Death By Overfunding: Fab.com

Moral of the Story

As we have seen in the case of Gilt GroupeNasty GalGlam Media, and now Fab.com, investors are getting carried away from fundamentals and have been overfunding these companies with the hope of the large traffic turning into revenue.

Entrepreneurs should realize that pumping huge amounts of venture capital into building audience that cannot be monetized is a very bad business strategy. Fab.com pivoted several times to find the elusive positioning that would result in hyper growth. It just took a couple of years for the company to figure out that this was just a suicide mission.

Heavily funded companies with large audiences acquired through reckless spending and without a sustainable, fundamentally sound business model, eventually die.

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More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book,  more

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