Tl;dr Fab’s CEO Jason Goldberg lays out the extent of their screw-up in a secret memo to the exec team.
At one time, Fab was “the world’s fastest-growing startup.” Later, it would be called the “the tech Titanic.” But while Fab.com was on top, it reigned supreme in the startup world. Then, mere months after a $900 valuation and a new round of funding, CEO Jason Goldberg realized the ship was sinking. Quickly.
Fab had failed to find a sustainable business model; Goldberg flat out admits it in this memo from October 2013. The company had shot most of their wad in the form of $200 million over the past 2 years.
The Rise of Fab
Hot off the sale of Socialmedian for $7.5 million in 2008, Jason Goldberg started a gay social network in 2010, named Fabulis. After struggling to be the “gay Facebook” it attempted other knockoffs like being the “gay Yelp” and “gay Groupon”, Goldberg and his business partner Shellhammer realized Fabulis just wasn’t working.
The way they tell the story, they cracked open a few bottles of wine and had a deep discussion over the future of their company and the market. They had a nice conversation and landed on a shared passion for design. Good chance it was closer to “Let’s just sell shit!”
Fabulis.com was shuttered and reopened as Fab.com, dropping a lot of letters and its commitment to being a space for people on the internet that identify as gay. Seven months later, they had 2 million users, 100 employees, and $50 million in funding. People forget now, but there was a time when Fab.com’s transformation had more buzz than Caitlyn Jenner’s.
Falling Apart
After ballooning up to over a $1 billion valuation at one point, some people might assume Fab was “too big to fail.” And they’d be dead wrong. There’s a reason that so many people become hyperfocused on a startup’s burn rate and estimated cash runway. It doesn’t matter if you have more money than God if you spend it faster than you can reach a positive cash flow.
Fab went through round after round of layoffs, including more than 100 Berlin employees in one fell swoop. Goldberg doesn’t have the best track record with handling his own successes, and Fab is not the first, or last, of his companies to crumble under its own weight.
Post-Fab Goldberg has since used his talent for raising funds to launch a furniture design company, a social media app, and a “cryptocurrency platform.” The latest project, Simple Token, has a surprising lack of buzz or public information; they are currently suspended on Twitter and their site links to a Discord with a little over 1,000 members. Not exactly a billion-dollar company.
While he might be down (again), most people hesitate to call Goldberg out. Maybe he’ll pull off another big idea someday. Just invest cautiously.
Goldberg is a huge fan of bullet-points, as you can see here in his blunt and honest memo:
Point-Blank Memo
October 11, 2013
We are going to make this work.
- It has to start with brutal honesty
- And we have to establish a few ground rules:
- I have promised the board certain things:
- The debate about our path is over. At this point it’s about deliberate action.
- We are not done righting this ship. It will be a constant, every day effort.
So..
- Step 1: Acknowledge that we have serious problems.
- Step 2: Ground ourselves in reality on what it will take to fix our problems.
- Step 3: Focus on fixing it.
- We have to be brutally honest with ourselves about where we are at.
- We spent $200M in the past 2 years. $200M!
- We spent $200M and we have not proven out our business model
- We spent $200M and we have not proven that we know precisely what customers want to buy.
- This is not an indictment about any person or persons or team.
- It must be a thoughtful discussion about what’s best for Fab.
- We have north of $100M and we a) have to make it last b) figure out all the things we should have been figuring out over the last two years.
- This is it.
- Retail businesses are all about the merchandise.
- No amount of marketing or financial engineering can overcome the merchandise.
- Successful retail is a marriage of merchandising and supply chain.
- Successful retail is a marriage of merchandising and operations.
- Selling a lifestyle = ruthlessly executing on a tight creative vision that is married with a deep and proven understanding of what customers will buy.
- Turning around a retail business is a slog. It wont [sic] happen overnight. Planning cycles. We need time.
- We must, must, must, narrow the focus. Even more than we already have.
- It is not enough to say let’s just get back to where we used to be.
- Strict frameworks. Buy what we love, within a strict framework of what our customers want.
- What customers want and will pay for matters more right now than what we want them to want.
- It’s not about us. It’s about Jennifer and Michael. [Jennifer and Michael are made-up profiles of Fab’s target user based on an internal customer survey]
- We won’t [sic] have the opportunity to build a business that Jennifer and Michael admire and shop from unless we:
What do you all need in order to do this?
- We have failed in the past to clearly identify what Fab’s core value proposition is to consumers.
- Who we target. Narrow, specific customer target.
- How, Product offering, price point.
We are doing [sic] do that now.
- We have failed in the past to acknowledge the cost-focused, execution-focused, low margin requirements of an e-commerce business. We are doing that now.
I have made mistakes.
- I guided us to go too fast.
- I enabled us to lose our core focus.
- I didn’t insist on our honing in on our target customer.
- I didn’t build discipline around costs and business metrics enough into our culture.
- I didn’t build a retail merchandising / marketing culture.
- I spent too much on marketing before we got the consumer value proposition right.
- I allowed us to over invest in Europe vs. insisting on scaling global teams from teh start.
- I didn’t build a culture and discipline that connected supply chain to merchandising to delivery. I allowed silos of teams and thinking, and that has seeded an awful an [sic] cancerous distrust.
- I didn’t see the need to course correct fast enough.
- Etc.
- Etc.
And all of you have made mistakes too.
I need you all to do this: Write down the mistakes you made.
It’s not about blame. It’s about healthy introspective dose of realism that is needed by all of us in order to go forward. We can’t build a better Fab until we have a clear sense for what we should have done different, better, smarter.
Things you can expect over the next weeks and months.
- Ruthless attention to righting this ship.
- Ruthless attention to focusing the business.
- Ruthless attention to opportunities to shave costs without hampering our future.
- More more more Jennifer and Michael.
- Influx of retail and ecomm experience.