Bradford Shellhammer's affection for people mirrors his feelings for his vast accumulation of inanimate objects, which include sunglasses, sneakers, and glass birds. "I collect things. People are just another thing I collect," he says, describing his Warholian approach to life. For his recent 37th birthday, which turned into a four–day celebration in a rented house in the Turks and Caicos Islands, he invited his newest trinkets, among them his Prada salesman, a guy from the gym, and a South African transsexual model. Once his guests flew in, 20 in all, Shellhammer ordered them to spend the day prepping for a drag contest that he, the birthday boy, would judge. "I'm a voyeur," says Shellhammer, who has an octopus tattoo snaking up his arm and a dot of a diamond twinkling in his ear. "Whatever's in front of me, I'm obsessed with. If it's the same 20 people going back and forth, I'm bored. And if it's not in front of me, the sad thing about that is, I sometimes forget about it. Which lets you get over people who die and people who break up with you easier."
I would say that a lot of Fab in the last 18 months has been go, go, go, go, and we'll figure it out later.
One unlikely collectible at Shellhammer's soiree, someone who'd managed to capture his attention for more than a fleeting moment, was tech entrepreneur Jason Goldberg. "He has a hundred best friends," says Goldberg of Shellhammer. The two have known each other for more than a decade, and Goldberg considers Shellhammer his singular best friend. "He's a social butterfly and I'm not. I hate meeting new people. I would just rather hang out in the corner." Theirs is an odd but useful dynamic, particularly because Goldberg and Shellhammer are also business partners in Fab.com, a company made of equal parts whimsy and calculation. Fab began as Fabulis, a gay social network, and Goldberg's third attempt at building a business. Once Goldberg realized Fabulis would be a dud, he hit upon the idea of bottling and selling Shellhammer's curatorial flair. "Everyone I know wants you to help them design their life, the stuff in their life," Goldberg recalls telling Shellhammer over a boozy dinner two and a half years ago. "What if we built a website around you, bringing your taste to the rest of the world?" The decision to do so would change the course of their lives, professionally and existentially. "You know, I've always felt like I had something to say in this world, and I didn't know how to say it," says Shellhammer, Fab's chief design officer. "And Jason has always felt like he wanted to do something in this world, but he didn't know how to get people to look at him."
There is no shortage of eyes on CEO Goldberg now. Fab launched in 2011 as a flash–sale site for designers to sell their wares, a place where you could find a $17 cardboard stool next to a sleek Jimmyjane vibrator, or an Alessi juicer alongside an $8,000 original Warhol print. This reflects Shellhammer's unique approach to creating a great global design retailer. "Charles Eames said, 'The best to the most for the least.' How did that get lost in translation to become 'Only really rich people who can afford an interior designer have good stuff'? That's repulsive to me," says Shellhammer, who considers the chili–lime beef jerky Fab carries to be as well designed as an Eero Aarnio Trioli chair.
In just two years of existence, Fab has given the design community a whole new sense of its retail potential. According to the company, Fab's network of makers now exceeds 20,000, ranging from prestigious design brands such as Vitra and Kartell to artisanal hipsters in Portland, Oregon. "Fab seems to have a very expansive definition of design, and that's really good because there are so many people who want to narrow it," says Murray Moss, founder of Moss, the pace–setting but recently shuttered design store in New York's SoHo neighborhood. Isaac Krady, a 32–year–old Brooklyn furniture designer, spent years trying to get a retailer to carry his angular modern plywood side table. "Stores didn't want it because I only had one product," he says. "They were like, 'Who are you?'" Fab took a chance on Krady and sold nearly 400 of his Tre tables––its entire stock––in 10 hours. "They are taking my career to levels I couldn't have gotten to on my own," he says. Alan Heller, a furniture manufacturer whose collections are everywhere from the Museum of Modern Art to the Louvre, says that Fab is "the one everyone's rooting for to win."
