Fab.com Raises $10M From Singaporean Telecom Giant SingTel at $1 billion valuation; Fab.com’s layoffs in Europe also come at a time when some reports have been critical of Fab.com’s missteps, as well as its company highhanded culture

Eyeing Potential Growth In Asia, Fab Raises $10M From Singaporean Telecom Giant SingTel

LEENA RAO

posted 2 hours ago

Amidst layoffs, and shortly following a new $150 million round in new funding, Fab is announcing an additional contribution to its Series D round of financing. Singaporean telecommunications giant SingTel Group has put $10 million into Fab, and according to the design-focused ecommerce company, the Asian company will will be a key partner wIn helping Fab explore expansion opportunities in Asia. CEO and co-founder Jason Goldberg explains that SingTel will be instrumental in helping Fab expand to Asian markets. He writes: He also addressed some of the changes taking place at the company, namely the layoffs and ditching the flash sales model: Most importantly, we announced the centralization of our operations at our New York headquarters, underscoring our shift from a flash sales model to more of a comprehensive global online lifestyle shop. We have momentum, we have growth, we have a solid team in place, and we have millions of customers worldwide that we want to continue to fall in love with Fab.SingTel has a lot in common with Fab – they serve a growing, young, and sophisticated population of consumers who are looking for lifestyle products to reflect their optimistic, dynamic and vibrant approach to life. That matches well with the predominantly 25-45-year-olds who come to Fab to browse and buy unique and compelling items they’ll live with in their homes, wear, and gift.

Fab, which was valued at $1 billion in this round, is going to be raising around $100 million more as part of  its Series D (Goldberg said in tonight’s post that more Series D investors will be announced in the future and he will share the news as it happens).

Part of this new financing is going towards Fab’s next pivot as an international design powerhouse. In May, Fab debuted its new design store, which makes it more of an integrated e-commerce site. The company is also experimenting with brick and mortar stores.

As we’ve said in the past, international is a huge potential growth area for the company, particularly in Asia. Tencent and Itochu invested in the first part of the Series D and it comes of no surprise that additional money is coming from Asian investors as well.

In the past, Fab has been expanding via acquisitions as well so it should be interesting to see if the company scoops up an startups in Asia for its big push into the region. Stay tuned.

Fab Lays Off 150 European Employees, But Its “Chief European Officer” Had Already Resigned

SARAH PEREZ MIKE BUTCHER

posted yesterday

It’s been a tough week for Fab. Yesterday, word came that the company is being sued for trademark infringement and unfair competition by shoes and apparel site Just Fab, and today Fab is announcing over 100 employees will be laid off from its Berlin offices. The company, which just last month announced the close of $150 million in Series D funding, says the layoffs are meant to reduce redundancies. However, the company notes that it will have over 600 employees by the end of today’s actions, and is still hiring for more than 70 positions globally.

TechCrunch has also heard that Fab.com’s “Chief European Officer” in Germany, Maria Molland, had actually resigned at the beginning of June, though her LinkedIn lists her still as a Fab.com employee.  We’ve also heard that the “over 100″ employees being laid off is actually closer to 150.

Up until recently, Fab had been essentially running two separate flash sales businesses,explains CEO Jason Goldberg in a blog post about today’s layoffs — one in the U.S. and the other in Europe. But alongside the news of the funding raise, the company had also announced that it was pivoting its business model (yes, again) away from flash sales, in order to focus on where more of customers’ dollars were being spent — in its online “lifestyle shop.” Fab had said that two-thirds of its sales were not coming from flash sales, so it had needed to rebrand. It seems Fab.com was really becoming known for home goods, which account for 50 percent of sales.

Goldberg basically says today that the flash sales model was difficult to scale, noting that Fab wanted to sell the same products globally to its customers. “That was hard to do with flash sales, as products would come and go from Fab daily,” he wrote in the post. “The nature of flash sales dictates that products are not kept in inventory and are thus very difficult to ship fast or for free. However, fast and free shipping is possible with an inventory-planning model,” he says. The company is now working toward that.

