We’ve been digging further into The Fancy, the social-commerce startup that Apple is trying to buy.Here’s something interesting: In 2010, the company, then known as Thing Daemon, raised $6 million in a round led by Allen & Co., the investment bank.
A document filed with the SEC plainly states that $2.66 million of that financing went to buy back shares from Joe and Jack Einhorn, the brothers who cofounded the company.
Technically, that’s not a secondary sale, but the stock buyback is a similar mechanism for giving founders liquidity.
Joe Einhorn, the company’s CEO, could not be reached for comment.
Why do investors allow founders to get liquidity? It used to be verboten, but it’s become more and more common as startups get attractive buyout offers at early stages.
Digg, for example, let founder Kevin Rose sell off some of his stake after the company turned down acquisition offers.
It’s a way of aligning founders’ interests with investors, since a founder can make a lot of money off of an early buyout, while venture capitalists and angel investors need to bet on a company on the long haul to make the kind of outsized returns they need.
At the time, Thing Daemon, also known as ThingD, looked nothing like The Fancy does today.
In fact, it’s not clear who would have known about ThingD. The fundraising and accompanying share buyback happened in May 2010. ThingD would not make its public debut until that year’s Sun Valley media conference two months later—an event organised by Allen & Co., the investment bank that’s also one of Thing Daemon’s investors.
So it’s not clear who would even have known about Thing Daemon, let alone why they would have wanted to buy it at such an early stage.
If the intent of the buyback deal was to get the Einhorns to look past early buyout offers and focus on building a long-term business, it seems to have worked.
The Einhorns shifted their attentions to The Fancy, an app which drew upon their database to showcase interesting objects. In February, they added e-commerce options to the mix, turning users’ interest into transactions. That shift may well be what caught Apple’s attention.