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That kind of mad love inspires wild ambition. Shellhammer, Goldberg, and their growing roster of international investors are betting that Fab will become the world's next great retailer. "They are building a global iconic brand that can be a $10 billion to $20 billion business," says Fab investor Geoffrey Prentice, a partner at European venture–capital firm Atomico. "In 10 years, they'll basically be in every living room." The startup has raised gobs of cash: $325 million and counting in venture backing from some 40 investors, including the hottest firms in Silicon Valley and the biggest e–commerce players in Asia, giving Fab a valuation of $1 billion––astonishing for a two–year–old company in retail, which can be a low–margin business. But that limitation may not apply to Fab, says Jeff Jordan, a partner in Andreessen Horowitz, which participated in three Fab fundraising rounds. "We don't see a logical constraint on growth," he explains. "It's not a vertical like Zappos just selling shoes. As long as it's got good design attached to it, they can sell it." Fab's promise to investors is to pair the design ubiquity of Ikea with the aggression and scale of Amazon. "Less than 2% of Bed Bath & Beyond sales are online," says Goldberg. "Eleven billion in annual sales and less than 2% online? Talk about a company that's ready to be Best Buy–ed." He says pretty much the same of another dozen old–world retailers from which he plans to steal business.
To reach these goals, Fab is moving at whiplash–inducing speed. The company is currently trying to figure out, simultaneously, how to make the transition from a flash–sale site to a traditional retailer, from a company that never handled products to one that stocks inventory in its own warehouses and manages logistics supply chains, and from a seller of other people's stuff to a designer and manufacturer of its own private–label products. It's doing all this on a global scale, selling in 29 different countries, with offices in New York, Berlin, and India that are staffed by 600 employees––many of them twentysomethings who have never worked in retail. The result is a startup of questionable design. "I would say that a lot of Fab in the last 18 months has been go, go, go, go, and we'll figure it out later," admits Goldberg of his impetuous style.
The Good, The Bad, And The Kitschy
A sampling of Fab's Rotating colorful wares
Illustrations by Radio
It's no surprise, then, that Fab has attracted plenty of skeptics. From Groupon to Gilt, this field is littered with the spectacular unravelings of startups whose hypergrowth drove ridiculous valuations. The skeptics have some numbers to back them up: Fab's revenues missed their target by 25% in 2012; it's rumored to have lost $90 million last year; its marketing expenses have been so enormous that it has been accused of buying all its revenue; and it won't be profitable for another year, at best. "It's a house of cards that is growing unnaturally," gripes the CEO of another e–commerce company. "Breakneck growth leads to break–your–neck growth." Even backers who love Fab's potential see the risk. "When you grow this fast, it's very hard because things can fall off the table and break before you catch them," says Fab investor Allen Morgan, an adviser with Mayfield Fund. "There are companies that have grown like prairie fires, like Pinterest, but they don't deal with shipping things around the world. Fab is doing one of the hardest things in business at a scale and rate that has enormous complexity."
It took Ikea some 60 years to turn its Swedish design sensibility into a $36 billion global powerhouse. Fab's goal is to be a global powerhouse in less than a decade. Even though Goldberg is selling that promise, he isn't certain it will work. "That's the million–, billion–dollar question for Fab," he says. "Is it possible to build a physical e–commerce brand at Internet speed the same way you could build a Facebook, Twitter, or Instagram? We don't know."
Jason Goldberg and Bradford Shellhammer found each other on the dance floor. "We were on Ecstasy," says Shellhammer, referring to the night they met 14 years ago at the Roxy, the '90s–Manhattan gay institution. "It was the first time I ever went out to a gay club," says Goldberg, then a 27–year–old former Clinton White House aide who had recently come out of the closet. Shellhammer, at the time a 23–year–old publicist, was a regular there, with "my ragtag band of gay pirates and 4,000 guys with their shirts off." The two started chatting and discovered they were both heading to the West Coast the following month, Shellhammer to San Francisco and Goldberg back to Silicon Valley, where he was earning $100,000 a year at a dotcom startup while getting his MBA at Stanford. Goldberg hired Shellhammer as his assistant. Within four months, they were both laid off.
A decade later, Goldberg persuaded Shellhammer to start Fabulis with him. ("I'll be the geek, you be the gay," is how he pitched it.) By then, Goldberg was nearing 40 and had experienced the ups and downs of startupdom. When he founded Jobster, a job search engine, he vaporized $48 million of VC funding and resigned as CEO before the company was sold for parts. "I was this poster child in Seattle of this guy who had burned through VC money, like a pariah," Goldberg says. "I needed to start over somewhere else." So in 2008, he moved to New York to start Socialmedian, a social news aggregator. He found an engineering team in Puna, India, to help him build it and, instead of getting VC backing, raised $600,000 from angel investors. In less than a year, he sold the company for some $5 million. "I learned you should only take VC money when you know you have an opportunity to build a huge business," he says.
