In July, Fab, the online high-design goods store, raised a $116 million Series C round at a $600 million valuation.Like its shoppers, its investors got a really good deal: Fab had initially planned to raise less money at a higher valuation, giving away less of the company to new investors.
Yesterday, Nicole Perlroth wrote in the New York Times that “Fab.com, a daily deal site for design, raised money at a lower valuation than it had planned because of Facebook’s troubled I.P.O.”
That confirms what we’ve consistently reported since last summer: Facebook’s IPO flop didn’t just cast a pall on companies hoping to go public. It also made things harder for startups raising money in private markets.
Two people involved in the financing confirmed Perlroth’s report to us.
One source told us that Fab had been looking to raise money at a range of valuations between $500 million and $800 million. It had received offers to invest at a $700 million valuation—but opted to cut that down to $600 million and raise more money than planned.
Fab CEO Jason Goldberg’s fundraising strategy, according to one person familiar with it, was to make it a “feel-good moment” for investors, and the decision to cut the valuation was his.
The immediate cost for Fab, like its valuation, is more notional than real. It has a large amount of capital for expansion, but gave up approximately 20 per cent of the company, rather than the 14 per cent it had planned.
If Fab ends up being hugely valuable in a sale or IPO, then its most recent investors will have a stake that’s 43% more valuable than it might otherwise have been.
Because of the complexities of venture-capital deals, those numbers could vary greatly depending on the specifics of any outcome for Fab, but they give a rough idea of the advantage Fab’s investors gained.
Fab is an e-commerce store for unique products and designs with more than 10 million members.
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