How the 200 million-dollar fab is going to die.

12 senior executives were summoned here to greet an important meeting in New York, the headquarters of the famous Flash-shopping website Fab on the eight-floor conference room in Friday, November 11, 2013. The conference promoter, the company's chief executive, Jeson Goldberg (Jason Goldberg), who had been waiting in the boardroom, sat in the middle of a silent silence, unable to conceal the exhaustion and gloom that implied the impending news.

As executives walked into the boardroom, everyone was given a five-page paper. When everyone was seated, Goldburg said, "Our company, Fab, valued $900 million three months ago and now has to face a radical overhaul." The company had to cut off two-thirds of its employees. European market sectors will also be closed. Although the company has 336 million of dollars in financing, but 200 million of them have been wiped out, and we still do not find a sustainable business model.

"We want to turn the tide," Goldburg, with a five-page letter distributed to everyone, slowly reading, "We have to face the grim reality." ”

Goldburg said to everyone solemnly: "We have to admit that we now face a very serious problem." ”

"Over the past two years, we've wasted 200 million of dollars. Listen to this number, 200 million dollars! "We've wasted 200 million of dollars, but we still haven't found a business model that suits our company's development," the letter wrote. Look, 200 million dollars is gone, but we still don't know what our customer needs are!

"With our rapid development, we are the highest-investment start-up company in the entire New York, and we have spent nearly two-thirds of our money ... God, I can't imagine!

However, no matter how bitterly Goldburg, it is impossible to save the Fab who is on the verge of bankruptcy.

The reality is, at the end of November, the company cut off a group of employees. The main executives, including Goldburg's co-founder, Bradford Schelheimer (Bradford shellhammer), also left the company.

A year later, it was rumored that PHC innovations would buy fab at a low price of 15 million dollars.

Last week, PCH Analysys (PCH), which helped start-ups design and manufacture hardware products, announced that the company had acquired Fab.com. It's worth noting that the beloved darling of the former investor has won the Penguin Empire's investment.

One wonders what has happened that has led to the collapse of businesses that once valued 1 billion of billions of dollars in three years.

Goldburg, as chief executive, haven't you had any inkling of the slightest hint? Why are investors still sending him hundreds of, tens of millions of dollars in a steady stream of investments?

Everyone wants to know why. So in the past few weeks, we have interviewed more than 10 people who know the fab business well, and have asked them the same questions. In order to avoid unnecessary legal consequences, the people interviewed are reluctant to give their names, but they are willing to provide more internal information.

"I don't think everyone at Fab has realised that the company is as gorgeous and dangerous as the Titanic," a former Fab employee said in an interview.

Below, the editor June will take you together to review the "world's fastest-growing start-up companies" is how to once fame, another night fell apart.

Myth Open: 9 months, from obscurity to shocking the world
At the beginning of 2011, Bradford Schelheimer and Jason Goldburg shut down the website Fabulis and devoted all their efforts to fab construction of the new Flash shopping site.

We came to see our hero, Jason Goldburg, 40 and two this year, and in his life history, it's not the first time that a startup failed.

Graduating from Emory University and successfully completing Stanford's MBA program, Goldburg's career can be said to be a bit of a envy to most people-he started working directly at the White House after graduation. He served as special assistant to Bill Clinton's chief of staff for six years at the White House and then came to Deutsche Telekom as marketing director. Goldburg initial venture in 2000 years or so, when he set up a recruitment platform company Jobster, received 50 million dollars of financing, the company gradually downhill, eventually had to cut half of the staff.

Goldburg's advantage is that years of political experience and a rich market background have made him more comfortable in marketing his vision and wooing his people. He often boasted in good faith-and, in fact, in order to achieve a more compelling purpose, the fact that he often spoke was not the whole truth. For instance, Goldburg told the media that Fab had 14 million registered users in July 2013. However, internal resources show that the number of registered users of Fab has never exceeded 10 million. Some people say that Goldburg's 1400万来 from "Up and down". Another insider rejects the idea of "rounding up", and the 4 million gap comes from natural losses and the company's unscheduled clean-up of inactive accounts.