With the change to Fab’s business model, the company says it now plans to consolidate most of its merchandising, marketing and operations teams into a single global team in New York. It will continue to operate local customer service, returns, shipping and logistics, finance, IT and HR positions in Europe at both its Berlin and Eindhoven offices.

Meanwhile, the company is planning to double its engineering team and hire in its sourcing and planning departments.

More than 30 people in Fab’s Berlin office are being asked to move to New York, while others are being laid off immediately or asked to remain in a transitional phase. Seventy of the employees began their “garden leave” (the approximate German term for paid leave) this week. Fab says it had 696 employees worldwide, which means the layoffs accounted for roughly 15 percent of its current workforce.

Europe is a big market for Fab.com, and especially the U.K., which generates nearly 40 percent of its sales in Europe and is its fastest-growing market outside the U.S. The company is also going after Asia, which is why Fab brought on Tencent and Itochu as partners, which was also alluded to in today’s announcement.

Growing the business to a worldwide scale is Fab’s overarching goal here, which means it will have to make strategic cuts like this when needed. Goldberg had previously said that there are only four e-commerce companies in the world that are valued at more than $10 billion: Amazon, Alibaba, eBay, and Rakuten. He wants Fab.com to be the fifth. But to do so, Fab has needed to invest in enhancements to its supply chain, logistics, customer service, technology and merchandising, and it’s also now bringing more product design in-house.  Fab expects to reach profitability in its U.S. and European operations by Q4 2014 or Q1 2015, Goldberg also noted a few weeks ago.

The layoffs also come at a time when some reports have been critical of Fab.com’s missteps, as well as its company culture, where, as Bloomberg found, “employees are asked to send e-mails in a certain font, use high-quality paper and always ‘be Fab.’” We’ve also heard that the culture at Fab has not been great. Goldberg fought back against Bloomberg’s claims, but many of the bullet points in that earlier post ended up confirming the original reporting.

Update: Goldberg responded to say that Maria’s departure was unrelated – “ A couple of months ago Maria came to me to let me know that she was interested in starting her own company. I have been very supportive of that and am helping her. It’s the best reason for an exec to leave a startup.” He also notes that in terms of net terminations, Fab expects to be around -70 by year end.

Fab.com’s Ascent to $1 Billion Valuation Brings Missteps

By Sarah Frier – Jun 24, 2013

Fab.com Inc., valued at more than $1 billion dollars after just two years in existence, is suffering growing pains from its rapid expansion as it applies a culture of meticulous control to a global business.

The online retailer — a darling of the New York startup scene for its uniquely designed home goods, art and jewelry — has made five acquisitions, expanded its staff to 650 people and spent tens of millions of dollars on marketing. It’s also lost or fired at least 11 of its executives in the past year and missed its targets for revenue by almost 20 percent.

To give investors a return on the more than $310 million they’ve put into the company so far, Chief Executive Officer Jason Goldberg will have to prove that he can handle an international expansion and push into new lines of business, such as Fab-branded products. At the same time, Goldberg and co-founder Bradford Shellhammer are honing a management approach that has involved threatening to fire workers in companywide e-mails and barring employees from hanging their jackets over their chairs.

“It is impossible to grow a company as fast as we’ve grown Fab without having mistakes along the way,” Goldberg said in an interview. “Hopefully we’re able to adjust and make changes effectively. We aim to be a learning organization.”

Fab brought in $113 million in global revenue in 2012, missing the $140 million Goldberg had publicly aimed for, according to an internal e-mail obtained by Bloomberg News. Goldberg confirmed that he sent the e-mail, saying revenue was later revised to $115 million. The money-losing company is projecting sales of $200 million to $300 million this year.

Marketing Costs

Goldberg, who previously founded startups such as Socialmedian Inc., aspires to make Fab as influential as Amazon.com Inc. (AMZN) or Ikea. That’s meant spending heavily on marketing, including TV ads — an unusual expense for a startup in its second year.

