There was a recent article in The Information titled “Welcome to the E-Commerce Winter '' by Mark Di Stefano and Malique Morris that really struck a chord with me (I had lunch with Malique at ShopTalk and like him very much—he’s quite smart). This, in particular, caught my eye:
“The implosion in public tech-driven retail and payments companies has been breathtaking—with investors losing tens of billions of dollars. Amazon shares have tumbled more than 40% from pandemic-era heights. Companies that help process online transactions took an even bigger hit. PayPal has plummeted 77% from its 2021 highs, and Shopify, which sells software to help small businesses sell online but makes most of its revenue from processing their payments, is down 82% from a November peak.
Startups that rushed to grab a toehold in the ecosystem of how people shop and pay online are now staring down the prospects of down rounds—or worse. The carnage includes Stripe-backed online-checkout startup Fast, whose April collapse came weeks before the broader startup bloodletting kicked into high gear. On the retail side, Amazon rollups—debt-fueled startups that snatched up third-party Amazon brands to build a new breed of online super seller—are reeling.”
So, with gloomy headlines coming daily, there’s no better time to provide an update on where fabric stands today, and where we’re headed. This journey has taught us several lessons, and so I want to share some of our key learnings as we move from a climate of raining cash to “the e-commerce winter.”
Where We Started
fabric is among a fortunate group of well-funded start-ups that are figuring out how to manage the challenging economy ahead. Happy customers and employees in a start-up can be a tough balance, even in the best of times.
We have had our own share of challenges over the past 20 months when there were tailwinds for commerce startups. When I arrived at fabric in August 2020, we had a big vision and boundless ambition that required maniacal planning and execution to quickly scale. Candidly, in the early days, we missed clear alignment with some of our customers and quickly realized that hiring more people doesn’t always result in better outcomes.
Because we were growing so quickly, it was difficult to maintain focus and process. We also learned that fabric needed to work hard(er) to ensure every single customer deployment was flawless—this required a shift in our approach.
fabric was built to change the industry norms that my team and I encountered (as SaaS buyers) time and time again: incumbent commerce platforms did not fit our needs for modern commerce architecture. The industry norm for platform providers has been to create their own product boundaries to operate in, which isn’t always in the best interest of the customer. However, we missed our internal goal of <180day implementations for ~45% of our customers. While we improved average implementation time by 20% from H2 2021 to H1 2022, we have a long way to go and look to dramatically improve implementation time by adjusting our investments in product-led growth.
Technology and Products
Headless commerce is now beyond the proof of concept phase and is being embraced across virtually every commerce vertical. Why? The API-first approach to architecture is cost-efficient, scales and extends much better, and is inherently easier to implement and maintain. Amazon realized this fact a long time ago. Composability and modularity provide customers the option to pick the best tools for their business with seamless and standardized integrations.
fabric did not come out of the gate with products that perfectly executed what I just described. Getting where we are today has been a monumental effort. The initial product releases required a lot of coordination, effort, and time. In parallel, we were creating and maintaining functionality to reduce customer pain points, while we defined the most customer-centric approach to replatforming commerce.
Addressing core concerns around extensibility and tenancy for front-ends required us to invest in novel and out-of-the-box approaches in building our platform and products. Our own evaluation and feedback from dozens of our customers have influenced how we’ve continued to evolve our products. We’ve spent the last 20+ months hardening our APIs and rebuilding our core platform in a more scalable and composable way than our initial offering.
As such, we’ve redistributed our core APIs to ECS and EKS from a predominantly serverless implementation earlier—this has reduced latency in core APIs (p90) by over 400 ms. We have added more than ~86 additional use cases over the past 6 months alone through our commerce APIs to service B2B, subscription, content, and customer management use cases. With significant investment in CI/CD, we now release multiple features per product API in each development cycle driving more value with each release for our customers.
Funding and Burn Rate
Back in February of 2022, we closed our Series C funding round of $140 million. Our timing turned out to be fortuitous as the day we closed and announced Russia invaded Ukraine and global markets started their tumble. It didn’t take long for us to conclude that uncertain times were ahead and that preserving capital would become increasingly important.
