Technology October 8, 2007, 12:01PM EST

Who Wants to Be a Facebook Millionaire?

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Since its debut in June, J-Squareds Sticky Notes application has been installed more than 3.5 million times, with 211,000 Facebookers actively using the widget each day.

A new application called Glitterbox, which lets you send sparkly messages and graphics to your friends, was installed more than 500,000 times in a matter of weeks.

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J-Squared's costs, so far, have been minimal—mostly servers, data storage, and copious amounts of Red Bull. A $10,000 investment in June from the TechStars program covered their expenses through mid-summer, when they started placing banner advertising on the "canvas page" of their application. Since then revenues from advertising have quickly started to add up—especially the rich-media ads VideoEgg (BusinessWeek.com, 8/14/07) serves up for brands like Burger King (BKC), which Aigboboh says pay out at a rate of $8 to $12 per thousand impressions.

Flirting with Investors

Today the J-Squared partners are still twitching with energy after this morning's big meeting with First Round Capital, an early-stage venture fund that has invested in several other Facebook-related companies, including VideoEgg and the widget maker RockYou (BusinessWeek.com, 5/22/07), which recently launched a Facebook advertising network of its own.

Back at the office, they use their new speakerphone to dial one of their TechStars mentors, Brad Feld, an early-stage venture capitalist in Boulder who is well acquainted with First Round. Tevelow gives Feld a quick rundown of the meeting, which he says went well. "Joe and I are thinking we want to go for it and take some serious investment," he says.

Now that venture capitalists (BusinessWeek.com, 4/2/07) are paying attention to startups like J-Squared—for whom a "serious investment" means a lot less than it used to—that is not an unreasonable goal. Two venture firms—Menlo Park (Calif.)-based Bay Partners and Monterey (Calif.)-based Altura Ventures —have set up early-stage investment funds focused solely on the Facebook platform. First Round founder Josh Kopelman also sits on the board of the new, $10 million fund Facebook's Zuckerberg announced in August, that will disburse grants of up to $250,000 to individuals or companies developing Facebook applications.

What's It Really Worth?

But Feld cautions that negotiating series-A financing is a trickier gambit than acquisition talks were: The time for simply saying yes or no to vague ballpark figures has passed. Tevelow and Aigboboh know why they want the money—so they can hire people. But Feld makes it clear that isn't going to cut it with VCs. "What are you guys going to do with half a million or a million?" Feld asks. "And is it half a million, or is it a million? There's a big difference between the two." Feld says there's another number they need to start thinking about, too: valuation.

When the call ends, there are a few moments of silence in the white-walled basement. Despite the hurricane of hype that surrounds Facebook (BusinessWeek.com, 9/25/07), Aigboboh and Tevelow are both well aware of the cynicism that exists among investors who question the utility and the long-term revenue potential of apps like Glitterbox. With the path to monetization on Facebook still unclear, they know those doubts will be reflected in valuations.

Still, Tevelow is optimistic. "I don't think it's that complicated," he pipes up—they just need to get everything down on paper: how many employees, how long the money will last. Aigboboh chews on his pen cap, thinking. He suggests they take a look at the valuation spreadsheet. "We're not going to raise half a million dollars and be done," he says. "I want to figure out how much we're going to raise now and how much we're going to raise a year from now."

Time to Make the Widgets

Meanwhile, there is still code to be written, bugs fixed, features added. "Do we have any stamps?" Tevelow wonders aloud.

On the corner of his desk is the first paycheck for J-Squared's one "employee,"a Flash developer in Ukraine named Sasha. At $3,300 a month, Sasha is a steal. Today, however, he's called in sick. When Tevelow phones the agency to find out when he'll be back, their contact, Natalia, reminds him that she could have two more developers ready to start within days. "Very talented, great communication skills!" she says, as Aigboboh, listening on speaker phone, vigorously shakes his head no.

They've already talked about this: Tevelow and Aigboboh agree that they want to hire someone local, even though they expect they'll have to offer to a starting salary more than double or triple what they'd pay an offshore worker. Technical skills, Teverow explains, are only part of the equation. They also need someone who can handle the nuances of tasks like the one he turns to now: surfing the Web for new images to turn into "glitter."

Aigboboh is working on an uploader that will enable Glitterbox users to do this themselves, but for now they try their best to keep up with the deluge of (sometimes baffling) requests from users, who seem to be split between middle-age women and middle-school-age girls.

Just Add Bubbles

Doing this, Teverow says wryly, has been an education in pop culture. "Yeah, 12-year-old pop culture," says his partner.

Today, those requests include: "Can u please design a Canadian 'Proud to be an Army Wife'…u have one for the Americans, but not Canadian." Writes another: "Hii! Awsome app!! Just one thing You have the PowerPuffs except for one, Bubbles!! Can she be added, plz?"

"This is my life right now," Tevelow says, shaking his head.

Tomorrow, the J-Squared team will head to New York to meet with another venture capital firm, where their thoughts will return to projections and term sheets and multimillion-dollar valuations. But for now, the missing PowerPuff Girl awaits.

Miller is a reporter with BusinessWeek.com in New York .