Apple is in talks to acquire The Fancy, a fast-growing social commerce site backed by cofounders of Twitter and Facebook, Business Insider has learned.
The objective: to secure a role for Apple in the growing e-commerce market, putting the 400 million-plus users with credit cards on file with Apple's iTunes Store to work shopping—with Apple getting a cut of the action.
While The Fancy is far smaller than archrival Pinterest, which similarly lets users make lists of things they find interesting, the 20-person New York startup, led by cofounder and CEO Joe Einhorn, is much farther along in linking its users to transactions. The Fancy takes a 10 percent cut of purchases. Last we checked in, sales were exploding.
There is no signed deal and no guarantee one will happen. We do not know the price Apple has proposed to pay for The Fancy or how recently talks took place.
However, given what we've learned, it was apparently no coincidence that Einhorn and Apple CEO Tim Cook met at Allen & Co.'s Sun Valley conference earlier this year. The notoriously private Cook, who does not visibly participate in any well-known social media sites, started using The Fancy shortly afterwards.
The Fancy raised a $10 million round at a reported valuation of $100 million last fall, led by PPR, the French luxury conglomerate behind Gucci. It previously raised $6 million in 2010; $2.7 million of that round went to Einhorn and his cofounder, his brother Jack Einhorn, according to an SEC filing. Investment bank Allen & Co. was an early investor.
It would be reasonable to think its investors would expect a healthy return—call it 3 to 5 times what they paid. (Consider that nothing more than informed speculation, based on similar deals.)
Twitter cofounder Jack Dorsey and Facebook co-founder Chris Hughes are on the board, along with LeRoy Kim of Allen & Co. and James Pallotta, the owner of the Boston Celtics. Marc Andreessen and Ben Horowitz, the co-founders of venture-capital firm Andreessen Horowitz, are also investors.
Apple is not known for making big, splashy acquisitions. But a source familiar with Apple's acquisition strategy noted to us that The Fancy is at a stage where Apple typically buys companies.
For example, in recent years, it has bought several companies to bolster its online offerings, like Chomp, an app search engine; Lala.com, an online music service; and Placebase, a digital mapping company. It is in the process of trying to buy AuthenTec, a mobile security company.
Still, how can a two-year-old company with 20 employees possibly be worth that much to Apple?
Apple's history in e-commerce stretches back almost 15 years to November 10, 1997, when it opened its first online store. On April 28, 2003, it got into digital commerce with the iTunes Music Store. Those foundations in e-commerce let it roll out the iPhone's App Store. As Apple's sales of mobile devices exploded, so did its rolls of online customers registered with a credit card.
But as its tentative moves into general e-commerce have shown, sending those customers on a shopping spree isn't a simple matter. PassBook, a new online wallet introduced in the latest version of iOS, Apple's mobile operating system, lets users store discounts, gift cards, and airline tickets—but it doesn't let people spend money with stored credit cards.
The Fancy could change all that by giving Apple a clear route to converting people's interest in an object into a sale.
Apple could well build an e-commerce layer into its operating system and let application developers hook into it, giving them a way to make money besides advertising.
The Fancy has recently rolled out a system that gives users a cut of the sales their lists of objects generate.
Einhorn's company began life as a project called Thing Daemon, or ThingD, which aimed to be a universal database of things. In February, it adopted a model focused around e-commerce—and its business has taken off since.
The Fancy's offices are situated above an Apple Store in New York City. We don't think that has anything to do with anything, but it's funny, given the circumstances.
Einhorn declined to comment. Apple, Dorsey, Hughes, and PPR did not respond to requests for comment.