Fab Growth
Within that first month:
$1.3 million Revenue 25,000+ Items purchased 50% Sales from social shares
Revenues
(in millions):
* projected
Source: Fab
While Goldberg was trying to crack the tech world, Shellhammer had carved out a reputation as a New York shopgirl. The son of a drug addict father who died when Shellhammer was in college, the Baltimore native had a string of jobs before landing at Design Within Reach. After four years selling in DWR's Manhattan shops, he was one of the company's top perfomers. Shellhammer had also spent nearly a decade cultivating a following by blogging about his technicolored life, which in part is why his old friend reached out to him in 2010 to join his gay social network. Goldberg needed Shellhammer to help woo the gay community.
But one year into Fabulis, Goldberg saw it was going to be another flop. So in late February 2011, he made what he calls the pivot to Fab. Fabulis had already raised $3 million. Goldberg called each investor with his new idea, told them he was essentially doubling his personal investment of $300,000, and gave them the option of getting a refund. No one backed out.
How Shellhammer and Goldberg built Fab is a lesson in improvisation. Within two weeks of making their decision, they replaced Fabulis with a splash page announcing the company's new mission: everyday design from the world's designers. No matter that they didn't actually have any designers signed on, or products to sell. Instead, to build initial buzz and get email sign–ups for the flash–sale site, they treated it like a curated Pinterest page. Shellhammer posted photos from his home, with an invitation for people to upload photos of their favorite design inspirations. Goldberg scrambled to build the site with his former Socialmedian team in Pune––including Nishith Shah, Fab's cofounder and CTO, who now runs the company's 110–person engineering office in India.
Meanwhile, Shellhammer put his sales hustle and Rolodex to work. He rummaged through every product he owned, every magazine he had, even his favorite objects at MoMA, ultimately cataloging them into a spreadsheet of 1,700 designers whom he would try to lure. Then began the phone calls, the emails, the cocktails. "I was like the Pied Piper, because here's the deal," says Shellhammer, not afraid of hyperbole. "The retail world had died. Design had shriveled up. These people were sad; it was depressing." As he describes it, between disintermediation from the web and the recession, design retail stores were going out of business and sales were plummeting. Shellhammer's only promise to designers was that Fab would tell their stories, put their products next to the work of other great designers, and aggressively promote them. "We positioned it as 'we want to change retail,'" says Shellhammer. "We wanted to change how designers with ideas make a living. We wanted people to get products that aren't Walmart bullshit crap."
To get there, Shellhammer employed the art of name–dropping. "My goal," he says, "was to basically make a couple of people I knew do it. And use their names to convince everyone else." One of those influencers was Heller, an old acquaintance whose modern furniture manufacturing company is most famous for the Bellini chair. Heller gave Shellhammer the phone number for Milton Glaser, the legendary graphic designer behind the "I love New York" logo. Shellhammer called the octogenarian. "I said, 'Hey, I just had sardine sandwiches with Alan Heller, and he said you might have some prints in your basement that we could sell on Fab. Can I come over?'" They spent two hours in Glaser's basement, where 90,000 posters with his original designs were collecting dust. By the time Fab launched in June, it had 175,000 members who could purchase signed Glaser lithographs for some $400 a pop, iconic metal Emeco Navy chairs, and industrial–chic Plumen lightbulbs. On its first day, Fab sold $65,000 worth of product. In less than three weeks, it had hit $1 million in sales.
Sporting Prada slippers and an immaculately cropped beard, Goldberg has Shellhammer's precise grooming but little of his style. He has just finished yet another campfire chat with the investment community, this time at a Goldman Sachs conference at Manhattan's Mandarin Oriental hotel. Goldberg has a politician's detached intimacy that seems authentic when you talk to him alone over coffee, until you realize it scales to a room like this, filled with 300 people. Handing out business cards with a $50 discount code for Fab.com as if they were autographs, he slithers through the crowd to a hotel room. Two suited men are sitting at a table. "I have no idea who these people are," he whispers to me with the indifference of someone who's been asked to the prom 25 times. It turns out the men run one of the largest retailers in Mexico, and they want to invest in Fab. "We have to keep being relevant," one confesses to Goldberg. A week later, Goldberg tells me they've offered $40 million. "The last time I thought about Mexico, I was going to Cabo. Literally," says Goldberg. But he'll at least listen to anyone who wants to throw money at Fab.