Fortunately, many of the fabric staff have previously worked at companies with frugal cultures, like fabric. So being mindful of spending comes rather naturally. As part of our journey of learning from customers and practicing our core values, we definitely found areas where we could tighten up and continue to improve our overall productivity. By adjusting how we invest our capital, we can build a more rigidly defined product that is best for our customers and reduce our burn rate by ~15%.
That said, we are fortunate to be in a position, with years of cash runway. We will double down on key areas (over-indexing on Commerce Platform, Marketplace, and OMS) where we believe investment cannot wait. That includes people, and we have several key technical roles open for which we are actively recruiting.
We have, and will continue to adjust our organization under leaders who have experience in building, selling, and delivering products. For our customers to be happy, we need to invent and build the technology they need, help them identify and solve the problems they have from older legacy systems, and then get them up and running on our technology quickly.
Speed matters and our customers expect us to move fast. Just last week I sent a note to the entire fabric team detailing a shift in our organization to ensure our product focus is completely aligned with our customers’ needs. I know this sounds obvious, however, it is surprisingly easy for fast-moving teams to get distracted, making it necessary for us to adjust our organizational structure over time to continue to support our mission.
Starting and scaling companies is hard, and we haven’t always gotten it right. Change is also hard. We challenge ourselves to remain flexible, self-critical, and honest to make the necessary adjustments for our customers and our company.
While fabric as a company has been around for a few years, we are organizationally quite young. 67% of our employees have been at fabric for only one year and 52% of the team has been hired in the past 6 months. For a company as young as we are, I am really proud of where we are culturally and our morale is high. We measure morale with an employee Net Promoter Score (eNPS). fabric scored an 8.4 out of 10 when employees responded to the question “Do you see yourself working at fabric a year from now?” and an 8.1 when asked, “At fabric, do you feel comfortable being yourself?”
These scores come after we initiated some changes that were not popular with some staff. Prior to December, we were hiring at a frenetic pace, hence we had loosely defined levels. We hired people quickly with titles that were for some inflated beyond their skills and experience. This resulted in performance that didn’t meet expectations. It’s hard to manage performance without levels, job descriptions, and goals.
So, while difficult, we “ripped off the band-aid” and re-leveled a good portion (20%) of the team with some employees being down-leveled in title from where they were and clearly were not happy about it. But this was the right thing to do for the company and we are in a much better place thanks to the hard work of our People+ team in getting this figured out. However, our attrition rate is not where we’d like it, and it is something we’re working on.
Companies often struggle with striking work-life balance, start-ups especially, and we are no exception here. We are remote-first and geographically diverse with teams across the US, CA, UK, and South Asia. Collaborating and managing across time zones is particularly challenging inside fast-moving start-ups and working from home presents another set of challenges.
There are no simple fixes to this, but it is something we are working on. Our team values summer Fridays, one Friday a month where the company is closed so everyone can enjoy a breather, and our Holiday Break, a week in December for everyone to enjoy the holidays without the pressure of a mountain of work to come back to.
We realize that start-up life is not for everyone, and we’ve seen some great people come and go. There isn’t a playbook for how to build this business, and it’s critical to stay nimble to change as we learn and grow through successes and mistakes. Change is a constant, and creating products our customers love is never an easy task.
As a business that is input-driven and long-term-minded, our values help us stay focused on our customers’ satisfaction and drive innovation every single day. While we have achieved extraordinary revenue over the last year, we don’t measure success solely in revenue numbers (outputs). Instead, we measure success via key inputs such as NPS, feature deployment velocity, platform scalability, performance, reliability, configurability with our APIs, and strict adherence to operational SLOs and SLAs.
While we have much more work to do, we also believe more strongly than ever in the scope of the opportunity ahead. We believe that the unique combination of our people, deep industry experience, customer empathy, capital resources, and strategy puts us in a position to reinvent and truly move the market forward in service of our customers, and we are going to work every day to deliver.
One thing is clear—the next 12-24 months will be volatile and every start-up (including fabric) has to brace for uncertainty and unpredictability in all parts of their business. We are extremely fortunate to be led by incredibly talented and experienced leaders who have weathered such storms in the past. We are also fortunate to have an incredible board, investors, and runway to see us through the e-commerce winter.
I personally worked in e-commerce through the 2000-2002 and the 2007-2009 downturns. In challenging economic conditions, fabric’s strategy is clear. Our focus on the inputs to build a platform that customers will love will net out the outputs that are meaningful to our investors and community.