Speaker 1: We're going to start our story today. On June eighteenth,
Speaker 1: two thousand and thirteen, this was the day that Jason Goldberg,
Speaker 1: the founder and CEO of an online startup called fab
Speaker 1: dot com, announced that he had just raised a big
Speaker 1: round of funding. Online retailer Fab dot Com announced a
Speaker 1: new round of financing today that values of the company
Speaker 1: at about a billion dollars. Now, that makes the company
Speaker 1: one of the most valuable startups in New York. A
Speaker 1: billion today doesn't sound like that big of a deal.
Speaker 1: I mean, Uber is worth what sixty billion dollars, but
Speaker 1: at the time it was an incredibly exclusive club, very
Speaker 1: rare achievement. Jason was in our bloombrick headquarters in New
Speaker 1: York to talk about the successive is fundraising, and he
Speaker 1: was beaming on TV. The way we look at the
Speaker 1: world is that there are currently four e commerce companies
Speaker 1: that are worth more than ten billion dollars, Amazon, Racketan
Speaker 1: and Japan, Ali Baba and China and eBay, and we
Speaker 1: think Fab has a legitimate chance of being the fifth one.
Speaker 1: But as soon as he got up the set, he
Speaker 1: walked downstairs to meet with the jackals the media. You
Speaker 1: Sarah I told him I had some documents to show him.
Speaker 1: It wasn't that excited about it. But the background is
Speaker 1: a couple of weeks earlier, I had met a fab
Speaker 1: former employee who told me about how dysfunctional the startup
Speaker 1: was internally, that they had missed the revenue targets a
Speaker 1: year earlier. By over, he introduced me to more employees.
Speaker 1: To introduced me to more employees, and I ended up
Speaker 1: with the stack of emails that showed a little bit
Speaker 1: about the company culture and how difficult it was for
Speaker 1: some people to work there, and also just how many
Speaker 1: executives had departed in the last year. It was about
Speaker 1: eleven people. So Jason had presented this rosie picture on
Speaker 1: TV and then you presented him with these very uncomfortable
Speaker 1: internal emails. How did he respond to that? So the
Speaker 1: thing about Jason is he's kind of a politician. He's
Speaker 1: very good at getting people on his side, being a
Speaker 1: very sympathetic character explaining his position. And so at the
Speaker 1: time we met, Jason was still very much in sales mode.
Speaker 1: He was like, maybe just don't understand that the culture
Speaker 1: of our startup. Maybe you need to come to our
Speaker 1: headquarters and will show you how it is to be Fab.
Speaker 1: So I presume you went, you visited the company, you
Speaker 1: drank a little bit of their kool aid, and then
Speaker 1: you still publish a very harsh story. And what happens
Speaker 1: after that it was kind of war. At that point,
Speaker 1: Jason put out a blog post saying that there had
Speaker 1: been blatant misrepresentations in the story. He denied it all,
Speaker 1: he spun. But it turned out that wasn't a blatant misrepresentation,
Speaker 1: and it was really the beginning of the end for
Speaker 1: fab dot com. I spent the next year reporting on
Speaker 1: layoffs after layoffs, everything unraveled, and eventually Fab got sold
Speaker 1: for fifteen million. Hi, this is Brad Stone and I'm
Speaker 1: Sarah Fryer, and this week on our very first episode
Speaker 1: of Decrypted, we're going to hear from Jason Goldberg. This
Speaker 1: is a particularly personal story for him, and it's a
Speaker 1: little bit of a personal story for you too, Sarah. Right. Well,
Speaker 1: for for me, it was just a constant back and
Speaker 1: forth between me and it's entrepreneur back in the day,
Speaker 1: and now we get to actually talk it out. We
Speaker 1: spend so much time talking about all the successes here
Speaker 1: until Icon Valley, but we really don't talk enough about
Speaker 1: what it's really like to drive an entire company into
Speaker 1: the ground and leave a smoking, crater sized hole and
Speaker 1: failure just the way things in for the vast majority
Speaker 1: of tech companies. It's brutal, it's emotional, it's public, and
Speaker 1: it's kind of embarrassing, and for some reason, somehow a
Speaker 1: lot of founders find a way to pick themselves back
Speaker 1: up and start a new company all over again. Jason
Speaker 1: is now launching an app called Peopo, and that's why
Speaker 1: he agreed to talk to me, probably so he can
Speaker 1: put all of this behind him. He called me the
Speaker 1: other week from Puna, India, where he was putting the
Speaker 1: finishing touches on his new startup before launch. You know,
Speaker 1: we had all sorts of promise and opportunity and it
Speaker 1: didn't work. And you know, I think my my, my
Speaker 1: biggest emotion of it is, you know, just you know
Speaker 1: that I'm sorry. So let's take this from the beginning.
