Mark Suster recently put up a video of a discussion that he had with Jeff Clavier on the lessons learned from Fab. It is embedded below.
In a nutshell they believe Fab paid too much attention to competition and did not stay focused on their core market market. Around the 3:20 mark things get really interesting when Mark starts talking about capital constraints. Capital constraints force focus, force creativity, and force innovation. Capital constraints also force you to ask harder questions about the viability of the business. Mark concludes that Fab’s issue was overcapitalization.
In his and Jeff’s point of view raising a large amount of capital increases investor expectations which in turn forces artificial growth and raises public expectations. The end result being growing too fast before a strong foundation is in place. Then things crumble.
Something to consider when big checks with high valuations are becoming more common.