Why sometimes it pays to return to square one
JASON Goldberg and Bradford Shellhammer, founders of the overnight internet sensation Fab.com, were almost too busy for our conversation to take place. That may be an occupational hazard if you’ve made it your mission to “change the world”. Fab.com is the hugely successful flash-sale site, that sells design items as diverse as furniture and jewellery – covering all price points.
Goldberg, it would seem, is a born entrepreneur. He began his career working on Bill Clinton’s 1992 presidential campaign, before creating two start-ups – Jobster and Social Median. Shellhammer’s background is in retail design, but he also maintained a career as a prolific blogger. The duo first met in a nightclub in New York 14 years ago, but it was only in 2010 that they joined heads to form a travel guide, focused at the gay community, called Fabulis.
I wasn’t long before they realised Fabulis didn’t excite them, despite a membership of 150,000 and a round of funding that raised $2m (£1.27m). “It wasn’t going to change the world”, says Goldberg. So over dinner and a bottle of wine in 2011, they asked themselves what could achieve this lofty ambition. “My passion is designing user interfaces; Bradford’s passion is helping people design their lives. So I asked myself: ‘How can I bring Bradford to the rest of the world?’ We knew design was the answer.”
Their investors and board of directors instantly supported their need to pivot the business. “That conversation lasted 20 minutes – they knew we were passionate,” says Shellhammer. “You have to find one thing you’re truly passionate about and do it. I didn’t want to spend another dollar, or minute, or resource on something I didn’t believe could be big,” says Goldberg.
They have never encountered any challenges finding financial backing. They’ve raised over $150m in three different rounds since they launched. “What investors want is a big idea, backed up by data”.
In February 2011, they targeted a June launch. In the interim, Goldberg built the technology; Shellhammer worked with the design community to source designers and products. They had 175,000 people sign up to the website (only 5,000 of which had transferred from Fabulis), before they launched – the result of highly-targeted Facebook advertising. “I spent around $50,000 doing that – so not a lot of money – and focused on users who had an interest in design, technology and start-ups. We created a viral effect,” says Goldberg. On their first day they sold $65,000 worth of product. It took 20 days to sell $1m. In 2012, sales grew by 500 per cent. How do they explain the instant success? “The formula is simple. We put products on our website that excited people, that they wouldn’t find elsewhere, and that were never knockoffs. We were unique.”
At least, until the Samwer brothers – the German trio who have made a business out of finding promising internet companies, and cloning them internationally – created rival brand Bamarang. But it couldn’t compete and has since shut down, and 30 per cent of Fab’s sales are now outside the US. Astonishingly, almost a third of its sales are done on mobile apps, about half of its 11m members come from social sharing, and on any day 25 per cent of its traffic comes from Facebook. This may explain why over half of its members are under the age of 35.
I ask what’s next. They inform me that they want to be the next Ikea – the $30bn business, that operates in 80 different countries, and “represents the same thing all over the world”. Goldberg has a plan to get Fab to $1bn in sales within the next three years. “But even then, we’ll only be one thirtieth the size of Ikea.” I wonder if Goldberg, for whom this is one of many start-ups, will stay at Fab for long. Shellhammer is quick to say he’s in it forever. And Goldberg? “I’m in it for as long as Bradford is here.
CV JASON GOLDBERG
Company name: Fab
Founded: 2011
Number of staff: 650
Job Title: Founder and chief executive
Age: 40
Lives: New York City
Studied: MBA at Stanford University
Drinking: Bordeaux red wine
Reading: Instagram photographs
Talents: Making people smile
Favourite business book: The Phaidon Archive of Graphic Design
Heroes: Jeff Bezos
CV BRADFORD SHELLHAMMER
Job title: Founder and chief design officer
Age: 36
Born: Baltimore
Studied: Communications and media studies, Goucher College
Drinking: Ketel One on the rocks
Reading: Specimen Days, by Michael Cunningham
Favourite business book: The Philosophy of Andy Warhol
Motto: “Be loud. Never let others keep you quiet”
First ambition: To own my own shop – I guess Fab’s fulfilled that one