Some people use "extreme" to describe Goldburg, because sometimes his behavior is quite incredible. On one occasion, Goldburg had not appeared in the office for a long time, so that the papers on his desk were piling up and even had to be collated. At other times, he did not sleep for days and nights, and worked frantically.

On the whole, he is a somewhat neurotic person, sometimes even lacking in executive power.

"He is very good at turning ideas into practical actions. At least, in my opinion, he is the best one, "said one of Goldburg's colleagues," but he is not fit to manage an entire company. ”

Another interviewer said: "Jason is the kind of person who can convince you to buy anything ... He had first persuaded himself that what he wanted to do would succeed ... Jason always has a lot of energy and enthusiasm, but it also infects your passionate passion. How could you hate him for that--you'd be with him in a hot, unrealistic dream and then go to hell. ”

Although he is not a good operator, Goldburg has already set up several companies. In 2008, he launched the Socialmedian, after being acquired by Qiao Xing Global (XING), after the acquisition, Goldbergian as Socialmedian's chief product manager, and at that time he saved a lot of money.

In 2010, Goldburg his friend Bradford Schelheimer, Socialmedian's co-founder Nishith Shah and Shah's wife, Deepa, co-founded another company--fabulis, originally a LGBT ( The social networking sites of LGBT, gay, bisexual and transgender groups are then transformed into daily trading websites. A year down, Fabulis registered only 150,000 users. As a result, they told investors who had smashed more than 1 million of dollars in the seed-round financing campaign, saying, "Sorry, our company can't go on."

"I always thought that the faster the company develops, the faster the iterations will bring more life." But it turns out I was wrong and you can't blindly change your business model. "At the Berlin Conference in 2011, when talking about Fabulis, Goldburg said.

Then, Goldburg and his co-founder spent three weeks researching another site, the later fab.com, an E-commerce Web site that provided a platform for designers to sell. The site is mainly for the sale of third-party-provided items, all of which come from small design studios around the world, and the introduction of a flash-purchase model-a new online shopping model that is considered a very successful model through the practice of websites such as Gilt group and LA.

Flash purchase is an E-commerce company in a certain period of time, usually only one day, at a discount to quickly sell only a small amount of inventory items. The flash purchase ensures that the site is aware of the inventory requirements prior to purchasing the goods.

Goldburg and his project team took the lead in securing 45,000 registered users prior to the launch of the site, and then launched the Fab site on June 9 in 2011. Goldburg himself to invest 500,000 dollars, and brainwave thought of a very wonderful invitation mechanism: by inviting friends to register fab, users can unlock new products and web content.

At the very beginning, Schelheimer said Fab was like his private shop. He flew around the world looking for all sorts of weird stuff and then put it on the website for sale. Every now and then a user buys these unique items.

Schelheimer's unique design taste quickly attracted the attention of users, and people began to recommend this magical website. In a short span of time, tens of thousands of users have registered Fab mailbox accounts, buying novelties that are not available elsewhere, such as the "Chandelier" artwork above, which costs 1775 of dollars, and is actually strung together by martini glasses, Or a motorcycle helmet studded with rhinestones.

"I was deeply shocked by the goods on their website, it's great to have a unique design and consistent quality," said an E-commerce executive when talking about the fab listing, "If I just grab an item and ask you, ' which website do you think you bought it from? ' La or one Kings lane? You must not answer it. But if you buy it from the Fab website, you'll recognize it at a glance. ”

A few weeks after the site's launch, Hollywood star Kutcher and Silicon Valley investors have invested 1 million of dollars in Fab. Investors who had previously invested in Fabulis, such as the first-Round capital and angel investor David Tisch, once again smashed the money into Goldburg's new company.

By mid-June, the company had 240,000 registered users and maintained a growth rate of 5,000 new registered users per day. In August, the number of fab registered users reached 500,000. In a round of financing, Goldburg got 7.7 million dollars from investors.

by October 2011, Fab's momentum was unstoppable, earning 100,000 dollars a day. The company employs 80 employees and the number of registered users has increased from 500,000 to 750,000. Etsy senior executive Beth Ferriera joined FAB as chief operating officer and David Lapter as chief financial officer of the company. At that time, people talked about Fab and would say it was "the fastest growing start-up in the world."

