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.

Netgiro, the Sweden-based e-commerce software developer, has been acquired by US-based Digital River for $27m (€17.8m) in cash. Netgiro's platform can support 20 online payment methods, ranging from credit and debit card processing, to direct debit, internet bank payments, local bank transfers and cheques. Earlier this year Aim-listed payment service provider Datacash Group terminated a proposed €10.2m acquisition of NetGiro, claiming a breach of the purchase agreement.

Joost, the Netherlands-based internet TV company, has acquired the digital programming guide OnTheToob.com. Hal Schechner, the creator of technology - which helps Joost beta testers create customised channels and RSS feeds out of Joost's channels and programs - has also joined the company. Financial terms of the deal were not disclosed.

CogniTens, the Israel-based provider of dimensional measurement products, has been acquired by Swedish measurement company Hexagon. Terms of the deal were not disclosed. CogniTens’ 3D non-contact measurement technology is designed to improve engineering and manufacturing processes in the automotive and other manufacturing industries.

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Dailymotion, the France-based video sharing website, has raised $34m (€24.9m) from AGF Private Equity, Advent Venture Partners, Atlas Venture and Partech International. The investment will be used towards technological and creative development as well as marketing. Dailymotion was launched within a few months of its main competitor YouTube, which was sold to Google last year for $1.65bn (€1.3bn). Website analysis company Alexa currently rates Dailymotion as the worlds 49th most visited site, compared to Youtube’s ranking of 4th.

XMOS Semiconductor, the UK-based fabless semiconductor company, has raised $16m (€11.7m) in series A funding from Amadeus Capital Partners, DFJ Esprit and Foundation Capital. XMOS has created a new category of semiconductors - called Software Defined Silicon (SDS) chips - for consumer electronics applications that require high performance, low manufacturing cost and design flexibility. The company expects its silicon, development tools and software components will sample to lead customers towards the end of this year and be broadly available from Q1 2008.

Netviewer, the Germany-based provider of real-time collaboration software, has raised €9m from Invision Private Equity and TVM Capital. Netviewer’s service enables business users to view each other's PC screens simultaneously in order to collaborate on a variety of documents, calculations or graphs. The company says that it has more than 10,000 corporate and SME customers from more than 43 countries. The latest investment is to be used to accelerate international growth and for further product development.

Power Paper, the Israel-based provider of low-voltage patch technology to the cosmetic industry, has raised $12m (€8.8m) from Amadeus Capital Partners, Apax Partners, Clal Industries and Investments, Infinity Venture Capital and Partech International. Power Paper’s patches, powered by an embedded ultra-thin printed battery, are designed to boost cosmetic efficacy by enhancing the effect of active ingredients. The company develops patches addressing various cosmetic applications including anti-aging, anti-wrinkle, skin whitening, anti-cellulite and acne. Pharmaceutical applications are also under development.

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Varioptic, the France-based liquid lens company, has appointed Christian Dupont as chief executive, replacing Etienne Paillard who has now left the company. Varioptic says the change coincides with a move in company focus away from technology and product development to the challenges associated with deploying its products in the mobile imaging market.

HelioDynamics, the UK-based developer of solar energy technology, has appointed Clarke Simmons as chief executive and Keith Glichrist as chairman. The news coincides with the announcement of further funding of £600k (€886k) from the Low Carbon Accelerator. HelioDynamics has developed a solar photovoltaic system that uses mirrors to reflect and concentrate sunlight to produce electricity and heat. The recent appointments are intended to add a further layer of commercial focus to the company.

SoonR, the US and Denmark-based developer of technology for accessing and sharing computer files remotely, has appointed Patrick McVeigh as chief executive. Mr McVeigh was most recently chief executive of Nasdaq-listed PalmSource, a global provider of mobile handset operating systems. SoonR has developed a service that is designed to link data-enabled devices, such as mobile phones, PDAs, or computers, to applications and data on any internet connected computer. The company also announced that company founder Martin Frid-Nielsen has been appointed chairman and chief product officer.

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Metacafe, the Israel-based online media and video sharing community, has raised $30m (€22.3m) in series C funding from Highland Capital Partners, Accel Partners, Benchmark Capital and DAG Ventures. Metacafe says that its 25 million unique viewers each month make it one of the world's largest video sites. The money raised will be used to support the company's continued global growth, including expanding the breadth and depth of content, sources of which include emerging video creators as well as partnerships with established media companies.

Novafora, the US and Israel-based fabless semiconductor company targeting the video processing sector, has raised $12m (€8.9m) from Gemini Israel Funds and Vertex Venture. The company, which is currently operating in stealth mode, was set up in 2005 by the Zaki and Shlomo Rakib, the two brothers who founded Nasdaq-listed Terayon Communication Systems in 1993.

Small World Financial Services, the UK-based money transfer operator, has raised £2.4m ($3.5m) from MMC Ventures. Small Word operates ‘corridors’ of money exchange between western Europe and developing countries. The UK is reportedly a strongly growing market, with many newly arrived workers now sending money back to their home countries.

iMotions, the Denmark-based developer software to measure emotional response, has raised $2.7m (€2m) from Inventure Capital, The Way Forward, Andy Miller, Joergen Thorball, Kenneth Morse and other undisclosed private investors. The company's software is designed to be an objective, non-intrusive, reliable way of measuring human emotional response to visual stimuli such as print ads, direct marketing material, and brochures. The funding is intended to allow the company to strengthen and expand its sales organisation in the US and its support organisation worldwide.

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