One chapter in the bizarre story of e-commerce startup Fab.com is nearing its end. But somehow, some way, CEO Jason Goldberg still has tens of millions in the bank and investor support to attempt another giant strategy shift.
Fab is in the later stages of finalizing a sale of its assets to a closely held manufacturing company called PCH International, in a deal that will net the startup $7 million in cash, according to a person familiar with the matter. Fab will also receive some shares in PCH, which are currently being valued at $8 million.
That valuation, however, is based on PCH’s last financing round, which happened several years ago, and Fab’s executives believe its stake is now worth much more than $8 million, given that PCH’s sales have grown significantly since its last funding round. Fab’s total deal value could grow to between $25 million and $50 million, these people say. Of course, there’s always the chance PCH’s value — and thus the value of Fab’s stake — could decrease instead.
TechCrunch first reported the talks. While Fab’s board of directors met on Thursday and agreed to go forward with the deal, according to a source, PCH is still running through the diligence process, meaning there’s still a chance the acquisition could fall through.
Under the terms of the deal, PCH would be acquiring the Fab brand name, its website and proprietary technology the company uses to customize the website experience for each shopper, as well as a manufacturing technology platform, according to another source. PCH will also receive Fab’s customer list, remaining inventory and as many as 30 employees still working on Fab.com.
On the surface, the deal — whether it ends up being worth $15 million or $50 million — would mark one of the largest venture capital flameouts in recent history. Fab, which began as a gay social network before morphing into a flash sale site, raised more than $300 million from Andreessen Horowitz, First Round Capital, Tencent and others, and was once valued at $1 billion.
But Goldberg pivoted yet again, this time away from flash sales to a more traditional retail site and cut hundreds of jobs along the way. At a TechCrunch event this fall, Goldberg admitted something he had never previously divulged in interviews: He shifted the company’s strategy (and cut jobs) because he couldn’t raise the $300 million the company had sought. Fab was burning through $14 million a month, and it was only able to get $150 million in funding.
Goldberg still has another chance, however improbable, to save face for himself, his investors and the board, which continues to support him despite his track record. For the past few months, he has been working out of Germany on a new business called Hem, with the help of tens of millions of dollars that investors originally poured into Fab and the 150 employees who either originally worked for Fab or came over in an acquisition of a Finnish furniture company.
Hem exclusively sells its own furniture designs, which can be customized to shoppers’ specifications and often require no tools to assemble. The company also works directly and closely with manufacturing partners, cutting out middlemen which it believes can help it produce high-quality products at lower cost than traditional furniture sellers.
Hem just launched this fall, but sources say the company and board is cautiously optimistic with early traction. If things go well, Goldberg would eventually relocate back to the U.S. along with Hem’s sales and marketing team, one person said. The company is burning much less cash than Fab did at its peak, giving it several years of money to figure things out. Unless, of course, Goldberg switches gears once again.
This article originally appeared on Recode.net.