Aiming to project an image of offbeat fun and design savvy, Fab devoted about $40 million, or 35 percent of revenue, to marketing last year. Fab has since learned to more efficiently target its advertising and plans to spend less than $30 million on marketing this year, Goldberg said.

Fab focuses on products that elicit a passionate reaction from customers and can’t be purchased elsewhere — something Goldberg calls “emotional commerce.” Its items are often quirky: a vintage yellow typewriter, tables shaped like U.S. states, or a piggy bank flocked in faux grass.

‘Be Fab’

The company’s attention to detail extends to its Manhattan office, where employees are asked to send e-mails in a certain font, use high-quality paper and always “be Fab.” The founders say it’s not much to ask in an office that provides beer on tap, free lunch and an ice-cream machine, and lets employees personalize their desks with small items from the site.

The headquarters, located in the West Village, features one conference room with scratch-and-sniff banana wallpaper and another made of removable blocks that employees can sit on. The office doubles as a showroom for Fab products and the idea is to make everything “pixel perfect,” said Goldberg, wearing all black except for a red belt.

“We believe in this notion of pixel perfect and we shouldn’t stop short of that,” said Goldberg, 41, who sports a trim beard and neatly coiffed hair. “We should make sure it is done the Fab way.”

‘Our Sass’

Employees who don’t comply face consequences.

One e-mail to the New York office from Goldberg on Dec. 6 asked for a confession from whichever employee left a mess in Fab’s model apartment — a showcase for its products within the company’s 47,000-square-foot workplace.

“Don’t confess and we find out it’s you and you will be fired. Period,” he wrote. He promised a $100 Fab gift card in exchange for a confession.

A message on Feb. 4 carried the subject header “Do you like getting paid?” Goldberg told employees they were required to have a photo uploaded to the “team” page on Fab.com “in order to be eligible for the next company pay period. No exceptions.”

An e-mail on Oct. 11 from Shellhammer, who serves as chief design officer, forbids people from modeling Fab’s products. Employees had been inserting themselves into shots of the company’s wares posted on its website. “If you have time to model, you have time to get fired,” Shellhammer wrote.

That, Goldberg said, was a joke.

“This is a little bit of our sass,” he said, while confirming that the e-mails were sent. “We are hard-driving, we are a little bit tough sometimes, and we make clear to people: ‘We are very fortunate to have this opportunity.’”

Executive Departures

The heavy-handed approach has contributed to management turnover, according to six current and former employees who asked not to be named.

Executives who have left include Fab’s chief marketing officer and the directors of human resources, communications, buying and logistics. Goldberg said that turnover is natural at a fast-growing startup, and Fab’s is relatively low.

Fab debuted in June 2011 after a previous incarnation of the company — Fabulis.com, a gay social network — failed to attract enough users. The company raised $150 million last week from investors, including China’s Tencent Holdings Ltd. (700) The deal, which valued the whole company at $1 billion, has helped elevate Fab to the upper echelon of New York startups.

London, Berlin

Goldberg wants Fab to be the next e-commerce company worth more than $10 billion, operating at the scale of Amazon, Alibaba.com Ltd., EBay Inc. (EBAY) and Rakuten Inc. (4755), he said. To expand in Europe, Fab acquired companies in Germany and the U.K., only to discover that it didn’t make sense to have two offices in the region. So it shut down the London operation and asked the employees to move to Berlin, irking some workers.

“We’re learning how to be a global company,” Goldberg said. “On one hand we’re saying, ‘Make mistakes,’ and at the same time we’re saying, ‘Get s–t done.’”

The latest round of funding may go toward an Asian expansion, though there’s no time frame for when that might happen, Goldberg said. The near-term growth is less important than Fab’s ability to establish staying power, he said.

“I don’t care if we do $200 million or $300 million in sales,” he said. “I just care that we grow for the long term.”

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net