Speaker 1: Sarah tell us about Jason and fat So. Jason is
Speaker 1: not your typical engineer founder. He came up through the
Speaker 1: Clinton White House. He's kind of a serial entrepreneur with
Speaker 1: a lot of suave personality. He gets his suits tailored
Speaker 1: at Bottega Vanetta. He takes an uber everywhere, it doesn't
Speaker 1: take the subway, and he sort of got this presence
Speaker 1: and he partnered with this guy Bradford Shellhammer, who has
Speaker 1: this incredible design aesthetic, and together they founded this site
Speaker 1: called Fabulous, which was a gay social network and it
Speaker 1: wasn't really going too well, but Bradford, with his design shops,
Speaker 1: started picking out these products that he really liked and
Speaker 1: he started doing this big gay deal of the day.
Speaker 1: This was at the height of group on and Living Social.
Speaker 1: Everyone was going crazy about these things and those deals
Speaker 1: really took off, and eventually Bradford and Jason realized that
Speaker 1: should be our company, so they shut that down. They
Speaker 1: launched this new site a couple of months later with
Speaker 1: all of these really quirky, interesting products that you really
Speaker 1: just couldn't find anywhere else. Yeah, I remember how much
Speaker 1: attention and hope there was around fab dot com and
Speaker 1: there could be this large space in e commerce outside
Speaker 1: of the amazons and the e bays for boutique products
Speaker 1: and eccentric product categories. You know, it took off like
Speaker 1: a rocket ship. Um. You know, when we launched we
Speaker 1: had a really small team we had. You know, I
Speaker 1: think we had fifteen people at most in New York
Speaker 1: and we had a team of like fifteen people in Puta, India,
Speaker 1: and you know it it was it was kind of incredible.
Speaker 1: I mean it was like, we sold a million dollars
Speaker 1: of the merchandise in our first twenty days. Um, we
Speaker 1: were profitable, uh, you know, kind of a casual basis
Speaker 1: in the first month, and I was like, whoa, we
Speaker 1: really had something in our hands. And um, in just
Speaker 1: six months, FABS old twenty million and merchandise. They raised
Speaker 1: money from investors at a two million valuation. And honestly,
Speaker 1: their biggest problem was that they couldn't keep up with demand.
Speaker 1: They were selling out of products too quickly and couldn't
Speaker 1: get things shipped fast enough. Right, So what did this mean?
Speaker 1: I mean, they sound like good problems to have, But
Speaker 1: what's the challenge. I just heard about a lot of
Speaker 1: angry customers who had to wait for months before they
Speaker 1: got what they ordered. And while still dealing with all
Speaker 1: those issues, Jason and his executive team got wind of
Speaker 1: some copycat companies in Europe and they decided to launch
Speaker 1: there and compete with them and crush them early. That
Speaker 1: was an early I think when you have a lot
Speaker 1: of you know, smart people who tell you that, hey,
Speaker 1: you know, you really should try, you know, going to
Speaker 1: Europe faster. And you know, we saw what happened with Airbnb,
Speaker 1: or we saw what happened with Pinterests or whatever it
Speaker 1: might be, you know you should go and you know,
Speaker 1: and and try to you know, going faster. I allowed
Speaker 1: myself to believe that, okay, you know, we should give
Speaker 1: it a look, and and then once we gave it
Speaker 1: a up, we got really excited about it. And so
Speaker 1: ultimately it became a distraction for both Jason and Bradford.
Speaker 1: And at one point they were spending a couple of
Speaker 1: weeks out of the month. They're trying to set up
Speaker 1: the right teams and the right executives to run the
Speaker 1: year of operation, while they still had all these problems
Speaker 1: in the US with merchandising and inventory. It was just
Speaker 1: getting to be too much. In our first year, we
Speaker 1: worked with more than five thousand designers and sold nearly
Speaker 1: two million products, and our dreams for FAB are just
Speaker 1: getting started. And even though expanding geographically onto an entirely
Speaker 1: new continent, FAB was expanding in some more product categories.