By the end of 2011, the company registered users have 1.3 million, annual income growth rate of 80 million U.S. dollars. With 200 million valuations, the company has also harvested a new round of $40 million trillion in funding from Silicon Valley's top VC company Anderson Hollovitz Fund. Jeff Jordan (Jeff Jordan), who had invested in Pinterest, then joined Fab's board of directors.

The company's office also moved into a two-storey spacious space, located in the Manhattan West Village area. Goldburg also delivered an inspiring speech in Berlin-"9 months from obscurity to shocking the world"-and described how he transformed a failed creative--fabulis into another great success.

However, the success of this time, in the end is only a flash in the pan.

"In fact, the company has been running very well," said a former FAB employee, "not this." ”

Others share the same feeling: "In the past people were always quick to tell him what they had bought on our website." We have the kind of attraction that drives people to register and fall in love with the content of our website ... There is no doubt that this is our core business. But then everything changed and it was a shame. ”

The cost of making mistakes: 100 million dollars

If a word is used to describe the state of the 2012 company, Fab's former employees will choose the word "wind showers."

In the new corporate headquarters office, lunch is served on time every day. Sales are rising. Employees can see the growth of earnings on the site in real time. At that time, the company was very popular with a game, and at the baby's party to bet the mother when the birth of the game similar, employees often bet each other to guess when the company's performance will again break through the new milestone, of course, guess the person will get an extra pizza.

When a new employee enters the job, Goldburg shouts loudly and tells the whole office, "We have new members!" and then everyone burst into cheers. A former employee recalls that Fab at the time felt like Google and the working environment was very similar. Fab at that time was in prime time, and the user grew even more than Facebook.

By June 2012, FAB staff had expanded from 80 to 150, financing 105 million dollars and valuing 500 million dollars. The company plans to expand its business rapidly and is expected to reach 100 million U.S. dollars in sales by the end of the year, a plan that quickly passed the board's approval.

Fab's early development attracted worldwide attention, so in the short 6 months since Fab was launched, 4 fab-like companies sprang up in Germany. And the fifth similar company, Bamarang, by the "European Internet Fortress King" reputation of the Samwer brothers investment, deeply troubled Goldburg and his board.
At first, every employee loved the company.

Marc and Alex Samwer, a German entrepreneur, are profiting in a way that is similar to an internet giant in the country, copying the operations of successful internet companies overseas, including ebay, Zappos,pinterest and Airbnb.

Bamarang copied Fab. As a result, Goldburg and his board decided to speed up the pace of the company's growth, rapidly expanding the European market, completely ignoring their presence in the United States has not yet a foothold.

Typically, most startups wait until the company matures and stabilizes in a country before they start thinking about entering the world market. But Fab believes that acquiring a few other clones and seizing the initiative in the European market will be the best tactic to dampen Bamarang.

So we saw that in 2012, Fab acquired three similar European start-ups in the form of a total stock exchange, acquiring Casacanda in February, acquiring Llustre in June, and Sparrow Bae in November.

The company's source survey shows that the European market will cost about 60 million to 100 million dollars of money. And, the limited sales volume is not enough to provide a large number of staff costs. Simplifying the company's business is not easy, and there is no successful manual for European affiliates to learn from. In addition, Fab spent 12 million of dollars signing a 10-year lease of a large warehouse, but the warehouse did not play a substantial role in the end was forced to shut down.

"When Fab decided to enter the European market, the company was still in its infancy in the United States," said a former Fab employee, "We have the ability to handle our jobs, but that doesn't mean everything is going really well." We don't have the extra manpower to transfer from US headquarters to the European division because we need to do our best to keep the headquarters running well. Perhaps it would be more appropriate for us to invest in the European market in two more meetings. ”

Looking at FAB headquarters in New York, the company has made another decision that has a big impact on its business-abandoning the original flash-purchase model and turning to inventory sales.

A rush to change is a blessing or a curse?
The company's decision to shift from a flash-buy to an inventory sale has not only increased spending but also reduced marginal profits.

