Any entrepreneur trying to raise cash for their startup should examine the most polarizing case study from this year, Exhibit A: Jason Goldberg.
Goldberg, the CEO of Fab.com--whom Fast Company profiles in our October Design Issue--is, depending on how you see it, either the next Jeff Bezos or the smoothest hustler to take on Silicon Valley since Color’s Bill Nguyen. Since the design e-commerce site launched two years ago, Goldberg has managed to raise $325 million in venture capital at a $1 billion valuation, despite the company’s frenetic pivots, unnatural growth, and distance from profitability. “If you have tens of millions of dollars it can create hundreds of sins,” says the CEO of a design company that is rooting for Fab but thinks it’s a house of cards. “To get the kind of organization that functions at that scale [Fab wants] can only be done with slow sedimentary layers. It’s like an old redwood tree versus a hormone-injected tree in the first windstorm. One has a disciplined foundation, the other is just jacked with stuff.”
Unlike many CEOs of fast-growing tech startups, Goldberg is not a founder in puberty. Before reinventing himself as an entrepreneur, Goldberg came, from all places, politics. Working for President Bill Clinton at the White House for six years gave him all the schooling he needed to learn how to become an efficient storyteller. “Having to walk into the president’s office and have 30 seconds to brief him on something,” explains Goldberg, “or explain a really complex problem in simple ways” was quite possibly a more valuable education for Silicon Valley than the MBA he later got at Stanford. The first time Goldberg’s fundraising skills were tested was in 2004, when the then 31-year-old managed to raise $48 million for his Seattle startup Jobster, a sort of proto-LinkedIn. Unfortunately for Goldberg--whose prior job was a T-Mobile product manager--he turned out to be better at raising cash than actually running a company. “I made every mistake in the book,” Goldberg says. After four years, Goldberg ran Jobster into the ground and ultimately stepped down before the company evaporated. “I was this poster child in Seattle of this guy who had burned through VC money, like a pariah,” says Goldberg. “I needed to start over somewhere else.”
So how did an entrepreneur with such a spectacular flameout go on to captivate the wallets of some 40 investors, including many of the most prestigious from Silicon Valley to China? By finding fresh ways to tell his story.
Three months after launching Fab in the summer of 2011, to woo Andreessen Horowitz, arguably the most coveted firm in VC, Goldberg broke character from the typical startup behavior. Instead of sending Andreessen partner Jeff Jordan a deck and meet him in person for a pitch, Goldberg did quite the opposite. Goldberg--not one to play the humility card--told Jordan he didn’t have time to fly to the West Coast from New York; instead, he’d give him the keys to Fab’s internal data. “He’s incredibly transparent and straightforward and honest,” says Jordan of his first impression of Goldberg. Andreessen ultimately led Fab’s $40 million Series B, cementing the attention of the entire tech community. “The data is the data is the data,” said Goldberg at the time of his unusual, but captivating, strategy. “If the data is good, it’ll speak for itself, and then you need to tell the story of how it gets even better. If the data isn’t good, well, then you need to tell a story of how you are going to turn it around.”
But more recently, Fab’s data has been questionable. Many posit the private company has been spending millions on marketing to buy its customers, while expensive mistakes are piling up. So as the stakes get higher and the rounds get pricier, Goldberg’s storytelling must also carry more grandiose stage presence.
Which is why, when Goldberg was out earlier this year trying to raise Fab’s Series D while Fab was “pivoting” from a flash sale site to the an e-commerce store, he had to boost the narrative with some pizazz. “My investor pitch is, Look, there are four e-commerce companies in the world that are worth more than $10 billion. Is it possible to have a fifth?” explains Goldberg of how he captured the imagination of a new set of investors. “It's very different than most companies that would say ‘So, we've got a great team, we've got a big vision and we’ve done a $100 million in sales this year, we think we can get the $200 next year.’ I actually start from the other direction and said ‘Look, for you to even believe that you can invest in this company, at this valuation, you have to believe that there is a chance that we could be one of the five.”
Meanwhile, Goldberg was also working a back channel: his own persona as CEO who holds transparency of the highest order. On his blog Betashop he regularly muses as philosopher CEO on theories like “the third wave of e-commerce” (which he’s dubbed “Emotional Commerce”); he geeks out on reams of data; and he and even Instagrams photos from his everyday life (including this shirtless selfie). His “radical transparency” holds a soft spot with investors. It even struck me as unusual at first. Over the course of my reporting, every time I met up with Goldberg he would casually mention yet another investor who he had met with that morning, or was trying to court him, as if he were confiding in me like an old pal. “There’s this company called Itochu, they are investor in Andreessen Horowitz, they asked if they could be an investor directly in Fab,” he told me one day back in spring, weeks before the deal was public, as if I was a confidante. “They came to our office last week. They were like, Oh, we’ll give you $5 million now, and come to Tokyo and meet our corporate office, we’ll consider investing $30 to $50 million.”
When I later asked Goldberg about his extreme candor, he replied as if it were a virtue: “It's very hard for me to hold things back.” But once in politics, always a politician. (Even says Goldberg’s Fab cofounder Bradford Shellhammer of his partner: “Jason has this politician mentality.”) It’s safe to assume that anything Goldberg does is not by accident. Goldberg’s transparency is less a sign of some kind of hacker ethos, than a calculated tool for his real talent--turning his loose lips into cash by creating FOMO (Fear of Missing Out). With Fab positioned by Goldberg as the next Amazon, and Andreessen endorsing that claim, it’s the ideal scenario to play on investors’ fears. “It’s gang mentality,” says the CEO of another e-commerce company of the VC-backed Fab hysteria. “Andreessen is the hottest VC in the world and there’s fear in the market of missing the next big seven.”
To some degree, that’s how Goldberg ultimately landed Fab’s Series D funding this summer. As Goldberg tells it, in March he and Shellhammer were in Hong Kong meeting with a potential investor, and were introduced by one of their board members to meet James Mitchell, chief strategy officer of Tencent, the Chinese e-commerce company with the fourth largest market cap in the world. “We go to dinner with this guy, but neither Bradford or I treat it as anything. We didn’t pitch them, we chatted,” says Goldberg. “Two months later James Mitchell says, 'Hey, we want to invest in Fab.' In between we didn’t speak with them for two months.” What was the urgency? “What happened was,” explains Goldberg, “we started talking to a different Chinese Internet company and word was getting around that we might be getting an investment from them and the Tencent guys said ‘Hey, let’s talk again.’” In June, the $150 million round led by Tencent became official. It’s safe to assume it was Goldberg who helped fuel the buzz.
But of late, Goldberg’s narrative tap dance is beginning feel more like the tech world’s version of a Jerry Lewis telethon. Last quarter, according to Dow Jones VentureSource, Fab raised more money than any other tech startup. This spring, during the height of his fundraising, Goldberg told me with his typical swagger that Fab’s Series D would close by the end of the summer, netting at somewhere between $200 to $300 million. But after the $150 million Tencent round was announced in June, Goldberg strangely started making piecemeal public announcements about tiny fundraising rounds--$5 million, and then $10 million--pocket change compared with Fab’s typical investments. So in August I asked Goldberg when the rest of the round would come in. Suddenly the summer date he was so firm about seemed to become more malleable, if not invisible. “We are comfortable if we finalize it in September or October or November, or even after the holidays,” he said. “I reserve the right to change it.”
[Photo by Bryan Smith | Corbis]