PCH, the custom design and manufacturing business, has made one more step into the world of direct-to-market sales. It has closed its acquisition of Fab — the e-commerce design portal that rose to dizzying heights of hype before crashing down to reality.
We originally reported that Fab was selling to PCH for around $15 million, a fire-sale price that included the remaining assets of the company. The company raised $165 million at a $1 billion valuation just over a year ago.
PCH will keep the 35 remaining Fab employees on staff who are based out of the U.S. as part of the acquisition deal. Renee Wong, who has been Fab’s general manager, will continue handling day-to-day operations. PCH plans to invest more in the business, adding merchandising and marketing positions to the team. It will also be exploring ways to attract emerging designers.
While the final price of the sale is not being disclosed, on the spectrum between home run and fire sale, it’s likely that the price is a lot closer to the latter.
In its lifetime, Fab raised more than $330 million and was valued at $1 billion at its last big round in 2013. But after Goldberg started to wind down Fab’s business to what it is today, he channeled whatever capital was left in it, plus the investors behind it and the valuation they had attached to the business, into a new startup, Hem. Based out of Berlin, Germany, Hem — Swedish for ‘home’ — focuses on designing, making and selling furniture, lighting and other home objects.
Hem has been further capitalised using the proceeds of the Fab sale to PCH, and Goldberg has been building out the new startup with acquisitions of its own.
“This transaction allows us to focus 100% of our resources on Hem,” Goldberg writes in a blog post confirming the deal. “All of the funds raised from that transaction will be reinvested into Hem. The stockholders that originally invested in Fab will continue to hold the same ownership interest in Hem.”
Fab had become something of a poster child for the boom and bust of e-commerce startup life. Starting out as a dating and community site for gay men, in 2011, it pivoted and grew into a popular retail platform for funky home goods, pulling together products like jewellery and tote bags through to kitchenware and home decorations from a number of smaller suppliers.
Investors like Andreessen Horowitz, NTT Docomo, Tencent, Atomico and many others piled into the company. Fab ballooned to 700 employees by 2013 as it pushed into more countries and more product categories.
But making good margins on marketplace services is a game of scale, and as Fab was scrambling to grow it was burning through money. The site devoted over a third of its revenue at the time to ad spend, only to miss revenue goals by 20%. Fab was said to be spending $14 million per month at its peak. Eventually came the layoffs and country closures.
We see an opportunity to reinvigorate the Fab audience. PCH Founder Liam Casey
For PCH, the deal makes a lot of sense. The manufacturing company already works with companies to produce hardware and other physical objects, so a service like Fab will now give it a way of channelling them directly into the market, building out PCH’s vertical integration.
This isn’t the first acquisition PCH has made in the e-commerce space. In late 2013, the company acquired online sales platform and website Shoplocket. It later launched the Blueprint, an e-mail newsletter for makers. But having a large potential group of customers for its hardware products could help it to grow e-commerce sales for its hardware partners.
“The association with design was important one for us,” Casey said. “We see an opportunity to reinvigorate the Fab audience… And because Fab has a flexible and dynamic technology platform, we have a good foundation to test new selling modes that will excite customers.”