Speaker 1: This is about authenticity. This is about showing people products
Speaker 1: they will love and delighting them day after day, adult products,
Speaker 1: pet products, all sorts of things that they had to
Speaker 1: find interesting, unique things for. Jason said that the quality
Speaker 1: started to deteriorate. At fab. We believe we have a
Speaker 1: special opportunity to become the world's greatest design resource. On
Speaker 1: the outside, everything's still looked great. I I remember spring
Speaker 1: two thousand thirteen story fab dot com winning the e
Speaker 1: commerce war with whimsy. Not quite sure if I remember
Speaker 1: who wrote that one. That might have been me. Okay,
Speaker 1: that was me. But inside, as you found out later,
Speaker 1: things were starting to fall apart. Well. They were spending
Speaker 1: so much money on marketing, I think like thirty million
Speaker 1: in and the customers they were getting through marketing. Per
Speaker 1: Jacent's calculations, he thought that they would be as dedicated
Speaker 1: as the early customers. That's how he built all his projections,
Speaker 1: But in fact they were kind of one and done,
Speaker 1: like they would buy one product and never come back
Speaker 1: to the site. And behind the scenes he was out
Speaker 1: there frantically trying to raise money to fit those growth projections.
Speaker 1: But people were actually a little bit skeptical and he
Speaker 1: fell short. He ended up with only a hundred fifty
Speaker 1: million of the three hundred million he thought he needed.
Speaker 1: What feeling at that time because everyone who talked to
Speaker 1: you around then describes you as just being completely, you know,
Speaker 1: religious about Fab's vision. And in anyone who thought that
Speaker 1: that the company maybe wasn't going to grow as fast,
Speaker 1: UM would would get talked out of it. It is
Speaker 1: quite possible that, you know, I think you're in a
Speaker 1: situation like that, then maybe you can get somewhat delusional
Speaker 1: um in thinking that you can just figure it out. UM.
Speaker 1: And also you know, just you know, it's like you
Speaker 1: you see that you know in that that you're growing,
Speaker 1: and that if you can figure out way to keep growing,
Speaker 1: that you can kind of grow your way through it. UM.
Speaker 1: And I think it was also kind of a fear
Speaker 1: for what happens if we don't if we, if we,
Speaker 1: if we if you know, if we did hit you
Speaker 1: slam on, if we did hit the brakes and we
Speaker 1: said let's not grow as fast, that would that would
Speaker 1: have meant, you know, it's pretty ter Cronian layoffs. And
Speaker 1: that brings us to the moment where we started today's
Speaker 1: show with us now for an exclusive interview is Fab
Speaker 1: dot com CEO Jason Goldberg. Jason, great to see you.
Speaker 1: Thanks for the scoop, huge cash infusion for you and
Speaker 1: your company. What are you going to do with them?
Speaker 1: On TV, things seemed to be doing so well. Jason
Speaker 1: looked so proud, but in reality he was backed into
Speaker 1: a corner. And then Sarah, you present him with the emails.
Speaker 1: You know, I was very proud of the company, very
Speaker 1: protective of the company, and UM and I also was
Speaker 1: scared at the time, um, because you know, I was
Speaker 1: in the midst of, you know, going through a fundraising
Speaker 1: process where you know, we raised a lot of money,
Speaker 1: but I also knew that we didn't have enough, and UM,
Speaker 1: I was worried about kind of like the chinks in
Speaker 1: the armor. And at least to the public and to me,
Speaker 1: he was denying that things were pretty bad, but Fab's
Speaker 1: board members were looking at the company's numbers and urging
Speaker 1: Jason to face reality. Howard Morgan was an early investor
Speaker 1: in FAB and he also sat on Fab's board. This
Speaker 1: is what he was telling Jason at the time. At
Speaker 1: this current rate, you're gonna be out of money much
Speaker 1: too quickly. You've got to really make radical changes here.
Speaker 1: You've got to make radical cuts. You've got to change
Speaker 1: some of the culture, because there was a very free
Speaker 1: spending culture for quite a while as well. Uh you know,
Speaker 1: Jason and Bradford were getting off for Europe a couple
Speaker 1: of times a month, and uh, you know, we're entertaining
Speaker 1: uh merchants and suppliers and stuff like that. You've got
Speaker 1: to cut all that. So it took a bit for
Speaker 1: this message to really reached Jason, but Howard says that
Speaker 1: to his credit, Jason acted fast. Wants to click for him,
Speaker 1: and it wasn't just about cutting back on his first
Speaker 1: class flights to Europe and five star hotel stays. Just
Speaker 1: a little more than a month after that TV interview,
Speaker 1: fabulaid off a hundred employees in Berlin to refocus in
Speaker 1: the US, and they cut another hundred employees, mostly in
Speaker 1: New York two months after that. And in those difficult months,
Speaker 1: Jason's best friend and co founder also left. Yeah, I
Speaker 1: reached out to Bradford to see if he would chat
Speaker 1: with us, he said in a Twitter direct message that quote.