One of the things that fab customers often complain about is the super long shipping time. On average, it takes 16.5 days to get items from the site list to the customer. Think about what this concept is.

But it is understandable, too, that one of Fab's highlights is that its suppliers are small design studios that sell their wares on the site; In addition to the site's orders, these studios have their own other channels of order to deal with. Naturally, the delivery time will be extended.

By the middle of 2012, Fab had made some improvements, with the average delivery time reduced to 6.5 days. The biggest reason is that FAB is starting to ensure that inventories are plentiful.

Fab has purchased a warehouse in New Jersey and the warehouse began to be used during the 2012 shopping season. Delivery time is again down to 5.5 days. The company's customer service has also been improved, customer response waiting time from an average of 48 hours to less than 12 hours.

In addition, Fab also quickly increased the number of products on its website. The company's Daily product volume or unit inventory expanded from 1000 in 2011 to 11,000, with only 6 months in between. Product classification also increased, including the food and pet products have not been the classification.

"We have 32 categories, from jewelry to furniture and so on," recalls the former FAB employee. "We were only selling goods at first, then we had inventory, and then we not only sold the goods but also produced our own goods." For a moment, we are faced with all kinds of challenges that are overwhelming. ”

The expansion did not give Fab any opportunity, but weakened the company's existing competitive advantage. Early fab users were fascinated by discovering novelties on the site that they could not find anywhere else. But as the company's inventory continues to grow, the freshness of the product is weakening: Fab sites can also be purchased on other competing websites, such as Amazon, and worse, other sites are shipped much faster than fab.

"Fab has a product that suits the needs of the market, but ironically, the company is completely unaware of it," sighs one former employee.

During the 2012 shopping season, management of warehouse staff took the lead in noticing the signs of the problem. Fab created 110 million of dollars in sales, but a lot of inventory changes were small. Consumers don't seem to know exactly what the site is selling. And marginal profits seem to have been ignored in pricing and selling.

Despite all the problems, Fab still resolutely decided to abandon the original flash-purchase model and sell its inventory on the site in 2013 years.

"It's the ultimate in death," he said. "Stretched, a former employee, said.

If the situation is downhill, who can Miaoshouhuichun?

Fab held a 5-hour board meeting in 2013. The Board members participating in the meeting were: Howard Morgan of the first round capital company (Howard Morgan), Fab CEO Jeson Goldberg, Anderson Horowitz Foundation Jeff Jordan, Atomico Jeffrey Prentis (Geoffrey Prentice), Tencent's Mitchell and Allen Morgan are unanimous in agreeing that Fab needs to accelerate the pace of development. The meeting passed a new plan to produce 200 million of the profits by the end of the year by raising the company's capital consumption rate. If the plan is implemented, the company will consume the remaining funds before August, but since the Goldburg can easily raise more than 300 million of the financing, the company will be a near misses to tide over the difficulties.

"We thought it was a rare opportunity," one of the board members recalled the scene and said, "We wanted to gamble on it, and maybe we were all dazzled by past successes before making such a blind decision." ”

The commitment made by FAB is very appealing, and Goldburg makes the company's commitment more unassailable. He said there are only four companies in the world with a market capitalisation of more than $10 billion trillion, but if you invest in fab, then you can believe that Fab will be the fifth power company with a market capitalisation of more than 10 billion in the future. It is also the fastest growing fifth Super power company.

In order to achieve the above rhetoric, Fab decided to play "emotional business" brand. Its golden signs are the warm gifts people give to their loved ones and the chic decorations that are placed at home.

"All investors only care about one thing: can make money," said one fab former employee, "Jason is eager to make more money, to expand the size of the company, to do more, and even to replace Amazon, ignoring the fact that our users like fab because the site can provide them with a variety of novel and interesting innovative design products ...... He gives a feeling like, ' The only reason he's doing everything is because I want to turn the company into a second Amazon site. ’”

Another former employee said: "It's clear that Jason wants to be a unique label for himself, to be a legend like the second Bezos (Jeff Bezos) ... If we keep our initial development line, Fab will be a very promising company. ”

Since the implementation of the decision, Fab's monthly spending has increased to $14 million trillion, while its first-quarter sales rose to only 40 million dollars.

