In June 2013, Fab.com’s chief executive officer, Jason Goldberg, dressed in all black with a red belt, arrived at the Bloomberg Television studios in New York, ready to spread the gospel of quirky home decor. Fab sold Texas-shaped coffee tables, necklaces with expletive pendants, cardboard lion heads, and other unique items, and investors loved it. Goldberg had raised hundreds of millions of dollars, and the latest round of venture capital valued Fab at $1 billion. Back then, a 10-figure valuation placed you in rare air, but Goldberg wasn’t satisfied: He wanted to be bigger.
“There are currently four e-commerce companies that are worth more than $10 billion dollars— Amazon, Rakuten in Japan, Alibaba in China, and eBay. And we think Fab has a good chance of being the fifth one,” he told Bloomberg’s anchors. “We have more money than we need right now to run Fab well into the future.”
But Fab did not have enough money. Goldberg had raised only about half of what he needed. Soon after his televised brag, Bloomberg published my story about troubling cracks in the business—revenue shortfalls, a revolving door of executives, low morale—and it was even harder for Goldberg to get cash from investors.
The turmoil that followed was well chronicled: round after round of job cuts, departures of executives, including Goldberg’s co-founder, and, in 2015, the sale of what was left of the brand to an Irish manufacturer. The price was $15 million.
Now Goldberg is back, with something new to sell. Later this month he’ll launch Pepo, a consumer messaging company. It’s based in Berlin, where Goldberg now lives, and there’s an engineering team in Pune, India. This time, he says on the first episode of the Decrypted podcast (subscribe on iTunes here), things won't get as crazy.
Fab’s crash is a cautionary tale for any startup that relies on selling things directly to consumers. Flush with venture capital, startups use it to afford marketing or steep discounts for their customers, which help them grow—but it can’t last forever. The current startup landscape—with more than 150 companies valued at more than $1 billion—is peppered with e-commerce companies yet to prove their business models. There are the subscription box companies such as Birchbox, food delivery startups such as Instacart and Doordash, and online stores trying to have a breakout success like Fab: Wish, Poshmark, and OfferUp.
In the larger startup landscape, enthusiasm for some of the unicorns has started to fade. Some of them are taking on debt, some of them are laying off employees. Goldberg is well-equipped to tell those CEOs what may come next: rounds of layoffs that aren’t enough, rifts between co-founders, and a selloff of assets.
“Don’t ever allow yourself to slip into thinking, ‘We figured it out,’ or you risk losing it all,” Goldberg said. “If you are ambitious and if you grow your company fast, this will be your own personal epic battle. It is very hard to remain humble when you are piloting a rocket ship. It is very hard to remain humble when the world is telling you: You are winning.”
If Fab had been more conservative in its numbers, more careful about its rate of spending, and had not such aggressive growth goals, it might still be around today, said Sucharita Mulpuru, chief retail strategist at Shoptalk.
“They might be smaller than they were, but they would be around,” Mulpuru said. “That’s the question that every entrepreneur has to face—how do you grow quickly and still stay alive?”