Speaker 1: I've put that way behind me and I'm focusing forward.
Speaker 1: I hope you understand Bradford's nowaty day. You know my
Speaker 1: co founder, Bradford was, you know, my best friend. We
Speaker 1: you know, built the business together, you know, um, you
Speaker 1: know he he and I did not kind of see
Speaker 1: eyed eye on um the needs for cuts and um
Speaker 1: and how deep we should go with the cuts. And
Speaker 1: it's very hard for him. And where I failed was
Speaker 1: I should have found a way to keep him on
Speaker 1: and involve him. Despite those cost cuts, Jason was never
Speaker 1: able to turn things back around again. After some more layoffs.
Speaker 1: In early Jason sold FAB to private equity firm for
Speaker 1: fifteen million. He used that money to fund a spin
Speaker 1: off site called him that made custom design furniture, and
Speaker 1: I never really took off either. Jason sold that company
Speaker 1: earlier this year. So to recap, Jason Goldberg laid off
Speaker 1: hundreds of employees, lost hundreds of millions of dollars of
Speaker 1: his investors money, had a falling out with his best friend,
Speaker 1: and became a poster child for a start up belly flop.
Speaker 1: And yet he's still in the game and he's got
Speaker 1: a new company. So much hype back then, but his
Speaker 1: new company, he's lying low. It's based in Berlin, and
Speaker 1: his engineering team is in India. But you're right. For
Speaker 1: most people, you'd think that would be enough to keep
Speaker 1: you on the sidelines, but really not Jason. That new
Speaker 1: company he started just a day after he signed the
Speaker 1: deal with him. That's I guess part of my therapy
Speaker 1: is just building something. And um, you know, I I
Speaker 1: love designing products. I love figuring out use cases, uh
Speaker 1: and acknowledging that you know, when it comes to turn
Speaker 1: it into a business that I have to make sure
Speaker 1: to avoid the missteps that we have with the What
Speaker 1: about you, I mean, what about your family and friends,
Speaker 1: your new life in Berlin? Um, how are you? How
Speaker 1: are you doing just in terms of personally coping with
Speaker 1: everything you obviously you know from on a on a
Speaker 1: friends standpoint. You know, I got divorced from Bradford basically
Speaker 1: right and so that you know, and then we were friendly.
Speaker 1: Now took us a while to be able to talk
Speaker 1: to each other. And you know, we've seen each other
Speaker 1: a few times and we have a lot of friends
Speaker 1: in common, but you know, the relationship is seen hard
Speaker 1: for to ever be the same. And I think we
Speaker 1: we have, we developed a mutual respect. Um, But it's
Speaker 1: it's you know, it's it's not the same and we're
Speaker 1: not best friends anymore. One relationship Jason has kept is
Speaker 1: the one with his husband. He and Chris got married
Speaker 1: in two twelve, which was back when things were still
Speaker 1: really good with BAB, and they stayed together even in
Speaker 1: the aftermath of bab Stermize. Now they live in Berlin together.
Speaker 1: We're both enjoyed living in Berlin and um getting you know,
Speaker 1: kind of getting away from some of the kind of
Speaker 1: spotlight and glare from the kind the star in the world.
Speaker 1: But I said this year sixteen is you know, people
Speaker 1: who know me really well, and I've got a very good,
Speaker 1: you know, group of friends all around the world. Um,
Speaker 1: you know, they would say that they haven't seen me
Speaker 1: this kind of um at peace and kind of mellow
Speaker 1: in a long time. Jason says that more than anything,
Speaker 1: he's just really sorry that you'd let his employees down
Speaker 1: at FAB, and he feels awful that Fab's investors never
Speaker 1: made a return on their investments. But Howard Morgan, who's
Speaker 1: that FAB investor and board member we've heard from earlier,
Speaker 1: says he doesn't regret investing in FAB. But I don't
Speaker 1: regret I don't regret doing it. Because we have to
Speaker 1: swing for the fences in order to get the big
Speaker 1: wins that we get. We were the first people in Uber,
Speaker 1: were the first people in Blue Apron. I mean, you know,
Speaker 1: so we we've had we had some some of our
Speaker 1: successes as well. Howard Morgan even invested his personal money
Speaker 1: in the startup that Bradford Shellhammer started after he left FAB.