After officially, Goldburg tried again to persuade investors to finance the fab with his tongue, but soon he found that the situation was not as smooth as expected. He then began to realise that FAB was facing a serious crisis that stemmed mainly from 2012 years of decision making. Also, users attracted by the intense Facebook marketing campaign did not show a strong willingness to buy again.

Fab has focused only on total sales and user growth, ignoring the growing quagmire of the company's cost structure.

"We could have created twice or even three times times more than we could have done, if our team was built reasonably," said one former employee, "but we've been doing greener things, recruiting people, and never facing reality." "Another former company employee said it has been seriously pointed out that Jason must reduce the company's operating costs as soon as possible, but he still insists, he said:" The senior team has repeatedly reminded us that we have to reduce the cost by at least half of Europe's business, but Jason didn't listen to the advice until the company's financing ended in less than ideal , he seemed to understand some facts. ”

Chief executive Jason Goldburg wrote a five-page letter in October 2013
Chief executive Jason Goldburg wrote a five-page letter in October 2013

Time Flash July, this time the Goldburg frankly, and all the investors candidly explain the company and the European market conditions and plans. This time, the company received $150 million trillion in financing at a 900 million dollar valuation, but that was far from enough. Funding is getting tighter, and Goldburg has even been prepared to cushion the entire company's August payroll-if the funding fails.

Goldburg said at the next board that he would use the only 150 million dollars to save the fab, and he made three recommendations: a gradual exit from Europe, a reduction in the cost of two-thirds of the company, and a realignment of the company's business to sell high-margin products, such as furniture. Shortly thereafter, the European division cut 150 employees.

In October, Goldburg held an important meeting among his top management teams, the one we mentioned at the beginning of the meeting, where everyone got a five-page letter. In this letter, Goldburg acknowledged his decision making mistakes as CEO of the company and highlighted the new direction of Fab's future development.

But the company's executives did not seem to be responding positively. Even some of them thought it was Goldburg who had ruined a company that had a future.
Bradford Schelheimer and Jason Goldburg, the two men co-founded Fab. Schelheimer initially did not choose to leave, and there were reports that he had tried to save Fab by reorganizing the leadership.

Goldburg's co-founder, Bradford Schelheimer, once invited a number of company executives to his home. In this respect, there are news reports that this seemingly ordinary party is "coup meeting", Schelheimer intends to "impeach" Goldburg, he expelled from the company. He suggested a joint letter to the Board of Directors to impeach Goldburg or a public speech to count Goldburg's mistakes in Fab.

Fab's chief operating officer, Beth Ferriera, on behalf of the senior management team, suggested that the entire company could be gradually taken over during the impeachment Goldburg. In this way, Fab can stop imitating Amazon mode and slowly revert to the original flash-purchase mode of cooperation with Third-party designers.

But the news of Schelheimer's banquet to entertain some of the top executives somehow spread to Goldburg's ears, and soon Schelheimer left Fab. Goldburg preemptive, thrown to the partners in a stack of documents, listed above Schelheimer during the tenure of all the wrong decisions made, including Schelheimer purchase of $15 million worth of merchandise inventory, these goods in the warehouse backlog for a long time, always sell.

Later, Schelheimer did not deny the "coup" said, but he also said that the invitation to the company's executives home is often a guest. Moreover, he was not expelled by Goldburg, and was his own resignation. After leaving Fab, Schelheimer set up a new company,--bezar, almost identical to the original fab.

By December, only 150 people had been left in the 700-person company. During the mass layoffs, in order to prevent employees from losing their temper, the office in New York even asked security personnel to maintain order.

The last fig leaf: Hem

In the middle of 2014, the once-mythical fab is now left with an empty shelf. But Goldburg is still struggling to save himself and the face of his board.

Looking at the only 80 million dollars in the bank account, Goldburg proposed to buy--one Nordic, a European private-label furniture maker. Meanwhile, sell Fab and invest in another new E-commerce company, Hem. Hem mainly sell original, high profit home decorations.

