Facebook VCs Have to Invest Somewhere, Right?

Yesterday, Eric Eldon broke the news about the Courses application developers receiving $500,000 in funding. The funding round was lead by Peter Thiel’s Founders Fund. Peter Thiel was also the primary investor in Buddy Media during their $1.5 million round. There haven’t been many announcements about Facebook applications raising capital though over the past few months. It appears that the top applications that weren’t already VC funded have since received funding, have partnered with larger media partners or have chosen to stick it out.

Facebook applications are currently one of the most risky investments that VCs can make and that’s why we are seeing such a small percentage of venture capital portfolios being invested in this space. The Bay Partners’ AppFactory fund is only a few million and even Facebook’s fbFund is only $10 million. The money has been dedicated to the space so now funds are being forced to invest in applications even if they have less than 1,600 daily users (as the Courses application does).

I have spoken with a number of individuals that are investing in the space but none of them appear to be significant investments. The main problem is that none of the applications have successfully exited for a substantial sum. There have been acquisition rumors and a few smaller acquisitions in which developers were also acquired but nothing big so far. Do you think this space will heat up or will it continue to be a lot of buzz with no real substance? When will the acquisitions start to take place?