering user data. There are actually a lot of apps that are making money, we have to convince them to take our money. I run a seed fund, I don’t need there to be huge exits. People are spending all their time here, and I have a little eyeball faith that the money will follow. Facebook won’t kill apps because it will scare away developers, since others will be opening their platforms they will all have to play more nicely. Historically the platform owner takes 70% of the revenues, but the 30% is still big enough for a few people to share. I’m looking for people that have stumbled into something and want to grow a big business on social networks with venture type returns.

1:20pm Rob: We’ve seen lots of interesting little applications, but nothing we think will be big enough for venture returns that we’re looking for. We’re looking for 10x returns, we want to see revenue, traction, market, we want to know that it’s not a fad, and that won’t break when Facebook makes a tweak. Naval has invested in some interesting companies, we may at some point. To build a real business, you need to be on things other than Facebook.

1:23pm Lars: Building companies on top of platforms has traditionally been a bit challenging. What we’re looking at here is more than a “platform” but more of a “social web operating system”. You want to build into that world. A lot of people are talking about what’s coming next, and those are the types of things we’re looking at.

1:27pm Andrew: Although there are risks associated with user generated content, there are great opportunities for advertisers to deliver a unique message in these environments. I think you’ll see new creative ways this will grow over time. We’re just at the forefront of virtual communities and virtual currencies. There is a lot of opportunity around being able to aggregate social attention.

1:29pm Rob: BoingBoing used to have SuicideGirls ads, now there’s Lenovo. Same with Digg – people used to be afraid to advertise there, now they’re not. In Facebook, you get very rich data about individuals, stuff that is hard to track with cookies. While advertisers will be risk averse at first, they will want to get in.

1:30pm Naval: Google didn’t get built by Madison Avenue, eBay didn’t get built by Walmart ads. There will be a new class of advertisers on Facebook as well. By the time mainstream advertisers get there, the party’s over.

1:31pm Naval: Don’t raise money if you don’t have to. If you have to, raise as little as possible. One of my friends says, “Money has karma too.” Our VentureHacks mug says, “Valuation is temporary, control is forever.” When you take money, you’re hiring a boss. Don’t let investors run your life.

1:33pm Rob: There are companies that are too small to take money, and there are some that need capital to grow.

1:34pm Lars: You see a few models. One common one is a media model, where you get large distribution and can make a little money off each of them. There are also others who have less traffic but are more focused and have a much higher effective CPM. Beyond that there are a few platform plays, that’s what we’re more interested in at Hummer Winblad.