Kirthi Kalyanam : Lessons from Fab.com’s Collapse : Bloomberg
Dr. Kirthi Kalyanam, the J.C. Penney Research Professor, Marketing Department Chair, and Director of the Retail Management Institute at the Leavey School of Business, was recently quoted in a piece on both Bloomberg and Livemint titled, “How Not to Strangle Your Unicorn.” It looked at the failure of Fab.com, which was valued at $1 billion before its collapse, in order to teach other startups how to avoid making the same mistakes. Professor Kalyanam adds that Fab was poorly positioned, and that its attractiveness to investors was heavily attributable to its charismatic founder.
An excerpt from the piece:
“Fab was badly positioned because it was selling a product people don’t need regularly, so it costs a lot to acquire and retain customers through marketing. Couple that with how much it costs to store and ship products, as well as the capital needed to support small-scale designers, and Fab’s model was bad even when the business looked successful.
‘Some of these people invest thinking that the founder has some magic, that he can think about it in a way that nobody understands,’ Kalyanam said, noting that Fab had some high-profile investors—Andreessen Horowitz, Menlo Ventures. ‘Why did it take so long for investors to figure it out? That’s the effect of a charismatic founder.’”
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