Fab has been a busy bee recently. Last week, the flash-sale site launched five new verticals. And now, the New York-based startup has snapped up Berlin-based Casacanda and opened up their first international site, Fab.de.
That’s a lot of expansion for a company that’s not even a year old.
Sure, Fab is growing like gangbusters. After opening its digital doors in June, it grew to 1 million members in November and got to double that earlier this month. It’s doing an average of $1.5 million in sales a week and plans to log at least $100 million this year. Along the way, the startup has scooped up over $51 million in venture funding, including a $40 million Series B led by Andreessen Horowitz in November.
But still, knowing when’s the right time to expand is always a tricky call: Try to do too much too soon, and a nascent startup risks imploding under its own ambitions. But wait too long to get all your ducks in a row, and you might be overtaken by competitors. So how do you know when’s the right time to start branching out?
We asked Fab cofounder and CEO Jason Goldberg how the company knew it was the right time to start expanding. Here’s what he told us:
In the beginning, focus on just “one thing”
“We have this concept at Fab called the ‘one thing,’ which is: Do one thing, and do that one thing better than anyone else,” Goldberg says. “We’re almost religious about that.” New opportunities pop up for Goldberg and cofounder Bradford Shellhammer all the time, but they say no to anything that isn’t design-related. “We’re very careful about [remembering] that moving in certain directions at a certain time [could be] too fast or would dilute our primary focus.”
Let the metrics guide the growth
“At the end of last year, we looked at where were we on our trajectory. We ended the year with 1.5 million members. We were growing very quickly,” Goldberg says. They had momentum, so they could start to think big when setting their goals for 2012. “One of them was to go from having about 3,000 products on the site per day to having tens of thousands,” Goldberg says. “We wanted to get to a place where people say: ‘I turn to Fab whenever I want something design-oriented.'”
The most logical way to explode the number of products was to add independent verticals. So the team reviewed the data to see which segments had the most demand. “There are categories on the site where we had clear evidence from our usage and from user behavior that our users wanted to see more, that were selling really well whenever we did it, but we just hadn’t provided enough product,” Goldberg says. That’s how they came to the decision to launch independent shops for Vintage, Fashion, Kids, Pets, and Food, which started going live last week.
Leave international on the back burner until you have momentum at home…
It used to be that companies could take their time going international. They’d master their game at home, and then take it overseas when it felt right, usually many years later, not worrying much about competition from local startups. Starting up was difficult and expensive. Competing with a well-funded American firm was no easy trick.
No more. “It’s faster, cheaper, and easier than ever to put up a website,” Goldberg says. “There are copycats and clones everywhere.” A U.S. company that takes too long to get its butt overseas risks finding the market saturated by the time it gets there.
Still, you don’t want to move too fast. “I wouldn’t think about it at all until you can say you’ve really started to figure out the business model, and you really can see some significant scale and growth,” Goldberg says. “In our company, I was religious about not thinking about doing anything other than our ‘one thing’–design in the U.S.–until we could say we had begun to seriously figure that out.”
…But once you have that traction, get moving overseas.
The flip side of taking your time is you don’t want to wait too long to make your move. “In the German market particularly, we saw six Fab copycats emerging over the course of this fall,” Goldberg says. “We had to make a decision pretty quickly: Do we want to get out ahead in the market or do we want to be playing catch-up?”
One of Fab’s investors and board members is Andreessen Horowitz’s Jeff Jordan, who also has a piece of Airbnb and Pinterest. “Those companies had German clones very quickly, and now they are just playing catch up,” Goldberg says. Fab knew if they waited too long to get overseas, local movers would define the game, and the New York company would have an uphill battle once it made landfall.
“Fab is an opportunity to build a brand for the ages,” Goldberg says. “We really think we have an opportunity to build the global brand synonymous with design for years and years to come. That drove us to think international faster.”
Acquire local companies so you can hit the ground running–but only if they’re a perfect fit.
Once you’ve decided to go overseas, you face the perennial strategy conundrum: Build or buy. Build out a team and infrastructure of your own so you know it’ll be perfectly suited to your needs, or buy up an existing company in the hopes of being able to easily retool it where necessary.
Buying an existing company often seems like the smart choice. It lets you hit the ground running. At least in theory.
The Fab guys decided that a local acquisition had to have three attributes. The local team had to be passionate about building a company just like Fab. “In Germany, it’s easy to find people who are passionate about building a business,” Goldberg says. “But we wanted to work with people who are passionate about building this business.”
The team would have to have mastered the fundamentals of executing on the business. “We didn’t want to have to teach them,” Goldberg says. “Casacanda had solved a lot of the same problems we had solved.”
And they had to have traction. Without that, Goldberg says, “you might as well build from scratch.”
Fab found those three attributes in Casacanda. “We met five other teams here in Germany, and none of them had learned those lessons like these guys,” Goldberg says. Fab snapped the company up for a reported $10 million in stock, and by earlier this week, Fab.de was open for business.
But despite the frenzy of activity in the Fab space overseas, moving this fast was never a sure thing. “If we had not been able to find a team like [Casacanda], we would not have gone to Germany for another six months,” Goldberg says.