In March of this year, venerable Silicon Valley VC firm Kleiner Perkins Caufield & Byers announced it had ‘earmarked’ $100m (€64.2m) for worldwide investment in companies being created on Apple’s iPhone/iPod touch platform. The iFund is a partnership between KPCB and Apple, which will provide the firm with ‘market insight and support’.

KPCB is one among several VC firms tying up with platform providers, including the UK’s Eden Ventures and Salesforce.com with their Million Pound Challenge for companies developing on Salesforce.com’s Force.com platform; and Accel Partners, The Founders Fund and Facebook with their fbFund for Facebook application developers.

Investor interest in new platforms is understandable. As KPCB Partner John Doerr writes on the fund’s website, ‘A revolutionary new platform is a rare and prized opportunity for entrepreneurs, and that’s exactly what Apple has created with the iPhone and iPod touch… we think several new significant companies will emerge as this new platform evolves’.

In introducing AppFactory, their independent initiative to fund Facebook app developers, Bay Partners – another well-established Silicon Valley VC firm – make a similar point: ‘Facebook, in essence, became the social Operating System. Historically, the creation of an operating system, or platform, has led to a new economy which includes a marketplace of applications’.

It is also clearly in the interest of platform providers themselves to encourage development on their platform. This is the reason why Microsoft, Sun, Qualcomm, Nokia, Oracle and others run extensive partner programmes. Furthermore, platform providers often put their own money down to encourage early adoption of their platforms.

For example, Google Gadget Ventures is making $5,000 (€3,200) grants to Google Gadget developers worldwide, with the chance for winners to receive further seed investment of $100k (€64k) from Google. In Autumn 2007 Amazon.com ran the Amazon Web Services Start-Up Challenge to encourage development on top of its utility computing platform, which offers startups on-demand computing, storage and other facilities. The winner of the challenge received $50k (€32k) in cash, $50k in Amazon Web Services credits and an investment offer from Amazon.

For platform providers, spending cash on grants and seed investments to yield greater platform adoption is understandable. What is more difficult to understand is why VCs would put their own money on the line in these exercises. To generate returns VCs seek out the highest-potential startups – so why restrict prospects to just a narrow slice of the startup universe?

fbFund works much like Google Gadget Ventures, providing grants of $25k (€16k) to $250k (€160k) to Facebook application developers; however, the $10m (€6.4m) investment pool comes not from Facebook but from Accel Partners and The Founders Fund. The grants are open to companies globally so long as they have not already received VC funding; in return for the grants, Accel and Founders Fund receive right of first refusal for VC investment in the winning companies.

Eden Ventures’ challenge is set up as a competition rather than a fund; entries from UK and Irish entrepreneurs must be submitted by 7 July 2008 and the winner will have the chance to negotiate with Eden Ventures for an investment up to £1m (€1.3m) in exchange for at least a 20% equity stake.

Apple, Facebook and Salesforce.com are assisting KPCB, Accel & Founders Fund and Eden Ventures, respectively, with their investment screening processes. This suggests one reason for the creation of such vehicles on the part of VCs. The strategic insight offered by the platform provider coupled with “official endorsement” during the early stages of an emerging platform may be enough to counteract the downside of tying up funds for such a narrow purpose.

Furthermore, in the case of fbFund, Accel Partners and The Founders Fund are investors in Facebook itself - so they stand to benefit should the fbFund encourage overall adoption of Facebook’s developer platform, regardless of whether or not individual grantees succeed.

Two questions linger, though. The first is whether there are enough quality businesses being built atop these new platforms to warrant so much investment interest. fbFund, for instance, rejected all applicants from its first round of submissions in January 2008.

The second question is whether platform-specific funds are necessary or even advantageous for making investments into the most compelling startups developing on those platforms. Take the case of Camrivox, a Cambridge-based startup developing on Salesforce.com’s Force.com platform. The company’s products allow businesses to integrate their telephone equipment with Salesforce.com, so that when a call from a customer or sales prospect comes in their record will be automatically displayed on screen. Before Eden Ventures and Salesforce.com were taking submissions for their £1 million challenge, Camrivox had already raised £2.5m (€3.5m) in VC funding from CREATE Partners, Cambridge Capital Group, NESTA Ventures, IQ Capital Partners and others.