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No entrepreneur needs a reminder of how scarce capital is these days, but things may be toughest for startups – those that as yet lack customers and sales to prove to investors that someone out there wants what they peddle.

So the idea of free money from a tech giant, showing its confidence in your fledgling business, would seem the stuff of fantasy.

But Rob Balahura knows otherwise. The 37-year-old founder of J2Play in Waterloo, Ont., had spent two years building what he terms a “social wrapper” for online games – a way of allowing makers of PC, Web and cellphone games to distribute them on social networking websites such as Facebook or MySpace.

The technology offers game makers a compelling proposition. Instead of hawking their wares on Web portals such as Big Fish Games or Real Arcade, which keep as much as 80 per cent of the revenue, “we enable developers to republish their games on a new channel: the ‘social Web,'” Mr. Balahura says.

By incorporating features such as leaderboard rankings, player profiles and chat functions, developers can foster communities of gamers that expand virally and reach out onto members' cellphones. They can also insert advertisements for others' games, generating revenues. “Each game becomes a games portal,” Mr. Balahura says.

For social networks, J2Play's technology, and social gaming in general, presents a way to keep members around longer. For example, the Scrabulous game was a huge hit on Facebook before the makers of Scrabble forced it to shut down, charging copyright infringement.

In September of 2007, Facebook announced a new way to draw developer interest: It launched the $10-million (U.S.) fbFund, which offers grants to makers of innovative Facebook applications that promote user engagement.

Mr. Balahura had already scored seed funding from Extreme Venture Partners, a Toronto venture capital firm. J2Play also did some contract work for RealNetworks and other major game companies. But the company was starting to run low on money when Mr. Balahura saw the call for submissions on Facebook's developer site, and learned that one of Extreme's founders could make an introduction.

The first hurdle was a meeting with Facebook's development team in Palo Alto, Calif., at which Mr. Balahura and three colleagues demonstrated their software. The Facebook crew was impressed. “They indicated to us that they had not seen anything like this before and wouldn't change anything,” he recalls.

Then came the critical second meeting with marketing people who were members of the fbFund's selection committee. It was a casual session, with Mr. Balahura sitting on a couch between Facebook reps and running the software on his laptop.

About six weeks after the second meeting, in late July, J2Play got the good news: It was one of the first 10 recipients of a $250,000 grant. The company was also invited to a Facebook developer conference in San Francisco as an exhibitor, a great networking opportunity.

Combined with R&D tax credits from the federal government, the grant should carry J2Play and its eight employees through much of this year (though the fbFund money has to go toward Facebook-related product only). “It's a good year to have this money, considering the economic climate,” Mr. Balahura says.

Just as importantly, he notes, “the grant validates to potential clients that an industry leader in this area believes in us.”

It has made a big difference in client pitches. When J2Play recently approached a large game developer (which Mr. Balahura declined to name), the deal closed with unusual speed. Facebook members will see some of that client's famous PC games later this month, courtesy of J2Play's technology.

Connect with Rob Balahura

Mr. Balahura took your questions on his experience. Click here to read the discussion.

Expert insight

“Startups need to sell products or services that customers want to buy. Doing cool things that no one will [pay for] is a recipe for failure,” says Kevin Talbot, managing director of RBC Venture Partners. On Wednesday, he will share his thoughts on J2Play's winning of a grant from Facebook's fbFund and how others can position themselves to make such scores.

Click here to read the interview with Mr. Talbot.

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