Death By Overfunding: Fab.com

In June 2013, Fab.com raised $150 million in a Series D round led by Itochu Technology Ventures and Tencent Holdings at a valuation of more than $1 billion with a $200+ million revenue run rate. By the end of the year 2013, Fab had grown its base to over 14 million members, but it had started showing signs that it was struggling to maintain momentum. Traffic to Fab’s website and mobile apps peaked at 5,275,000 in November of 2012, just before its pivot away from flash sales and fell 75% to around 1 million within a year.

It then started laying off employees. From a peak of 700 employees, it dropped to just 200 employees in mid-2014. In a memo in October 2013, Goldberg told his employees,

“We spent $200M and we have not proven that we know precisely what customers want to buy. We have north of $100M (cash) 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.”

Then in June 2014, Fab.com announced its own branded merchandise and even acquired One Nordic Furniture, a Helsinki-based custom-furniture manufacturer. One Nordic was also known as a luxury Ikea with focus on high design wooden and metal furniture. Fab was now talking about taking on Ikea.

In September 2014, Fab.com launched a sister website Hem, which offered customized furniture designs.

Soon after, in March 2015, Fab.com was acquired for $15 million to $50 million in stock by PCH International, which planned to use it as a sales channel for the hardware products it designs and manufactures.

Goldberg shifted to Berlin to focus full time on Hem. He reportedly has about 100 former Fab employees working with him. His backers have reportedly agreed to let him use tens of millions in funding from Fab for the new venture.

Overall, Fab had raised $336 million in investments from Itochu Technology Ventures, SingTel Innov8, Tencent Holdings, DoCoMo Capital, RTP Ventures, Pinnacle Ventures, Andreessen Horowitz, Phenomen Ventures, VTB Capital Investment Management, Atomico, Mayfield Fund, Menlo Ventures, First Round, SoftTech VC, Baroda Ventures, Thrive Capital, BoxGroup, Jon Anderson, Don Baer, Zelkova Ventures, SV Angel, The Washington Post Company, Allen Morgan, and Lars Hinrichs.

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