New Fab Announcements 4-29-13 .090Last year Fab started to move away from its flash sales roots into big-kid commerce — the kind that doesn’t rely on gimmicks like deadlines, huge discounts, celebrity endorsements, or monthly subscriptions. Much of this was done quietly, but today the company is making all kinds of noise.

On the product side it’s announcing a redesigned website and mobile app. On the strategy side, it’s announcing the first ever Fab brick-and-mortar store in Hamburg, Germany and the anticipated launch of its own in-house design and manufacturing of products. And on the biz dev side, it’s launching the Web site in France and announcing that it acquired a German custom furniture business called Massivkonzept valued at $20 million to $30 million with earn outs.

These are big moves that signal just how big Fab’s ambitions are– and just how much more cash it needs to pull off its vision of building a hipper version of Amazon. That much is clear talking to industry insiders: Fab lost $90 million last year; it’ll lose somewhere in the ballpark of $50 million this year, according to a source familiar with the company’s finances.

Jason Goldberg, CEO and co-founder of Fab, presented his elaborate plans at Fab’s Tribeca headquarters last night in what is likely becoming a well-rehearsed pitch deck. Fab has been looking for a new round of funding that could top $100 million and value the company as high as $1 billion, TechCrunch reported last week and we confirmed independently.

Goldberg had no official news on the round, but at least now we know where the money will go. The company is already one of New York’s most well-funded startups. Fab has raised $171 million in funding to date. The next $100 million or more will support the company’s ambitious growth plans even as it burns insane-sounding sums of money.

The company is expanding its team, product selection, acquisitions, and regional presence at a breakneck pace. You could argue that Fab is using the goal of becoming the next Amazon to mask a potentially unsustainable cost of acquiring customers. You could also argue it’s using the ability to raise capital to justify for a Groupon-esque global land grab.

When I dared invoke the “G” word last night, Goldberg was two steps ahead of me. Groupon lost sight of its customer and let marketing and customer acquisition costs spiral out of control, he said. Former CEO Andrew Mason admitted as much in his now-infamous parting letter. Goldberg said Fab’s focus on “everyday design” and the inimitable taste of co-founder Bradford Shellhammer will keep Fab true to its brand identity as it scales.

Regarding the rapid growth, Goldberg says Fab’s global vision has technically only taken it to two markets: The US/Canada, and Europe, which it plans to fully penetrate before moving on to other regions. That still adds up to customers in 26 countries but it is certainly more reasonable than Groupon’s international land grab.

But mostly, Goldberg argues the same playbook every ambitious Silicon Valley company has ever uttered: Its all about growth over profits. Fab could become profitable this year if it wanted — the company’s margins are an attractive 45 percent, he says. But the company is making huge investments in things like warehouses and manufacturing its own designs. It’s all part of Fab’s master plan to, in a matter of years, catapult itself into the top echelon of global commerce companies, somewhere between Amazon and Ikea.

“We don’t want to be a $100 million or $200 million business,” Goldberg said. “We want to be the global brand synonymous with design for years and years to come, and we’re building a business that can exist at scale.”

It’s more than a little ambitious. It’s a vision that could make Fab into the first real powerhouse ecommerce company since the days of Ebay and Amazon. Or, overcapitalization could turn a site many users love into a tragic Icarus tale.  Particular risks include a backlash from designers whose products Fab sells. They could feel competitive with Fab’s plans to design 3000 new products in-house, or they could tire of the need to discount their goods on Fab. Beyond that, the company could risk a watering down of its brand as it increases the number of products it sells (today the site carries 15,000 unique products).

Fab has shown an aptitude for silencing critics before their complaints get very loud. For example, the company’s warehouse and inventory has lowered its slow shipping times from weeks after the order — now the majority of items ship within one day. And the company is diminishing its reliance on discounts — two thirds of daily revenue is not from flash sales and less than 1 percent of merchandise is inventory liquidation.

The right indicators are there. Fab’s 2012 sales were more than $100 million and it plans to double that figure in 2013, Goldberg said. Fab has 12 million users in 28 countries; 40 percent of sales in April were outside of the US. Perhaps the most telling data point on the difference between Fab and Groupon is that Fab isn’t worried about competition from copycats. Goldberg vociferously called the Samwer Brothers’ clone, Bamarang, out for its shamelessness, saying copying wouldn’t fly in a world where people value design and originality. He was right: Bamarang gave up and shut down operations after six months.

Last night Goldberg matter-of-factly explained why his company can’t be cloned. “This is a taste business,” he said. “They didn’t have a Bradford.”

That’s a lot of credit given to one person’s aesthetic– and a lot of pressure. He’s counting on hard-to-quantify, hard-to-copy aesthetic to keep Fab unique even as it becomes an online super-store.

Fab’s investors include The Washington Post Company, Allen Morgan, Lars Hinrichs, Don Baer, Baroda Ventures, First Round Capital (where Partner Josh Kopelman is a personal investor in PandoDaily), Baroda Ventures, Zelkova Ventures, SoftTech VC, SV Angel, Menlo Ventures (which invested in Pandodaily via its Talent Fund), Ashton Kutcher, Guy Oseary, Kevin Rose, Jon Anderson, Dave Morgan, Ben Ling, David Tisch, A-Grade Investments, Andreessen Horowitz (where partners Marc Andreessen, Chris Dixon and Jeff Jordan are personal investors in PandoDaily), RTP Ventures, Pinnacle Ventures, DoCoMo Capital, Mayfield Fund, Atomico, Phenomen Ventures, VTB Capital Investment Management, and Phenomen Ventures.

Pictured: Fab’s first ever brick-and-mortar store in Germany.

  1. Fab is Everyday Design. People use Fab to discover everyday design products at great prices, to connect with the world's most exciting designers, and to share their favorite design inspirations.