I'll be the geek, you be the gay," is how Goldberg first pitched Shellhammer on Fabulis, the social networking site that soon morphed into Fab.
Goldberg started getting his swagger with investors less than one month into Fab's existence. To power the initial shift from Fabulis to Fab, Menlo Ventures led the company's $8 million Series A round, giving Fab a valuation of $20 million. But when Fab's launch went better than planned, Goldberg says he immediately told Menlo he wanted to renegotiate the terms. He said Fab should be valued at $33 million. "So Menlo gave the same amount of money and got less ownership," says Goldberg. "They told me it was the first time in history that an entrepreneur had renegotiated an assigned term sheet." (Menlo puts the figure at $24 million.) Meanwhile, Shellhammer began serving as a sideshow prop with VCs. "It's like The Wizard of Oz," describes Shellhammer. "Jason does all of the work, gets everyone excited, wheels me out for three minutes, and they've never seen anything like it before. They're like, What the fuck is this? They look at me like I'm the biggest freak. They're fascinated by me."
Every time Goldberg went to investors for more cash, he seemed to have a good reason. By October 2011, he was projecting that Fab would do $20 million in sales that year. To boost that number to more than $100 million in 2012, he'd need to make a hefty investment in operations. Fab started out with most products being "sell–first," meaning it wouldn't buy a product until after a customer did––a process that was low–risk for Fab but dissatisfying for shoppers, who would sometimes have to wait 26 days for their orders to arrive. Goldberg knew that this was unacceptable in an Amazon world. To solve the problem, Fab would have to build up its own inventory and therefore make expensive bets on buying products. If those items didn't sell, the company would have to off–load them at a loss.
Fab Products
6 million
Sold on Fab so far
20,000
Designers selling on Fab
FAB MARKETING (2012)
$40 million
Amount spent on marketing (35% of revenue)
$25 million of that
On Facebook advertising
$8 million of that
On a national TV ad campaign
20%
Increase in registrations since the ads ran on TV
$10 million to $14 million
Amount CEO Jason Goldberg regrets spending on advertising
Source: Fab, other reports
The dicey strategy required a brand–new round of financing. "We had literally every VC calling us and saying, 'I want to invest in your company,'" says Goldberg. But he had his eye on only one––Andreessen Horowitz, arguably the hottest consumer tech firm in Silicon Valley. "It was the most unique investment process I've had to date, bar none," recalls Andreesen's Jeff Jordan of his first interaction with Goldberg, in fall 2011. "Fab had been operating for only three months, I had never heard of them, and I get on the phone with this guy Jason who says, 'Good to meet you, the round is closing in 24 hours.'" Goldberg told Jordan he was too busy to fly from New York to Silicon Valley to meet, but that he would make the extraordinarily transparent move of giving him access to all of Fab's data. Jordan checked out the numbers and was impressed by the abnormally high level of risk Goldberg was willing to embrace. "I said to Jeff, 'If you hit this number, the deal is yours,'" recalls Goldberg. "Two hours later, he sent the term sheet." Andreessen led Fab's $40 million Series B round, valuing the company at $200 million. Says Jordan of Goldberg: "He has one gear: overdrive."
Goldberg immediately started making decisions as if Fab were sure to become a billion–dollar company. He recruited from Amazon, Etsy, and UPS and built warehouses in New Jersey and Holland. John Wu, the UPS vet in charge of the least overtly fabulous part of Fab's business––its storage and shipping infrastructure––says the company's willingness not to play by the rules has given it a competitive advantage. "We'll work with any designer," says Wu. "With Walmart, if you don't have your product come into their building with a specific [UPC bar] code, they're not going to do business with you. Amazon's actually going that way too." A UPC can cost more than $1,000 to register, a barrier to entry for many small designers. Wu's team has found its own way of codifying any product that comes in the building, while reducing Fab's average ship time to five days.