In the 2012 Fab sales statistics, the proportion of furniture sales accounted for more than 15%. If combined with lamps and other home decoration words, sales accounted for the total sales performance of more than 40%. Obviously, Goldburg is to see these data only decided to give up Fab, founder Hem, Hope in home decoration goods sales.

"Maybe outsiders will think we're struggling to find a way out," he said. You are wrong and I am very sure of our future development, "Goldburg wrote confidently in an e-mail to some of the FAB designers in June 2014. "My plan--which was already brewing as early as last November--relies on the design concept that we initially brought to the market and the manufacturer to create a brand that never goes out of fashion." ”

Goldburg continued to explain that before the end of the month, he would split the Fab into two companies: the original Fab would continue to sell "gift" goods on the site, and the new brand Hem would sell home furnishings designed for the site. Once again, Goldburg bombast promised designers that if they joined the hem, they would get a high return in the long run.

In the fall of 2014, Goldburg began looking for a company that would buy Fab, so he could devote himself to the management of the new company Hem. Sources say both Zulily and Groupon have shown an interest in the acquisition of Fab. In December 2014, Fab formally changed the corporate entity to hem, and at the end of the month, PCH innovations expressed a willingness to acquire Fab.

From brilliant to bankrupt, the chief executive's reflection
In December 2011, Jeson Goldberg apologized for Fabulis's failure at the HACKFWD meeting of the entrepreneurial platform in Berlin, Germany. He thought it necessary to take the consequences and make a public apology.

Fab's failure is really distressing, the former employee said in an interview, "Fab's first operating model has proved to be successful, even if there has been a deviation, we still have a chance to save." However, Goldburg not only in time to solve the company is facing the problem, but blindly transformation, eventually to irreparable situation.

"You can change the business model of the company, once or two, but only the current business situation is at its worst," said one former employee, "but Fab does not." ”

Goldburg was the first person to publicly admit that he had repeatedly made mistakes in his fab development decisions.

In his five-page letter in October 2013, he listed a series of erroneous decisions:

I lead you to blindly pursue the pace of development.

I've let everyone throw away the core business.

I did not lead you to keep digging deeper into our target customers.

I ignored the company's cost and business metrics, and didn't take these as a corporate culture into every employee's heart.

I have not perfected our retail sales or marketing standards.

I spent too much time and energy on the market, but I didn't find an accurate consumer position.

I failed to stop over-investment in the European market in time and even insisted on expanding the global market team.

I didn't build a complete system from supply chain to sales to delivery. I put my work and responsibilities on the warehouse manager and created a new crisis.

I'm not aware of the urgency of adjusting the error.

Wait a minute......

Now he has a new plan and looks promising. Goldburg said that Hem's development was very smooth, and he believed that in a few years he would regain confidence in himself and investors.

In a handwritten statement inside the company, Goldburg said:

As a founder and CEO, I should and have the obligation to be responsible for all the good development and bad condition of the company. We have had glorious achievements and made stupid mistakes. Our brand--fab is establishing a good reputation and steadily moving towards a better direction. Our newly founded Hem is a fully independent design brand, and its development is also gratifying. Hem's products are unique and innovative, favored by consumers. Our average order price is more than 1000 U.S. dollars, in the opening 100 days, we have sold thousands of sets of goods, our customers are also spread all over the world.

Compared with the past few years, we are more confident in the future. We will create a more meaningful and valuable enterprise, feedback has been supporting our investors. Shareholders, I assure you that our company will not disappoint everyone's expectations and will be the pride of all. All our efforts are moving in this direction.

Time will prove my confidence.

Behind the impassioned monologue, we need to know that Goldburg is a natural optimist. And the collapse of Fab has not gone away, and we still remember these appalling figures:

Layoffs: 500;

Loss: 850 million USD;

Waste of money: 250 million dollars.

For most people, Fab's brilliance and failure is a sad one. For some, this is more of a bittersweet, far-reaching lesson.

"I think of this experience as the most important experience in my life, and it teaches me a lot of things," one former employee recalls after being laid off, "the only regret is that the company is bankrupt." ”

Source:bi