What Does A Startup Actually Do With $105 Million?


Last night, design ecommerce site Fab announced a new big round of financing.

Atomico, a tech VC firm founded by Skype’s Niklas Zennstrom, led a $105 million Series C round.

We wondered why Fab needed that much money, especially after it raised $40 million last fall and $8 million the summer prior.

“What gives?” we asked Fab’s cofounder and CEO Jason Goldberg over the phone.

“We essentially just did the equivalent of a small IPO, in terms of the amount we just raised,” says Goldberg. Although Fab is twelve months old and $105 million sounds like a lot of money, Goldberg says Fab’s fundraise is “tiny” compared to the billions Amazon and eBay raised in the public market. Now, companies typically stay private for longer.

“The top 10 offline companies we are disrupting (e.g. Ikea, Crate & Barrel, Bed Bath and Beyond, Williams Sanoma, etc) combine for more than $50 billion in annual revenue. What Fab is raising is tiny compared to that,” says Goldberg.

What’s more, he says the fundraising may not stop at $105 million. There’s a good chance Fab will raise an additional $10-20 million in the near future to let in more investors. Fab may also raise an additional $20-30 million in debt.

“We signed a $100 million term sheet but had over $200 million worth of investor interest,” says Goldberg. “It became, ‘Who do we want to bring around us?'” Goldberg says “every investor and their mother” came to Fab last spring.

Initially, Fab planned to raise its round at the end of the summer. “We raised the $40 million last November and we planned to raise a round again, $50 million or so, by September” says Goldberg. “We decided to raise sooner rather than later; it became clear we could get a valuation we felt we could grow into.  If we ended up raising 6 months later, we probably would have raised at the same valuation.”

So where is all the money going? Goldberg’s answer:

  • A lot of cash in the bank makes it easier to fulfil the company’s plans comfortably over the next few years.
  • It can build and own massive warehouses in New Jersey and on the west cost to store piles of inventory.
  • Fab can nail the supply chain so all orders can be fulfilled and delivered to Europe and the entire US in just a few days.
  • Grow the tech team from 50-150 people within a year.
  • Stay out in front of the competition in social and mobile efforts. Mobile currently accounts for 35% of Fab’s daily US visits.
  • Triple from $150 million in sales this year to $450 million next year.
  • Build a global brand.

We asked if any of the cash would be used for acquisitions. Goldberg says to date, all of Fab’s acquisitions have been stock, not cash deals. They’ll probably continue to be stock deals. The cash will only be used to build out the teams once an acquisition has been made.

“Last year at this time, we only had 20 full-time employees in New York,” says Goldberg. Today it has 200 in New York.

A lot can change in one year. 

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