Hot E-Commerce Startup Fab Is Losing Money And Missing Revenue Targets

Business Insider

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jason goldberg
Fab is a 2-year-old e-commerce company that sells functional design. It has grown to 650 employees and raised over $300 with another $100 million reportedly on the way.

But the company isn't profitable yet, and it has made expensive choices that are drawing questions from critics.

Last July, Fab raised $105 million. Last week, it raised another $150 million. One industry source says part of the reason for the second large fundraise is because Fab loses a "staggering" amount of money. So much so that the entire $105 million it raised last year might all be gone, this person said.

When asked how much of its 2012 financing was still in the bank, CEO Jason Goldberg declined to comment.

"We're a private company. We're not going to comment on how much we've spent," Goldberg told Business Insider. "But the best time to raise money is when you can. We weren't desperate."

According to Bloomberg's Sarah Frier, Fab spent about $40 million on marketing last year, which is equal to 35% of its $115 million 2012 revenue. It's trying to cut that spending down to $30 million this year.

In addition to the high burn rate, Fab has battled executive turnover and missed revenue targets.

Last year it publicly aimed to generate $140 million but missed that goal by 20%. This year it's hoping to pull in $200-300 million.  Frier says at least eleven Fab executives have quit or been fired in the past year as well, including the company's former CMO.

Goldberg is the first to admit his company hasn't done everything right. “It is impossible to grow a company as fast as we’ve grown Fab without having mistakes along the way,” he told Bloomberg.

But if the company only has 14 million users and it is missing targets, how – and why – is Fab raising so much money?

Goldberg says he's determined to build a multi-billion-dollar global brand and stop competitors abroad before they can even launch. Its international dominance is important: currently, 40% of Fab's total sales come from outside the United States.

"It's the expense of building a global brand," Goldberg told Business Insider when asked about the $310 million he's raised. He also said that Fab is the only billion-dollar e-commerce startup to invest in its own warehouses. It currently owns 90 of them.

"I can't speak to strategy of other companies, but we identified with Fab that it was growing so fast from both an emotional reaction among consumers and from an order volume that copycats of Fab were exploding all over the world,' Goldberg says. "We decided early not to let Fab be cloned and have to react later. Instead we decided to take on a bigger play...We've unapologetically taken on what it will take to be a top global commerce brand."



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