The mistake: By late 2010, serial entrepreneur Jason Goldberg and interior designer Bradford Shellhammer realized something devastating. Their one-year-old social networking start-up for the gay community, called Fabulis.com, had plateaued at 150,000 users and showed no real signs of future growth. The guys also realized that the failure was all their fault. Instead of creating something innovative, they had spent their time playing dress up: They tried making the site the gay Facebook, then the gay Yelp, and even the gay Groupon. "[We had to] admit that what we had built over the previous year was not a success," says Shellhammer. The brilliant part: Shellhammer says finally admitting that their site was not a success gave the duo the confidence to start over. From scratch. "We asked ourselves, 'If we could do anything, what would we do?'" says Goldberg. "Then we asked three questions: What are we most passionate about? What are we good at? Where is there an underserved market? The answer was design, design, design." Shellhammer adds that admitting to utter failure "gave us the confidence to go to their board and 'Hey, we have your money but we want to do something completely different.'" The glorious fallout: Once a rather dramatic pivot plan was in place, the duo shut down Fabulis. Three months later, in June 2011, it relaunched as Fab.com, a flash-sales site that sells indie designer housewares, apparell, and vintage items. Since the pivot, Fab, which is based in New York City, has seen stellar growth. In July, the company raised $100 million, just seven months after raising $40 million in funding, putting it at a $600 million valuation. What about breaking that 150,000 user mark? Fab says it now has close to 5 million members and plans to do $140 million in sales this year in roughly 20 countries. "There was risk [in pivoting], but we looked at it as an opportunity, not a failure," adds Shellhammer. --Nicole Carter
NEXT: Can Outsourcing 'Artisan' Work for Glassbaby?
Tim Donnelly is a freelance writer and managing editor of Brokelyn.com. His work has appeared in Billboard, The Atlantic, Thought Catalog, and The New York Post. @TimDonnelly
Nicole Carter was previously a reporter and web editor at the New York Daily News, and her work has also appeared in Consumer Reports magazine. @ncarterinc
Bill Murphy Jr.: is a journalist, ghostwriter, and entrepreneur in Washington, D.C. He is the author of Breakthrough Entrepreneurship (with John Burgstone), and is a former reporter for The Washington Post. @BillMurphyJr
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