Two months after its Series B, Fab decided it needed to expand more internationally. Some 40% of visitors to Fab's website were from outside the United States, but the company had no way to sell to them––leaving those consumers little alternative but to buy from copycat sites in Europe. Not wanting to cede the market, Goldberg spent heavily to defeat the clones and acquired one of them, Casacanda, in Germany. The international push was fueled by more investor cash. In July 2012, Atomico, a VC firm started by a Skype founder, led the $105 million Series C round to amp up everything––build more warehouses, take on more inventory, expand to more countries. Andreessen, Menlo, a Russian investor, and others also threw in more cash. Fab's valuation skyrocketed to $600 million.
"I'd like to see three different–style sofas," says Shellhammer, as if he were ordering eggs at a diner. "One that's Niels Bendtsen–clean–Italian looking. One that's simple, your Room & Board customer, straight–guy sofa. Then let's do something mid–century that looks like it was found in a thrift store in the '60s." Sitting in Fab's glossy, new five–story Berlin office, Shellhammer isn't talking to his merchant team about items to curate. He's telling his new design team about prototypes that Fab could actually make. Last November, the founders had another epiphany. Until then, their strategy had been to sell as many exclusive products as possible, a mix of indie designers and prestigious brands such as Tumi and Nespresso, rather than try to compete only on price. But there is a problem with selling other people's stuff. You get less of a cut of the final price. During Fab's early days, the company says, its gross margins were 29%, and were now hovering at 43%. With a private label, where Fab could control such things as materials, gross margins might reach 65% .
Design had shriveled up," Shellhammer says. "These people were sad; it was depressing.
Determining which of its 20,000 products should become part of its permanent inventory has involved a combination of science (Goldberg's affinity for data) and magic (Shellhammer's instinct). Fab's 56 buyers are a motley collection of recent college grads, young expats from industries such as theater and entertainment law, and even an Apple Genius. "Sometimes we do things where we think we're being incredibly innovative, but it's kind of like, Oh, this is just how they do things in a store," says 31–year–old head of merchandising Grace Glenny. They were asked to find products they "loved," which were then tested via a weeklong sale. If a product sold and generated social media heat, Fab would stock it.
Fab Funding
$325 million: Total raised from investors
$1 billion: Fab's current valuation
$10 billion: Fab's targeted valuation
100: Investor pitches Jason Goldberg made in the first half of 2013
40:Fab investors
Fab Culture
0: Number of coats or jackets allowed on the backs of workers' desk chairs
1: Number of fonts employees are allowed to use in a single email
100: Dollar value of gift card awarded to employee who confessed to leaving a mess in the display room
2: Rotating brands of beer on tap in HQ
Source: Fab
This flash test model did spawn unpredictable hits, like the Hamburger Sweatshirt (see "The Good, the Bad, and the Kitschy"). But those hits made a mess of Fab's business. In 2012, the company made a big bet that anyone who made one purchase would come back to make more. Two other campy products––a $14 T–shirt with a photo–realistic animal face and Beardo, a "beanie with a built–in beard"––also became hipster catnip. Fab poured marketing gasoline on each, luring new customers via Facebook and banner ads. "We just cranked the volume," says Jared Cluff, Fab's senior vice president of marketing. "We were doing cartwheels about this stuff a year ago saying, 'This is incredible!'" But after nine months, Fab realized that those shoppers were the equivalent of one–night stands. "We spent over $30 million last year on customer acquisition," says Goldberg, although other reports suggest Fab may have spent even more. "I wish I had $10 to $14 million back in my pocket."
It was a costly lesson: People who purchase core design products––for example, those in the home category at a price point above $70––are more likely to become repeat customers. Which, in addition to the promise of higher margins, is a key reason why Fab is busy becoming a manufacturer, with the goal of making some 30% of revenues from private–label products. And instead of focusing on one particular strategy to get there, with typical Fab zeal it's pursuing three, simultaneously. One is to sell customizable furniture through MassivKonzept, a German company Fab recently purchased (now called Designed By You). Another is to form licensing agreements with Fab's flock of designers, paying them a 3% to 10% fee on goods that Fab itself will mass–manufacture. "The design community has grown accustomed to taking risks, and then the Crate & Barrels, West Elms, and Urban Outfitters of the world knock off their designs," explains Goldberg. "We will never knock off a designer. We will never say, 'Okay, so someone sold this and so we'll sell the exact same thing, just make it ourselves.'" Krady, the furniture designer whose Tre table is now being licensed by Fab, says that the arrangement "opens me up to be a better designer, because I can design more rather than work on manufacturing, importing, and storage."
