Perhaps some of the hesitation is due to the fact that FB is seeking "proposals for building a business on Facebook Platform". I think a lot of people are considering making a FB app to augment their main offering, but most probably aren't building a whole business on the platform. My interpretation of the common blogosphere opinion seemed to be that focusing only on Facebook was too risky given that you could be screwed over by the whim of the growing giant.

I've been assuming that the startups that were granted would be public information.

If so, it'd look really bad for FB to screw them over.

It's like a reverse protection racket.

i just got a cease and desist letter from facebook for owning facebookfund.com...hmm...

Not surprised. They have to defend their trademark.

More info:

What is fbFund? fbFund is a fund focused on continuing to create incentives for the development of applications on Facebook Platform by accepting applications for $25,000-$250,000 non-recourse grants from anyone interested in building their business on Facebook Platform. The grants will not come with any conditions except that the grantee use the funds to build their company on Facebook Platform.

What is the total investment in the fund? Initially, the fund will make available $10 million in capital. This may grow over time.

Who is eligible? Any individual or company, anywhere in the world can apply as long as they have not raised any formal venture funding.

What companies are involved? fbFund will be administered by Facebook and funded by Accel Partners and The Founders Fund.

Will there be any equity granted in exchange for the investment? No, Accel Partners and The Founders Fund will have the right to fund these companies first, but beyond this, no equity or debt will be associated with any grant made.

Who is participating in fbFund? The investment committee will be comprised of Mark Zuckerberg, Facebook founder and CEO, and Chamath Palihapitiya, Facebook vice president of product marketing and operations. Facebook board members Jim Breyer (Accel Partners) and Peter Thiel (The Founders Fund) will also be part of the committee. Additionally, the fund will rely upon an advisory council that includes Reid Hoffman, founder and chairman of LinkedIn; Josh Kopelman, founder of First Round Capital; and Rajeev Motwani, professor of computer science at Stanford University and early advisor to Google.

Why are you forming this? We are forming this fund to help grow the Facebook application ecosystem. By decreasing the barrier to start a company, we hope to entice an even larger group of people to become entrepreneurs and build a compelling business on Facebook Platform. We hope this is also a funding model that other venture capitalists will follow.

How will you decide on investments? Anyone will be able to apply for an fbFund grant from the Facebook website. All proposals will be reviewed by the advisory council and then approved by the investment committee. The goal is to get decisions to potential grantees within the month that they apply.

How does an individual or company apply? Initially, you can mail your business plan to platform@facebook.com. In coming weeks, we will set up an online submission process. Submissions are being accepted immediately.

What will be the criteria for selection? We want to see the most innovative and ambitious proposals for building a business on Facebook Platform.

How long will it take to hear back from the fund? The goal is to get a response to the applicant within 30 days of receipt.

Sounds cool.