How Fab.com pulled off its pivot

The founders of Fab.com discuss the ultimate business turnaround.

In early 2011, serial entrepreneur Jason Goldberg and interior designer Bradford Shellhammer were the owners of a flailing social networking site for the gay community called Fabulis.com. It was a hot mess: The site had tried to be, at various times, the gay Facebook, the gay Yelp, and the gay Groupon. But the bells and whistles hadn't been enough to attract a significant number of users. Last March, the duo shut the site down. Just three months later, it relaunched as Fab.com, a flash sales site that sells indie designer housewares, accessories, clothing, and jewelry (and isn't specifically targeted at a gay audience). In 2012—just seven months postpivot—Fab boasts more than two million users, has grown to 100 employees (from three), and is sitting on $50 million in venture funding. The pivot is legendary in the start-up community, a tribute to high-octane, "no guts, no glory" entrepreneurship. But the guys claim it was actually the result of careful reflection and calculation. They spoke to Inc.com's Nicole Carter about the anatomy of a successful pivot.

Be honest (wine helps). In February 2011, the pair found that their 12-year friendship allowed for some honest reflection. "It was over a series of dinners and bottles of wine that we—just two old friends—started very openly discussing the state of our business," says Shellhammer. "In that context, it was easier to admit that Fabulis wasn't a success." At that point, the site had been stuck at 150,000 users for months, and no amount of new features had prompted growth. "We couldn't even get our friends to use it," he adds. "That was the metric that really told us we needed to start over."

Dream again. "We asked ourselves, If we could do anything, what would we do?" says Goldberg. "Then we asked three questions: What are we most passionate about? What are we good at? Where is there an underserved market? The answer was design, design, design."

Face your fears. The $1 million in seed funding Goldberg and Shellhammer had raised to start Fabulis was going to be wasted if Fab.com flopped, but the two partners looked beyond that. "There was risk, but we looked at it as an opportunity, not a failure," says Shellhammer.

Go lean. When their board approved their new plan, in February 2011, Goldberg and Shellhammer immediately reduced their staff from 10 to just three and kept only people crucial to the transition process. "We restarted by just talking to people in our own networks—small designers, buyers, and merchandisers," says Goldberg. "Eventually, we hired expert people in editorial, operations, and logistics, and those who knew a lot about home décor and furniture."

Clean the slate. "We totally shut down Fabulis before working on getting Fab together, which was risky, because we did have 150,000 members," says Goldberg. "We weren't sure if they would be on board with the new plan." They posted a simple Coming Soon page that encouraged users to sign up for Fab.com. "But once we made the decision to pivot, we committed to doing one thing and doing it well," says Goldberg. "No distractions."

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