Finally, Fab will pump out its own products, from towels to lamps to luggage. In June, Shellhammer and his new design team are in the Berlin office after a dizzying, unglamorous two–week trip through China, South Korea, and Vietnam visiting a dozen factories and showrooms. If Shellhammer and Goldberg are foils, then Shellhammer's new deputies, design director Evan Clabots and global sourcing head Young Kim, are sheer opposites. Clabots, a chambray–clad RISD–educated industrial designer, until recently worked out of his Williamsburg, New York, studio creating products that sold on Fab and in the MoMA store. Kim, sporting a white and navy golf shirt and loafers, spent a decade at Li & Fung, the giant Hong Kong–based global supply chain manager where retailers like Walmart and T.J.Maxx develop private–label products. "I'd be lying to you if I told you that I knew a lot about the design world," he admits. While in Asia, the team reviewed thousands of products, including hundreds of pieces of jewelry. "They have really good margins and are easy to ship," gushes Shellhammer. But margins can be intoxicating. The more Fab starts to look like a Forever 21, the less likely a sophisticated customer––the one Goldberg claims he's obsessed with attracting––will come back. "It will get complicated," warns the CEO of one prestigious design company that works with Fab. "If they are unique designs done by real designers, that will be one thing. But if [the manufacturers] are using look books and facsimiles, that's not design."
After Shellhammer runs through the other products he wants to test––couches, lounge chairs, poufs!––Kim suggests one more. "What about bookshelves?" he asks. Shellhammer, launching gummy bears into his mouth like popcorn, peers outside the glass–walled conference room, his eyes settling on a chunky Ikea bookshelf. "The Expedit––" he says, reciting the ubiquitous Swedish shelf's name. "Knock that off. See what you can do with that." Then he corrects himself. "The world doesn't need another––we don't need to copy Ikea shelves. Let's do something that's inspired by it, but different."
Every morning at 8 a.m., Goldberg orders avocado toast at the Soho House. Without the toast. "Avocado can keep you going for six hours," says Goldberg, who talks about feeding his body as if it were a machine to be optimized. It's actually the second time that Goldberg has told me, unsolicited, about his methodically regimented morning routine. (The toast comes after the gym, and before he walks to Fab's West Village office.) The first time he described it, he checked to make sure I was getting all the details. "Are you recording this?" he asked.
Goldberg is obsessed with capturing, and quantifying, every metric. At a staff meeting in June, while Shellhammer paraded around with a mic pretending he was '80s talk–show high priestess Sally Jessy Raphael, Goldberg regaled his staffers with the many records Fab has broken: "I have done at least 100 investor pitches in the last three months," he said. "We will be the third–fastest company in history to be valued at a billion dollars. We will be the most heavily funded private e–commerce company in the past 10 years." He makes business sound like an Olympic sport, another example of his extraordinary storytelling skills––which may, in the end, be Fab's greatest asset. "My investor pitch is 'Look, there are four e–commerce companies in the world that are worth more than $10 billion. Is it possible to have a fifth?'" says Goldberg. This, he says, is how he captured the imagination of investors to raise Fab's ongoing Series D round, which stood at $165 million in August. Led by Tencent, the Chinese Internet giant with the fourth–largest market cap in the world, it gave Fab a valuation of more than $1 billion and will help fuel its next invasion: Asia.
This cocktail of crazy cash and an obsession with speed has led to more than a little haphazardness. "I will admit I think we move a little too fast, and we tend to say we're going do something without sometimes having the people and the structure to do it correctly," Maria Molland, Fab's chief European officer, told me in June. She cites Fab's acquisition of not one but two European flash–sale sites––Casacanda and the U.K.'s Llustre––as a mistake. "I still look back on it and I'm like, Why did we think we needed that?" Another thing they didn't need: the majority of the employees they hired in the past year to staff up the Berlin office. By August, Molland had resigned, and shortly thereafter Goldberg abruptly laid off 60% of his European workforce, due to "redundancies," as he realized, belatedly, that decentralization was inefficient. Says Goldberg, "We're entirely unapologetic about the moves we've made as long as we keep learning."