Speaker 1: I asked him if given the opportunity, he would invest
Speaker 1: in Jason's new startup too well first round because the
Speaker 1: idea conflicts with another one about company. So but I
Speaker 1: would invest in Jason again, absolutely, because you feel like
Speaker 1: you've learned. I know that he's learned. I mean I
Speaker 1: see what he's trying to do with with with Pico uh.
Speaker 1: And not not only has he learned, but he's quite
Speaker 1: a bit humbler, I think. And he still has the
Speaker 1: skills to design great products and to motivate people to
Speaker 1: join them in the effort. The stories are really a
Speaker 1: great commentary on Silicon Valley and how it perhaps doesn't
Speaker 1: celebrate failure as much as it says, but it tolerates failure,
Speaker 1: and an entrepreneur can drive a company into the ground,
Speaker 1: can fail very visibly, and yet there's always the second chance.
Speaker 1: There's going to be someone out there who believes that
Speaker 1: he or she has learned from their mistakes and deserves
Speaker 1: to try it again. Well, failure in Silicon Valley is
Speaker 1: actually widely celebrated. You see see posters and Facebook's wall
Speaker 1: saying um, move fast, break things, fail fast fail. Often
Speaker 1: you have entrepreneurs who write these heartfelt medium posts about
Speaker 1: what they learned after they had to shut the lights
Speaker 1: off at their startup. And in this failure is unique
Speaker 1: because of how how big it was, but it doesn't
Speaker 1: make it any less a part of the Silicon Valley
Speaker 1: culture where we all sort of feel like, if you're
Speaker 1: going to take these big risks, some things aren't going
Speaker 1: to work out. And actually more than startups fail. But
Speaker 1: let me ask you this, So let's go back to
Speaker 1: where we started the show two thirteen. You're seeing him
Speaker 1: in the Bloomberg offices. Uh, you're presenting him all these
Speaker 1: uh internal emails and documents from the company, and he's
Speaker 1: trying to persuade you not to run the story. Is
Speaker 1: he now fast forward to today? Do you think he's
Speaker 1: still spinning you in terms of how he says he's
Speaker 1: learned and he says he's moved on, and um, you know,
Speaker 1: it's a much more humble I mean, I think I
Speaker 1: think any any time you go through something like that,
Speaker 1: you kind of have to force yourself to learn if
Speaker 1: you're going to have the confidence to go out there
Speaker 1: and do something again. But what I will say is,
Speaker 1: oh my gosh, I'm reporting for this podcast, and in
Speaker 1: reporting on Jason in the past, there are so many
Speaker 1: people who will not cannot refuse to forget times that
Speaker 1: he's he's spun them, or lie to them or or
Speaker 1: screwed them over. And so I think after a while
Speaker 1: it becomes difficult to to believe. And I think, you know,
Speaker 1: even for Jason himself, he has to pick himself back up.
Speaker 1: And for you personally, are you still skeptical my job?
Speaker 1: Are there days where I'm like, you know, gosh, I'll
Speaker 1: never you know, I'll never work again. And you know,
Speaker 1: who's want to hire this guy or invest in this guy?
Speaker 1: And yeah, but not too much. I mean, I think
Speaker 1: for the for the most part, I think the attitude
Speaker 1: of you know, I think that I have some talents
Speaker 1: and that has some flaws, and I need to prove
Speaker 1: to myself and to others that the talents can overcome
Speaker 1: the flaws and I can improve on the laws and
Speaker 1: um and be successful. And that's what I'm setting out
Speaker 1: to do right now. Well, that's it for this week's
Speaker 1: episode of Decrypted. Thanks for listening. If you haven't already,
Speaker 1: subscribe to our show and iTunes or any of the
Speaker 1: great podcast apps out there and leave us a grating
Speaker 1: and review that goes a long way and getting our
Speaker 1: show in front of more people, and tell us what
Speaker 1: you thought of today's show. You can talk to me
Speaker 1: on Twitter at at brad Stone, Sarah's at Sarah Fryer,
Speaker 1: and you can follow our whole tech team at at Technology.
Speaker 1: This episode was produced by Liz Smith and Akiato. Aaron
Speaker 1: Black assisted with reporting my print story, which I hope
Speaker 1: you'll check out on our beautiful, newly designed tech page
Speaker 1: at Bloomberg dot com. Slash Tech was edited by Emily Busso.
Speaker 1: ALC McCabe is head of Bloomberg Podcast. We'll see you
Speaker 1: next week.