No one derails a startup quite like the Winklevoss twins. Now their colossal egos have sunk a startup they invested in because they didn't approve of the terms of its sale.
The alleged casualty of Winklevii's hubris is Hukkster, a discount-tracking app with approximately 300,000 users. The company raised $4.5 million in funding throughout its 27 month life span, according to BuzzFeed, and Winklevoss Capital was its largest investor.
However, Hukkster's sizable chunk of funding wasn't enough to sustain it. The company was reportedly "burning through cash" and was unable to find new investors. So the app, which notified users when products they followed went on sale, needed to either sell or shut down.
BuzzFeed reports that Jet.com's Marc Lore offered to acquire Hukkster "for a fire sale price of less than $1.5 million" at the last minute. The price was low, especially given how much the company had raised, but it would have saved the business:
[The offer] appealed to [Hukkster co-founders Katie Finnegan and Erica Bell] because it would allow Hukkster to keep its website running and its team mostly intact and return at least some money to [the company's most recent] investors, who had been issued convertible debt. (That money was going to be spent on digital marketing and advertising, the pair told BuzzFeed at the time.) The Winklevoss twins were equity investors and thus ranked below debtors for a payout, though they did have blocking rights for a deal, two people familiar with the matter said.
The Winklevoss bros were allegedly miffed they and their friends wouldn't be receiving a payout in the sale. Instead of letting it go through, the twins, who reportedly made upwards of $300 million when Facebook went public, blocked the Hukkster deal hoping to reap more from the small sale.
But with a term sheet on the table and the deal set to close, the twins said they wanted all equity holders to share in proceeds from the sale, which just "didn't make sense" given the financial structure, said two people familiar with the matter. The debtholders came back to the Winklevoss twins and said they could share in 15% of the deal's proceeds if they waived the block, but the twins refused to back down unless 20 or so equity investors were also able to split the money, according to a third person with knowledge of the negotiations. A number of the twins' friends were invested in the company as equity holders, though Winklevoss Capital was the largest equity investor, this person said.
The debtholders—who had only just invested in Hukkster in March—decided they had enough of the Winklevoss's antics and killed the deal altogether. This left Hukkster with a depleted bank account and no choice but to "abruptly" shut down.
Now their employees are presumably without jobs and the company "will probably head into bankruptcy," according to BuzzFeed. All that's left of Hukkster is a splash page celebrating the million-plus hours worked on the business and a brief message telling their users "it's time for a nap."