PCH International in Talks to Buy Fab for $15M | Hacker News Reader

PCH International in Talks to Buy Fab for $15M

techcrunch.com

50 pointsnikhilpandit23 comments

At first glance, it may seem like a startup that raised >$300m is selling itself for $15m but that's not the case at all. Earlier this year, Fab effectively pivoted from selling stuff designed and manufactured by other companies to designing, selling and manufacturing - and the other those words are in is significant - their own products (i.e. vertical-integration)[1]. That pivot was given a new brand (Hem.com) and it looks like the old Fab brand and business are being sold off, and the focus is now on Hem which, I presume, has the same shareholders that Fab had.

1: www.digitaltrends.com/home/hem-new-venture-fab-like-ikea-customizable-furniture/

Yes, I'm sure the deal was structured so that Andreesen Horowitz and other late stage investors won't have to take an immediate 99% loss on their Fab investment.

At first I was confused on who these guys were.

http://techcrunch.com/2013/07/29/just-fab-sues-fab-over-trad...

Two founders with the same last name

found companies with the same corporate name.

Not to be confused with "JustFab"[1]

_____________________________________________

[1] Why can a scam company raise $40 Million Series C + $76 Million Series B?

"https://news.ycombinator.com/item?id=6455391"

http://www.matrixpartners.com/entrepreneur-stories/adam_gold...

(Obligatory reply from VC is below)

https://news.ycombinator.com/item?id=6455575

Turns out they are litigating the names

Were JustFab ever legally punished for their deceptive "payment" process? I'm guessing not. Their current site now shows regular and membership options (like they did on their German site 1-2 years ago), but they still don't state it's a subscription up-front or in the costs box.

I don't mean this in a negative way, but how does a CEO retain control through a fall from $1B+ to $15M? Isn't that endemic of significant mismanagement, at least in expectations?

IMHO, it can go both ways. It can definitely be mismanagement, but it can also be mismanagement by the VCs who have outbid each other on a "hot" company. To a large extent it is the CEOs role to maximise capital raised while reducing shareholder dilution.

I don't know the specifics of Fab, but from the outside it can be anyones responsibility. Fab was valued at $1bn because investors paid that valuation, so I'd be curious to see how Fab was pitched at the investment committee in each of the VC shops during the C + D rounds: Andreessen Horowitz, Atomico...

A bit bittersweet for me. I had a failed startup a year ago where we were trying to connect consumers with local woodworkers and metalworkers. At the time, we attributed our lack of success to Fab and their ability to convince consumers to focus on discounts. We had a ton of other reasons for failing but ecommerce, especially for higher ticket items is extremely difficult and definitely sucks that they didn't make it work. On an abstract level I feel validated that their model didn't succeed but I also sympathize with the founders and the rest of the team. Hopefully they learned a ton and land on their feet.

I'm sure Jason will be just fine.

http://www.geekwire.com/2012/lessons-learned-jobster-jason-g...

Not so much worried about him - more the rest of the team but hopefully they learned a ton during the experience.

I'm always curious what goes into a decision to sell at all in a situation like this.

$336 million raised, sold for $15 million

Is there actually a good reason to bother to do that?

Whatever the case, this is one that'll be referred to with the market bubble of 2012-2014 (along with perhaps Twitter's former $48 billion market cap, Zynga's $15b valuation, the insanity that surrounded Groupon and its $20b valuation, and so on).

I would speculate that it's to at least salvage something. I read that their recent burn rate was as high as $14m / month and of course they are in no position to raise a further round.

No idea about this specific case, but the assumption of liabilities may or may not be involved. There are also some ethical considerations about keeping jobs in a going concern (however minimal), and some PR considerations about liquidation, etc. It wouldn't be out of order for a company with $300MM in funraising to have $15mm in misc. liabilities.

Probably pressure from investors who want some money back & board

I always really enjoyed the products Fab procured, but most of it was way outside my price range, and now they have pivoted to hem, where they sell this table (http://hem.com/en-gb/product/bento-dinner-table-long-10022) for ~1200$ USD

Oddly, the table is priced identically in Euros and Dollars ($999 and 999€).

That's fairly common. German prices include 19% sales tax.

"Fab has seen some drastic changes in its 3 years of operation. It started out as a dating site for the gay community and then relaunched as a flash sale site for home decor. Fab announced just six months after the pivot that it had grown its membership to 2 million, "

Is that stretching the definition of pivot just a bit too far?

Fab Inc is selling off what remains of the Fab brand & website(s). This should not be a surprise to anyone given they pivoted to Hem in Sept:

http://techcrunch.com/2014/09/29/hem-fab-europe-furniture/

I had the pleasure of visiting the PCH Shenzen office recently. Surprisingly cool company. Through an accelerator they help make some interesting products, including Navdy.

Quite curious to see what they'd do with the Fab brand.

oww.. the half-stock/half-cash is the insult to injury.

nastygal, modcloth (well funded ecommerce) also having tough time.

good reminder that 1) ecommerce is hard and 2) vanity metrics on ecommerce is an order magnitude larger than most many entrepreneurs think:

"$10 million in goods sold this year" --> not at scale

"$1.5 million sold a day" --> still not at scale!

CEO “It’s not that hard to build a $100 million revenue e-commerce business, but how do you scale ... "

er, yep that's not good.

Ideeli has also pivoted from designer to more low-cost goods.

Nastygal is not having a tough time if you solely read Sophia Amoruso twitter's feed:

https://twitter.com/sophia_amoruso

I think there's a big problem when CEO's become more concerned about their personal brand than the company's brand. And in the case of Sophia, I posit that she has done so. Her book and her attendance at conferences seem to be her major focus these days.

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