Fab Was Burning Through $14M/Month Before Its Layoffs And Pivot

Jason Goldberg, the co-founder of Fab.com, says that the design marketplace was burning through $14 million per month at its peak before it went through a drastic round of layoffs and decision to pivot the business. Speaking at our Disrupt London conference, he said that the startup’s decision to pivot was inevitable after the company didn’t raise as much money as they had expected to.

That’s not to say it wasn’t a massive round of money — it was $150 million at a $1 billion valuation. But they’d set out to raise $300 million. “And when you set out to raise $300 million and you raise $150 million, you change your business model,” he noted a little grimly.

The change, of course, is Hem (Swedish for “home”), the company’s new vertically integrated home furnishings business that launched last month.

Created out of Fab’s acquisitions of European companies like MassivKonzept and One Nordic, Goldberg has relocated to Berlin to build and run that business. “The unique value we apply to Hem is how do you apply technology, use technology to make the process of making and selling furniture easier,” he says of the new project. “Hem is an evolution of Fab. We realised that this was the area that showed great margins.”

In the process, he’s now wound down the Fab brand everywhere but in the U.S.

And from what we understand Fab.com is up for sale in its home market, although Goldberg would not comment on that, but he did note that when Fab’s global prospects were a bit more different the company rebuffed acquisition offers.

“We had an opportunity to sell Fab in the last couple of years, and I said, ‘I didn’t start it to sell it, I started it to build a great e-commerce business.'”

This is another pivot for Goldberg, who has also been behind Jobster and then dating site Fabulous. But it comes with an interesting twist: Goldberg says that Hem is keeping Fab’s capital, and its $1 billion valuation.

“Investors didn’t invest in Fab, they invested in our ability,” Goldberg says. “I went to investors and said I believe we could build a great business.”

It’s not raising more money right now, he said today.

“We have years and years of cash left,” Goldberg notes. It seems that even if there may be new kinds of overhead with the design, building, selling and distributing of furniture, it’s nothing compared to the burn of a startup with hundreds of employees and the challenges of grappling with inventory from dozens and dozens of suppliers.

Real estate is one part of that cost base: in New York, Fab paid $250,000 per month for two floors of office space. In Berlin, the company spends $125,000 per year on rent.

The Fab.com business is still there, but greatly reduced in size — there are now 25 employees, compared to the 150+ now tasked with building Hem. “The Fab expense base is very low,” he says, “it’s a steady and stable business that is almost breakeven.” Goldberg is technically the CEO of both companies, but since he is in Berlin and looking at Hem, the Fab business is being run by the company’s CFO Rene Wong.