Fab

What did it do?

Fab was an online shop that sold a curated selection of design products every day through time-limited discounts. It stood out for its social commerce features, which let members share what they had bought and liked. The Manhattan-based company ran a warehouse in New Jersey and opened offices in Berlin and Pune.

Why did it shut down?

Fab grew fast on more than $150 million raised between 2011 and 2012, making acquisitions in Europe and opening new offices. The daily-deals model drew a large audience but never made the company profitable; in 2013 it laid off 100 people in Berlin and then 101 more, mostly in New York. In 2014 the company tried to change direction by launching Hem, which sold customisable furniture, and co-founder Bradford Shellhammer left. In March 2015 Fab's digital and e-commerce assets were sold to PCH International for an undisclosed sum.

The story

Fab did not start life as a design shop but as Fabulis, a social network for gay men and their friends. Jason Goldberg, who had a background at XING and Jobster, and the designer Bradford Shellhammer launched the venture in February 2010. When the social network failed to take off, the pair changed course on 9 June 2011: Fab became a site selling a curated selection of design products every day through time-limited discounts.

The new model grew at an astonishing pace. Membership, which stood at 175,000 in June 2011, reached 1 million five months later; the company crossed that threshold faster than Facebook, Twitter or Groupon. In July 2011 it raised $8 million in a round led by Menlo Ventures; VentureBeat had reported that the company turned a profit when it was just six weeks old. In December 2011 it raised $40 million in a round led by Andreessen Horowitz. The $105 million Series C led by Atomico in July 2012 was the company's biggest round. In December 2012 membership passed 10 million and the site was selling an average of 5.4 products a minute. During this period Fab bought Casacanda in Germany and Llustre in the UK, and opened offices in Berlin and Pune. At one point it was estimated to be worth more than $1 billion.

But growth did not bring profit. In July 2013, in pursuit of profitability, the company cut 100 roles at its Berlin office, and in October 2013 it laid off 101 more people, mostly from its New York office. That was 19 per cent of its workforce. In 2014 Shellhammer left to found his own design marketplace, Bezar. In June 2014 the company bought the Finnish furniture retailer One Nordic Furniture, and in September 2014 it launched Hem, offering made-to-order furniture designs.

In March 2015 Fab's digital and e-commerce assets were sold to PCH International for an undisclosed sum. The site relaunched under its new owners without the founders' involvement, turned into a site selling health and fitness products in 2019 and went offline at the end of 2022.

Fab is one of the examples reminding us that member numbers say nothing about the health of a business. With a model that grew its audience very fast but kept postponing making money on each sale, the company could not turn the capital it raised into a lasting business.

Lessons for founders

• Track contribution margin per order and repeat-purchase rate, not growth metrics such as member numbers.
• Prove a profitable model in your home market before expanding abroad through acquisitions.
• Pivoting again and again wears out both the team and the brand; tie every change of direction to a measurable hypothesis and a deadline.

Sources

1. Fab (website) (Wikipedia)
2. Fab.com Cuts 101 Jobs as E-Commerce Site Aims to Turn Profit (Bloomberg, 2013-10-03)
3. Fab Passes 10 Million Members, Sells 5.4 Products Every Minute (Mashable, 2012-12-30)

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