For all of Goldberg's devotion to numbers, he can also be reckless with them. After publicly stating in 2012 that Fab's global revenues would be $150 million, they came in at $113 million. His revenue projections for 2013 hover somewhere between $200 million and $300 million––two vastly different outcomes. He even admits Fab doesn't need the hundreds of millions of venture–capital dollars it has raised. "We need, at this point, $100 million less than that [$325 million]. So we're building ourselves a nice buffer to be able to invest in those opportunities to make some mistakes and learn along the way," he says. Fab will be spending some of that money on its latest costly gambit: an offer of free shipping and returns, plus a price–matching guarantee. When I ask him to explain the alleged $90 million loss from 2012 and projected $50 million loss this year, he says, "I'm not going to comment on that."
"Money should be hard to come by," says Rob Forbes, the founder of Design Within Reach and a Fab adviser. He should know. DWR was arguably the last innovator in the design retail sector. En route to its IPO, it overexpanded, to its detriment. "If it [money] comes easy, then you have to have really good people around you who are keeping you honest." Fab's investors, like its employees and cofounders, aren't experienced in retail. "Private label, exclusive partnerships, licensing from designers––these are things every retailer tries. It keeps their heads above water, but it doesn't accelerate the growth of anyone's business," says Sucharita Mulpuru, an analyst with Forrester Research. "It sounds new to their foolish investors, but it's not going to be the game changer they are hoping it is."
Ironically, the more Fab grows and morphs, the less it looks like the kind of fast–growing tech company its investors are accustomed to betting on. "Fab would be a very powerful business if it didn't have ambitions to be three times as large as it is," asserts Mulpuru. "It may be able to build a brand for the long term that is significantly less profitable. The comps will look closer to a Bed Bath & Beyond––not an Internet stock."
For Goldberg, that prospect would be grim. While he uses words like humble to describe his ascent with Fab, Goldberg has positioned himself as a tech genius in the making, with all the attendant control–freak impulses. "If you look at companies that have succeeded over the last 20 years––Steve Jobs, Jeff Bezos, Bill Gates––they owned it," says Goldberg. "You have to be obsessed with the details." In Goldberg's case, the details come juicy: He has ended up in the tech gossip pages for such offenses as allegedly threatening to fire employees who didn't submit a head shot for Fab's website and for bitching to his 38,000 Facebook followers of his failed attempt to bribe an airplane passenger to switch seats for $100. Says one of the several senior staffers who have left Fab in the past year, "He thinks he's the next Steve Jobs, but at least Jobs admitted he was an asshole." Goldberg sees it differently. "I don't think Jobs was actually that much of a dick," he tells me. "I see glimpses of us in him." Today, the napkin on which he sketched the original concept for Fab sits in a glass frame in a conference room, as if destined for the Fab Museum one day, like Sam Walton's 1960s taxidermied office in Bentonville, Arkansas.
In the end, Goldberg's relationship with Shellhammer could be both Fab's great strength and its weakness. "Bradford is Jason's style guru and security blanket whom he wants to keep happy at any cost," says one former employee, referring to their cloistered relationship. "He is Jason's blind spot." While Shellhammer might be expert on such things as "New Yorkers don't buy 90–inch sofas because you'd have to break the arm off to get in the door," he has never run an operations–heavy business like this one. Fab's chief operating officer, Beth Ferreira, formerly the VP of operations and finance at Etsy, politely questions how much control Shellhammer should have. "Bradford is just so free with his thoughts and opinions. The question is, What will his long–term role be in the company? He's such an asset from the creative standpoint. Will the company be better served with him focusing only on that?" Goldberg maintains that Shellhammer's role "is like a creative director of a fashion house. 'Here's the look,' not 'Here's how it gets made.'"
Ask Goldberg if he thinks Fab can live up to expectations, and he says it's binary: "Either Fab will be worth four or five billion dollars in three or four years from now, or Fab will still be worth a billion dollars." He leaves out the other scenario. The one in which, for the second time in his life, he becomes the pariah who squandered bales of VC money––but this time it's $325 million, not $48 million. Even so, he finds a way to take that kind of skepticism as a compliment. "Amazon was on the cover of Barron's at one point. It was like this picture of Jeff Bezos, and it said 'Dot Bomb,'" says Goldberg, as if he's carrying the torch for all his brothers who came before him. "That was the heralding of the dotcom crash. And Amazon persevered."
[Illustration by Christian Labrooy | Photos by Rennio Maifredi]